From the street, they appear harmless, even enticing. Promising fast cash to cover everything from school expenses to doctor bills, payday lending stores — also known as check cashers — offer quick loans to be paid back in full in two weeks.
When her husband was out of work, Sandra borrowed $500 from a payday lender to pay her car insurance. Over the course of the next two years, Sandra and her husband borrowed a total of $2,510 and ended up paying $10,000 in fees! That’s because most payday lenders set outrageous interest rates, some starting at 390 percent APR! According to the Center for Responsible Lending, the average customer will end up paying $800 for a $300 loan.
Why would anyone do this? Well, you might if you didn’t have any other options. Of the 12 million Americans who take out payday loans, many have been turned down by banks or credit card companies because of poor or no credit score.
When you boil it down, it’s a financially vulnerable people that has fallen victim to human greed.
Many state governments have tried to enforce interest caps on predatory lending. And 16 states have even banned the business. Not surprisingly, these groups are experts at slithering their way around the laws, by transacting online, for example, or incorporating under the jurisdiction of Indian Reservations, which are immune to state interest-rate caps.
This could be one of the biggest justice issues of our day, and one that the church, as the leading defender of the poor and the vulnerable, needs to take seriously.
In Pittsburgh, one church has. Allegheny Center Alliance Church has confronted the problem head-on — not by going after predatory lenders, but rather by creating an alternative. Started in 2007 by Tony Wiles and Dan Krebs, two men connected with Allegheny Church, Grace Period, Inc., offers loans up to $500 with 13 days free. Working in partnership with a local credit union, Grace Period aims to turn its clients into savers rather than borrowers, by implementing a system in which they contribute to a credit account while paying off their loan. Members are free to dip into their credit accounts as they have need. To date, more than 3,600 people have accessed free loans through the company Grace Period.
The system works because members are rewarded for paying off their loans in a timely fashion. So why aren’t there more places like Grace Period popping up around the country? You tell me! It’s a brilliant idea, and one that seems to work. Not that there aren’t risks, but who ever said that fighting against injustice wouldn’t be costly?
Just because the victims of predatory lending don’t wear visible shackles doesn’t mean that they are any less enslaved. Isn’t it time for the church to get serious about putting predatory lending out of business?
To find out more about how you and your church can get involved in the fight for financial justice visit our website, BreakPoint.org, and we’ll link you to Grace Period.
Folks, this is a great example of Christian worldview in action. Grace Period and others who minister in their communities like this are showing the secular world a better way: a way rooted in the love of Christ that sets the captives free.
Chuck Colson's daily BreakPoint commentary airs each weekday on more than one thousand outlets with an estimated listening audience of one million people. BreakPoint provides a Christian perspective on today's news and trends via radio, interactive media and print.
Publication date: November 11, 2011