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Conventional Thinking: Preying on the poor

We’ve all seen them. Some communities have more than one. They are called payday lending centers, and they are coming under criticism from a new group called the Faith for Just Lending Coalition, for charging obscenely high loan rates that hurt families.

According to the Ethics & Religious Liberty Commission (ERLC) of the Southern Baptist Convention (which is part of the Coalition), here’s how it typically works: “A payday lender offers to lend a single mother, say, $500 to help pay for an unexpected expense, like a car repair. He offers a simple deal—repay the loan in two weeks with 15 percent interest… when her next paycheck comes in. … Two weeks come in a hurry, and suddenly she owes $565, the $500 loan plus 15 percent interest. … She goes to the lender and explains her problem.

“He says, ‘No problem.’ Just pay the interest due and he can extend the loan for two more weeks, at another 15 percent interest. What choice does she have? She pays the $65 and signs on for another two weeks. … Every two weeks, things are the same, and this woman is now paying out $130 a month on a $500 loan, with no end in sight.”

What was first presented as a quick solution becomes a long-term problem, a debtor’s trap.

The sin of usury—or unfairly loaning people money at unreasonable high interest rates—is nothing new.

Nehemiah was outraged to know usury was happening to God’s people, and he put a stop to it (Nehemiah 5).

In Christianity, the poor and underprivileged are not to be preyed upon; they are to be prayed for.

ERLC president Russell Moore is creating awareness of this social problem, saying, “Payday lending is a form of economic predation and grinds the faces of the poor into the ground. As Christians, we are called by Jesus, by the prophets and by the apostles to care for the poor, individually, and also about the way social and political and corporate structures contribute to the misery of the impoverished. Groups across this diverse coalition don’t agree on every issue in the public square, but I am happy to work together on this issue to stand against unchecked usury and work for economic justice, human dignity and family stability.”

Sadly, in our age so saturated by the prosperity gospel, even some Christians get carried away in a worldview that would accommodate practices like this.

Christ calls us to so much more. The state of Oklahoma does have regulations surrounding this practice, yet we ought to pray that our lawmakers across the country would have wisdom as to how best to regulate this and to hold accountable groups that would come into our communities to make a quick buck on the backs of the poor.

We ought to be thankful for the many reputable loaning sources in our communities.

We also should give thanks to God for our forefathers establishing the Baptist Foundation of Oklahoma, which invests in Kingdom work.

After all, in Christianity, our attitudes and intentions about money are not secondary. Jesus said, “…for where your treasure is, your heart will be also” (Matt. 6:21).

With His help, we can bring about a better day in America when usury is not tolerated and when we see as part of our mission to help people out of debt.

Kindness to the poor is a loan to the Lord, and He will give a reward to the lender” (Prov. 19:17).

Brian Hobbs

Author: Brian Hobbs

Brian is editor of The Baptist Messenger.

View more articles by Brian Hobbs.

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  • Jimmy Alexander

    Although this ariticle is well meaning by someone who has probably has never used a ‘payday’ lender, it is incredibly naive. It ignores the facts that these businesses have helped many people who have special short term needs such as medication or even a new tire. Where else can they get this kind of loan? Since the track record of work and paying for people in this kind of category is not good, these business have to charge more to make a profit. Something people in ministry and the government do not seem to understand.

  • Brian Hobbs

    Thanks for reading Jimmy. You may be able to dub me naïve, but there is no way Dr. Russell Moore, the Coalition and others I cite could not be called such on this issue. Be that as it may, we disagree on more than one point. The Payday lending industry did not exist in an established way until very recently (the 1990s), so most of human history has gone by without it. While none of us wants a “loan shark” system in its place, there are many positive alternatives to payday lending. There are traditional lending institutions, private loans from family, friends, neighbors, et al and more; there are also non-profits, churches and government programs to which people can turn for financial assistance. As far as specific needs you mentioned (tires, medication), there are plenty of reputable institutions (and even government programs on a local, state and federal level) and groups to which people in America can turn. No one is saying the Payday lending has done no good. What we are saying is that the payday institutions have, according to the best research available (cited in articles like this, failed more people than they have helped and created systemic problems. And in general they typically are built on a model that encourages use of credit to purchase consumer goods, instead of capital goods, which typically leads to societal and personal trouble. In conclusion, we are saying is that is only right and good Payday lending comes under increasing scrutiny and regulation, if they are to subsist at all. Most of all, we are saying Christians must help find better ways to help the poor, underprivileged and desperate in a nation like ours. Thanks again for reading the Messenger.

  • Trutexan

    Just one problem with the article, Brian. The amount the woman in your example would owe would be $575 at a 15% interest rate, not $565. Her payments would total $150 every month, not counting that there are actually 26 two-week periods in a year. So she would have one extra $75 payment during that year. And, by the way, compounding on a bi-weekly basis, that’s 3,686% interest on an annual basis.

    When I was on active duty with the Navy, back in the 1970s, we had a similar system aboard ship. It was underground because it was highly illegal. The typical loan was “5 for 3.” That meant that for every $3 loaned by the “shark,” $5 would be due the next payday. We held payday twice a month, but sometimes the loan was made with only a few days until the next payday. Obviously the effective interest rate (which was ostensibly 66.7%) was far higher depending on the actual length of the loan. As an officer, my instructions were to toss the “book” over the side of the ship if I caught someone involved. I never caught anyone lending on those terms, but the rumors had it that the practice was flourishing.

    • Brian Hobbs

      Dear Trutexan,

      First thank you for your service to the country through the Navy. About the example from the Ethics & Religious Liberty Commission, the full quotation and mathematics (which is based on a two-week period) can be found here.

      Any distinctions aside and to your example about the “sharks,” the only options are not “loan sharks” or payday lending. There are, as I pointed out to the other reader, many other reputable options, including traditional lending and legitimate private loans. The bigger societal problem is incurring debt for consumer goods, rather than capital goods, which creates community problems as well as personal ones. The poor are being disproportionally hurt in the system we have.

      I stand by my point that Russell Moore and others are pointing out legitimate negative effects to the poor and calling for responsibility and accountability. I applaud their efforts.

      Thanks for writing and again for your service.

      • Trutexan

        I checked that article, Brian, and I am in complete agreement with the point they are trying to make and with your point. I don’t have a problem with the idea that we Christians have a duty to the poor. But I’m just saying the ERLC got the math wrong. Fifteen percent of $500 is $75, not $65. But the egregiousness of the situation is even worse than they say. If they assume that the woman pays $75 in interest every two weeks, the opportunity cost of that money must include the effect of compounding, which means that she’s paying far more than the 390% that they posted in the article. The poor are being exploited, for sure.

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