Pastor's Page for July 2008: Payday Lending

I am trying to figure it out.

There was an article in The Columbus Dispatch on Monday of this week, explaining legislators’ dilemma in dealing with payday lending.

They are asking themselves whether it is a trap or a service.

To me, it’s a no brainer

It’s not that the lending itself is bad; it’s the interest rate that’s bad, that is surely a trap, something which keeps people in poverty and beholden to these companies, while the companies, in turn, continue to realize huge profits.

It’s as much of a no-brainer as is figuring out that $5.15 an hour, or, as of this week, $5.85 an hour, is not nearly enough in these times on which a family to live.

Some legislators are proposing a 36 percent cap on the interest which can be charged. That’s high, but not stupid high, like 400 percent. How can anyone ever hope to get from under the economic constraints in which they find themselves with an interest rate like that?

Sen. Ray Miller is trying to get legislators to agree on regulation; Representative Joyce Beatty, on the other hand, seems a bit reluctant. Her position is that nobody in her district wants to see the payday lending places close. The places offer emergency support when someone needs food for their baby, or money to keep the utilities on. Nobody wants to see the places close, especially since banks will not lend to poorer people or people whose credit scores are not high enough.

But closing the places is not what’s being proposed. What’s being proposed is that the payday lenders are regulated on the amount of interest they charge.

Surely Ms. Beatty can understand the wisdom in that.

Data collected in research about the places show that 90 percent of those who frequent payday lending places get five or more loans a year, and 62 percent of went to people who have taken out at least 12 loans.

At 400 percent interest, someone is getting really rich, while others are getting poorer and poorer.

The best thing to me would be if we’d all just learn to manage our money, to be less interested in spending money and more interested in saving it and making it grow. That’s a lifestyle and a mindset change that would be hard to produce in this consumer-driven economy, but worth it.

Since that ideal is not even close to being a reality, however, it seems that lowering the interest rate would be the best service legislators could offer the people of Columbus. That way, people could have a way to get emergency funds and still be able to live.

Any other way just doesn’t make sense. In fact, it’s criminal and immoral to charge that rate of interest to people who obviously are having a very hard time.

I wonder why the legislators don’t understand that?

We need to make them understand and encourage them to care more about the people they serve than the offices they are trying to hold onto.

Have a good week.

Pastor Smith