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Churches fight predatory payday lending with political pressure, small loans

Religion News Service | 11/21/2018, 6 a.m.
Anyra Cano Valencia was having dinner with her husband, Carlos, and their family when an urgent knock came at their ...
Rev. Frederick Douglass Haynes III

Anyra Cano Valencia was having dinner with her husband, Carlos, and their family when an urgent knock came at their door.

The Valencias, pastors at Iglesia Bautista Victoria en Cristo in Fort Worth, Texas, opened the door to a desperate, overwhelmed congregant.

The woman and her family had borrowed $300 from a “money store” specializing in short-term, high-interest loans. Unable to repay quickly, they had rolled over the balance while the lender added fees and interest.

The woman also took out a loan on the title to the family car and borrowed from other short-term lenders. By the time she came to the Valencias for help, the debt had ballooned to more than $10,000. The car was scheduled to be repossessed and the woman and her family were in danger of losing their home.

The Valencias and their church were able to help the family save the car and recover, but the incident alerted the pastoral duo to a growing problem — lower-income Americans caught in a never-ending loan cycle. While profits for lenders can be substantial, the toll on families can be devastating.

Now, a number of churches are lobbying local, state and federal officials to limit the reach of such lending operations. In some instances, churches are offering small dollar loans to members and the community as an alternative.

The opposition is not universal, however. Earlier this year, a group of pastors in Florida lobbied state lawmakers to allow one payday loan firm, Amscot, to expand operations.

An estimated 12 million Americans each year borrow money from stores offering “payday loans,” billed as a cash advance to tide workers over until their next paycheck. The vast majority of borrowers, according to research compiled by finder.com, are 25- to 49-years-old and earn less than $40,000 a year.

The promise of quick cash may seem appealing, but people living paycheck to paycheck often are unable to repay quickly. In Garland, Texas, northeast of Dallas, Pastor Keith Stewart of Springcreek Church said one-third of the people coming to his congregation for assistance cited payday loans as a problem in their lives.

The lenders, Rev. Stewart said, “set up a credit trap and keep people in perpetual payments.” He said he was frustrated to have his church help people with food or rent, only to leave them as prey for the lenders.

For the Rev. Frederick Douglass Haynes III, who pastors the 12,000-member Friendship-West Baptist Church in Dallas, the trigger was seeing a local plant nursery replaced by a “money store” offering payday loans. That was followed by a similar conversion of a nearby restaurant and the transformation of a bank branch into a car title loan store, he said.

“In our community alone, in a 5-mile radius, you had 20 to 25 payday loan and/or car title loan stores,” Rev. Haynes recalled.

Another surprise came when he saw the interest rates the lenders charged.

“The highest I’ve seen is 900 percent; lowest is 300 percent” per year, he said. Officially, state usury laws generally limit the amount of interest that can be charged, but loopholes and fees push the effective interest rate much higher.