Dear pastors, missionaries, chaplains and friends,
Steve here… In any town or city of our land you can pass by two or three payday lending businesses. I do. What are we to make of these businesses who typically cater to those struggling financially?
In Matthew 26 the disciples argued it a waste of money to buy perfume rather than use the money to care for the poor. Jesus’ response, “You will always have the poor among you, but you will not always have me.” (Matt. 26:11 NLT). Was Jesus showing indifference to the millions visiting these payday store fronts each and every day?
If we’ll always have the poor, why bother combating poverty? Jesus was actually harkening back to the Old Testament. What does the OT have to say about poverty? Plenty.
· Deuteronomy 15:11 says, “There will always be some in the land who are poor… share freely with the poor…”
· Deuteronomy 15:7-8 says, “But if there are any poor… do not be hard hearted or tightfisted toward them. Instead be generous and lend them whatever they need.”
We are commanded to “give” and to “lend”. The OT goes on to share some bold commands on what should characterize our “lending” habits and behaviour. How is our society doing?
While there is significant regulation of Canadian banks and other financial institutions, predatory lending is a widespread problem in North America. Payday loans, auto title loans, high cost retail installment loans, refund anticipation loans, and cheque cash back are all means to gouge the consumer, especially the poor. I recently heard of one person in Texas who borrowed $700 from a payday loan business which required $200 every two weeks to pay off the loan. With all the fine print they finally paid off their $700 loan in five months costing them $3,300. I’m pretty sure that interest (usury) level violates the spirit of instruction in Exodus 22:25, or Leviticus 25:35-37 and 1 John 3:17-18.
A typical payday loan is a small cash advance ranging from $100-$1,000 and typically paid off in two weeksor until your next pay cheque. There is often little to no credit check required. The repayment is most often a lump sum including principle and interest with no ability to pay down principle over time. Often repayment is secured by direct access to a personal bank account or post-dated cheques.
The actual payday loan business is a multi-billion dollar industry. The industry-insiders spin a tale of seeking to help people, but the result is often misery.
What they say publicly:
“Speaking from experience, most customers facing financial emergencies use short-term loans wisely. It’s a viable solution offered by reputable lenders, like Cash America.”
—Dennis Wise, President & COO of the retail services
division of Cash America International
What they say privately:
“The theory of the business is you’ve got to get that customer in, work to turn him into a repetitive customer, long-term customer, because that’s where the real profitability is.”
—Dan Feehan, CEO Cash America, June 2007
This business model works. Governor Jeb Bush (Florida) signed into law (2000) a restriction of 30% interest on car title loans. But due to loopholes and costly insurance products associated with these loans, the average loan customer paid 419% interest for a 14 day loan in Florida in 2013 and the average borrower made 8.8 loans each year. It’s an unending and vicious cycle of debt.
Former Canadian finance minister, Jim Flaherty (deceased) sought to combat this reality a few years back with legislation to only allow a 30% interest rate, rather than the 60% current among these payday loan business. It’s no wonder you will likely find a payday loan business close to a government office that issues secure cheques to citizens. One denominational leader in Toronto told me one of these businesses is three stores down from their Refugee Home with large signs saying $30 can get you $300. The business model works and the poor are exploited.
HOW CAN WE HELP
· Write your MP and city leaders asking action against predatory or deceptive lending practices.
· Speak out in your local media as a person of faith calling for reform.
· Talk about it at church and consider visiting a business location.
· Research the current law.
· Ensure your church is teaching and modeling Biblical principles on godly stewardship.
· Churches should consider offering help to their neighbours in times of financial crisis. Possibly considering loans at reasonable interest rates based on their ability to repay the loan in a timely way.
This could become a possible new ministry for some of our churches in the future. I’d love to hear your stories if you have already been fighting this fight. Talk to me.
Have a blessed week,