The Scourge of Payday Loans
Known as a “debt trap,” “easy credit,” and “small-dollar lending,” payday loans have been crippling consumers since the 1970s. Conventional lenders made few loans during that “credit crunch” era. Consumers desperate for access to ready cash had to wait weeks or even months for loan approval.
Subsequently, family financial trauma spawned the payday loan industry. Today, one in six families, according to the Community Financial Services Association, fall prey to these money monsters.
On average, the annual percentage rate (APR) of a payday loan is 391 percent. This astoundingly high APR has led several individuals and organizations to lead efforts to restrict and cap interest.
Many financially strapped churchgoers have succumbed to the temptation of taking out payday loans in an effort to make ends meet. Church leaders recognize those partaking in such a venture often wind up spending exorbitant interest fees that prevent them from ever getting ahead financially.
Chuck R. Greenaway, 39, director of Adult Ministries at James River Church in Ozark, Missouri, began to hear stories of more and more people within the large Assemblies of God congregation caught in predatory lending schemes. Greenaway decided to take action and rally toward change. In 2015, he went to Washington, D.C., along with several other pastors and community leaders from across the country, to meet with representatives of the Consumer Financial Protection Bureau (CFPB) to encourage stronger restrictions on lending practices. Afterwards, the CFPB proposed rules to regulate consumer lending.
Greenaway also has worked with other area residents speaking out on predatory lending practices, including Suzan Schmalzbauer of Faith Voices of Southwest Missouri. Schmalzbauer says she is appalled that Missouri, unlike many other states, does not have a payday lending cap written into its constitution.
“Missouri is the wild West of payday loans,” she says. “Basically, there are no regulations.”
Some state lawmakers have begun to take notice. Recently, Missouri Rep. Lynn Morris introduced a bill that would place a 36 percent cap on interest rates — the same federal law figure that protects active military service personnel. Greenaway believes similar safeguards should apply to civilians.
The Assemblies of God has spoken out about unsound lending practices. George O. Wood, AG general superintendent, wrote an article in 2016 referencing Exodus 23:25-27 and Luke 6:34-36, both of which discourage God followers from taking economic advantage of the poor in their time of need.
Wood calls on the Church to corporately meet the needs of those facing financial hardships while calling for reform of payday lending practices, which he calls a “moral imperative.” Wood suggests true progress is possible with both legal reform and potential immediate solutions from local congregations.
It’s essential for all parties involved — the borrower, the lender, the church, and the government — to participate in fair lending practices, Wood says.