News - Payday lending practices ‘wrong,’ Texas faith leaders argue

Payday lending practices ‘wrong,’ Texas faith leaders argue

March 22nd, 2011 at 3:29 pm

AUSTIN – Gathered on the steps of the capitol, representatives of Texas’ faithful took a stand March 21 for the state’s struggling poor and against the “immoral” and “predatory” practices of payday lenders who “enslave” them in a crippling cycle of debt.

Baptists, Mainline Protestants and Catholics called on legislators to close a loophole that allows payday and auto-title lenders to operate as “credit services organizations” that charge up to 500 percent yearly interest plus fees. Leaders voiced support for legislation set forth by Sen. Wendy Davis, D-Fort Worth and Sen. Royce West, D-Dallas, which would allow payday and auto-title lenders to continue operating, but under similar guidelines as other lenders.

Often serving on the frontlines of helping those searching for assistance, faith leaders reported a significant portion of the people churches seek to help in times of financial need often are struggling to pay off payday loans. A recent survey indicated roughly 20 percent of those helped by Catholic Charities financial assistance also have pay day loans.

“While we are providing $300 cash assistance to a family for food and utilities, that same family has payday loan debt of an average of $455,” said Bishop Joe Vasquez of the Catholic Diocese of Austin. “In effect, our assistance was helping a client pay for a need such as electricity or water, so that our client could continue to pay off a payday lender. Our charitable dollars are in fact funding the profits of payday lenders rather than helping the poor achieve self-sufficiency.”

Jeff Johnson, pastor of First Baptist Church in Del Rio, said many of the people his church helps through a variety of benevolence and micro-enterprise ministries also are dealing with the effects of payday loans.

One, a 23-year-old who supported the rest of her family on her own, turned to First Baptist Church for financial help. She took out a $500 payday loan, had paid $500, but still owed $500, plus fees. The church connected her with a financial mentor who helped her break out of “debtor’s prison.”

When mentally-challenged people receive their social security checks near a Del Rio institution that helps them, payday lenders are there attempting to persuade those individuals to seek payday loans, Johnson said. “It’s a pay day for the payday lenders.”
“As a pastor, I cannot understand how this is in the moral law of this state,” he said.

Charlie Singleton, director of Texas Baptists’ African American Ministries, said the way payday lenders prey on the vulnerable in society, including the poor, minorities, the elderly and the military, “is analogous and tantamount to financial slavery.” The loans these lenders offer take advantage of people in their time of need, trapping them financial constraints many of them cannot escape.

According to representatives at the gathering, a person can receive a $300 payday loan. Four weeks later, that person would need to pay $480 to pay off the loan. By 16 weeks, a person would need to pay $840 to relinquish the loan.

Frederick Haynes III, senior pastor of Friendship West Baptist Church in Dallas, said the current arrangement not only allows payday lenders to profit off creating a cycle of debt, but digs families further and further into debt.

“We throw them a shovel when they already are stuck in a ditch,” he said.

The ethnically and geographically diverse gathering is the latest effort by Texas Christians through a coalition of Texas Impact, the Texas Catholic Conference and the Texas Baptist Christian Life Commission to influence legislators on the payday lending issue. Clergy and laypeople individually have been visiting and writing their respective legislators about the topic. On March 22, many of the leaders who gathered today will testify before lawmakers about the current effects of payday lending.

The efforts of the Christian Life Commission to influence legislation that matters to Texas Baptists are supported by gifts through the Cooperative Program, the primary giving channel of Baptists. In this session, the CLC also has been advocating for the existence and effectiveness of professional prison chaplains, against expanding gambling in the state and in support of funding for education.

Like many legislative issues the CLC deals with, payday lending emerged on the CLC’s radar when ministers began seeing how the lending practices were impacting their members and their communities. Chad Chaddick, pastor of Northeast Baptist Church in San Antonio, said that’s exactly how he came to understand how harmful current payday lending actions are. A woman who took out a $700 payday loan came to the church seeking help. She already had paid $1,800 but still owed $700 and was struggling to get by.

“In many ways, I’m an accidental advocate,” he said. “A family came to us knocking on our door looking for us to bail them out.”

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