An Open Letter Concerning Payday Loans
Many churches have been telling us they have spent their entire year’s benevolence fund. I believe I have found out a MAJOR reason why:
It is becoming more and more apparent to me that our Churches are paying the way in many cases for the Payday Loan Industry. The very people that knock on your door for financial assistance for rent and utility payments, may be doing so because they have an obligation to give their money to predatory lenders!!!
Therefore, the bottom line, churches are indirectly paying the Payday Loan Industry. It's an industry that our legislature allowed for those in desperate need of money to sign away the protection of state usury law and submit themselves to 391 % APR. In addition, it's a loan that for many people never gets paid off. It's all they can do to just cover the interest. The principal stays obligated until the end of time! One gentleman has 3 loans and on his fixed income, will NEVER in his lifetime, pay them off. Other cases where churches are being asked to pay rent and utilities while Payday is being paid are becoming all too common.
One state legislator I spoke with puts the blame on the borrower, saying 1.) they should read the fine print and 2.) they have no other place to turn if they have a financial emergency because banks will not risk the loan. Was it a reasonable alternative when the legislature in 2002 passed a law allowing people to be subject to 391% usury by signing an acceptance contract? Was it a reasonable alternative that in that first year of legalization, the payday revenue in the state of Virginia alone amounted to $165.7 million and just three years later, 2005, the industry revenue (again just in Virginia) amounted to $1.2 BILLION! Could it have something to do with the fact that there were 17 lobbyists who spent over ONE MILLION dollars, lobbying for the payday loan industry? My question to the legislators who voted for this law is, "Which of you fathers, if your son asks for a fish, will give him a snake instead? Or if he asks for an egg, will give him a scorpion?" Luke: 11-12
Payday lenders as with all other lenders should be capped at 36% APR and that cap should apply for those that sell used cars as well! God calls us to be compassionate, to help the poor and the needy not to take advantage of them and increase their suffering! By the way, the payday loan industry tries to "pitch" that they fill a useful need for those that just need to take care of an unforeseen emergency. However, the AVERAGE number of loans per borrower is 8 (eight!)!
What am I asking Pastors to do? Because we are 501 (c)3s, we cannot lobby. But we CAN educate. Please make a way to inform your congregation of this evil in our midst and let them know the only resolution is for the legislature to withdraw the ability of this industry to practice legal usury. This will only be done if enough concerned people speak up.
One other thought: Not only are churches paying out more money to help the loan victims, but Social Services is also paying out more money to assist them. Translated: That's spending more of our tax dollars to payday loans! I was just informed of another example that will strike close to home: One church just counseled with a member who borrowed $300 to help cover his household expenses. He is now way in over his head and STILL owes $1,200.00! Had the church been made aware of his plight it would have been 4 times cheaper to have paid the $300! I wonder how many times this has occurred in your church?
Please share with me anything you can suggest to help reverse this injustice. God Bless,
Raymond H. Klein, Jr.
Executive Director
Love INC (In the Name of Christ)
198 Spotnap Road, Suite C-1 Charlottesville, VA 22911
(434) 293-6060
dirloveinc@embarqmail.com
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