Faith and Action are Inseparable:  Usury is Wrong

36% APR IS ENOUGH

 

If you lend money to my people, to the poor among you, you shall not deal with them as a creditor; you shall not exact interest from them.

 (Exodus 22:25)

 

The Problem:

The Bureau of Financial Institutions reports that over 3.5 million payday loans were made to 433,537 borrowers in 2006, from 791 payday loan locations in Virginia (that’s more payday loan shops than McDonalds restaurants!).  The Virginia General Assembly passed a Bill authorizing payday lending in 2001. This legislation prohibits payday lenders from renewing, refinancing, or extending a payday loan.  It also prohibits lenders from making more than one loan at a time to a borrower.  However despite these prohibitions, many Virginia borrowers are, in effect, renewing their loans and getting more than one loan at a time:

 

§         Many borrowers get back-to-back loans.  The borrower pays off his loan and then immediately gets a new loan.  Often, the borrower does this repeatedly.  A report done by the Bureau of Financial Institutions indicates that the average number of loans per borrower is 8.  But for 96,831 Virginians, 8 loans could not free them from the debt trap, and they sank deeper still, taking out 13 or more loans in 2006!

 

§         The borrower goes to a second payday lender for a loan to pay-off his first loan and eventually winds up with two, three or more outstanding loans at the same time.  A study funded by the payday industry trade group reported that payday customers use an average of 1.7 different payday lenders per year.

 

 

The Solution:

The Virginia Partnership to Encourage Responsible Lending (VaPERL) and Virginians Against Payday Lending (VAPL) are two statewide coalitions working to protect vulnerable people from the payday lending debt trap.  VaPERL works more broadly on predatory lending issues, while VAPL is campaign-focused, working solely on payday lending.  The two coalitions work in tandem and share membership.  Founding members of VaPERL are the Virginia

Poverty

Law

Center , Virginia

Interfaith

Center for Public Policy, AARP of Virginia, and Housing Opportunities Made Equal.  Other members include Richmond Better Business Bureau, Virginia Credit Union League, Virginia Organizing Project, Piedmont Housing Alliance, New River Community Action, Voices for Virginia ’s Children and others.  Our research and collaboration strongly indicate the need to cap the interest rate of payday loans to 36% APR.

 

 

Theological Foundation

The governor Nehemiah and the infamous tax collector Zacchaeus both understood that faith must be accompanied by action.  Nehemiah, Governor of Judah, had tremendous compassion for the Hebrew people who had returned to Jerusalem from Babylonian captivity.  They were a crushed people, spiritually starved.  Nehemiah not only rebuilt the walls of the city of Jerusalem but he led the Hebrew people to a spiritual awakening, and defended and protected the powerless.  He understood that God cares especially for the poor and marginalized, and after learning that powerless Jews were forced to borrow money on their fields and vineyards in order to pay the King’s tax he was outraged.  He stopped his work on the city walls to bring charges against the nobles and the officials, saying simply, “The thing that you are doing is not good” (Nehemiah 5:9). “Let us stop this taking of interest,” (5:10), and he persuaded them to restore all that they had exacted from their fellow people.  

 

 

Zacchaeus, a chief tax collector, was a rich man whose faith we know little about except that he had enough of it to climb a sycamore tree to get a look at Jesus, and that after having dinner with Jesus he said, “Look, half of my possessions, Lord, I will give to the poor; and if I have defrauded anyone of anything, I will pay back four times as much,” (Luke 19:8).  

 

Both of these men realized, through their faith, a deep understanding of economic justice.  They demonstrated their love for God and for their fellow human beings by not allowing people in higher positions of power to take advantage of the poor. 

 

The work of the faith community to protect and advocate for the poor and marginalized continues today.  Payday lending preys upon financially vulnerable people directly and it indirectly undermines the church’s work, outreach, and contributions to poor and low-income people.  While we work to improve the lives of the less fortunate through our direct giving or through our partnerships with service organizations, predatory lenders are waiting on the sidelines to strip them of any opportunity to turn their lives around.

 

 

Ann W. Rasmussen

Policy Director

P.O. Box 12516

Richmond , VA

23241

(804) 643-2474

ann@virginiainterfaithcenter.org