“If you make money by charging high interest rates, you will lose it all to someone who cares for the poor.” – Proverbs 28:8
AUGUSTA — If there is one thing Mainers have been clear about, we don’t like scams in our communities. By and large our state Legislature has outlawed the worst of the usurious payday lenders, and our attorney general has been able to keep them out, but payday lenders are still tracking people down online and pulling them into loans that are unaffordable and unfair. Vulnerable Mainers pay an especially big price for these lapses, in the form of triple-digit interest rates and loss of financial security.
Last October, the federal Consumer Financial Protection Bureau completed a set of protections to rein in the most abusive practices of payday lenders, by calling on them to make a good-faith assessment of whether a borrower is able to repay the loan before it’s offered and by limiting the “rollovers” and hidden fees that routinely turn these loans into debt traps. Of course, the industry is trying everything it can to get rid of these common-sense guidelines.
In Congress, there are measures in the House (H.J. Res. 122) and the Senate (S.J. Res. 56) to formally repeal the Consumer Financial Protection Bureau’s rule before it can take effect, which will leave low-income borrowers across the country and those here in Maine at the mercy of the worst actors of the payday loan industry. Regardless of what happens with that effort, payday lenders are counting on Mick Mulvaney, the consumer bureau’s acting director, to undo these community protections, as he has hinted he intends to do.
Payday loans are marketed as a form of emergency consumer credit – a quick fix to help people get out of a financial jam. Here’s the key thing, however, to know about these loans: They’re easy to get, but, by design, hard to repay. In fact, most payday loans are taken out to pay off previous payday loans, leaving the borrower in a far deeper jam than they were in when they started.
By seeking out the most financially vulnerable neighbors among us, payday lenders guarantee that a large share of their customers will be caught short. Through a default process spelled out in fine-print legalese, most borrowers end up making payment after payment that goes almost entirely to interest, leaving the original balance untouched for months or years on end.
Christians have two powerful reasons to object. In the first place, when a lender’s success rests on the borrower’s failure, we’re talking about a business engineered to undermine people’s dignity. Christians are called to create and support financial systems that respect all persons, because we all bear the image of God.
Secondly, we care about payday lending because of its harmful impact on our communities. Church members and our neighbors struggle with these loan products. When our congregations seek to help people trapped in the payday loan debt cycle, our funds and our parishioners’ contributions end up subsidizing unethical lenders’ profits.
The Bible (along with the texts of most of the world religions) defines usury as a sin. High-cost lending was against the laws of most U.S. states through the greater part of this nation’s history – until only recently.
Over the past 10 years, however, online lenders have been violating Maine law with abandon, with many of them targeting seniors and people living on fixed incomes in the rural parts of our state.
As a practical matter, it is forbiddingly difficult for Maine authorities, on their own, to protect our residents against out-of-state online predators who operate through untraceable shell companies or hide behind new company names and addresses whenever law enforcement gets on their trail.
This is a case where states need more tools to protect their residents. The Consumer Financial Protection Bureau’s protections put more tools into the hands of Maine’s attorney general and our families to protect themselves from scams. We at the Christian Civic League of Maine are hopeful that Sens. Susan Collins and Angus King will oppose any effort to roll back these protections.
A broad coalition of Christian churches and organizations has long advocated for such rules. We have seen the devastating impact of predatory debt traps on the lives of our vulnerable neighbors. While the consumer bureau’s rules will not curb all abuses, they represent an important step forward. Mainers should be fighting to make sure that those entrusted to keep our communities safe do their job and enforce the law.