It’s tough to be poor. (I know, for my wife and I were quite poor for the first several years of our marriage.) And some of the poor in this country are even poorer because in times of great need they have gotten a loan (or loans) from a payday lender.
A Short Introduction
Payday loans are typically small loans ($500 or less) that people can easily get by walking into a business establishment with a valid ID, proof of income, and a bank account. Such loans are generally due for complete repayment two weeks later, or on the borrower’s next payday.
Payday lenders are plentiful in most states across the country. According to this helpful Aug. 2018 online article, there are approximately 23,000 payday lenders in the U.S., almost twice the number of McDonald’s restaurants. In addition, now there are also many online lenders.
While payday loans might be considered “life-savers” for some people, the problem is the exorbitant interest/fees charged. While the loans provide quick much-needed cash, the national average annual percentage rate (APR) for such loans is almost 400%. (In contrast, last week the average credit card APR was only 17.39%.)
An online investigation of three payday lenders closest to my home here in suburban Kansas City revealed that the interest rates for 14-day loans of up to $500 are from 443.21% to 651.79% APR.
These establishments are often rightly called “predatory lenders,” for many people can’t make their re-payment on time and have to roll over their loans—and Missouri allows up to six rollovers. Consequently, some people end up paying far more in interest than the amount of money borrowed.
An Immediate Goal
The Northland Justice Coalition is a small group here in Liberty (Mo.) where I live. (Northland refers to Kansas City and its suburbs north of the Missouri River.) For the last several months, some of us in that organization have been working on ways to limit payday lenders in our small city.
Because of our work in preparing a petition and obtaining 1,270 signatures, there will be a special election on Nov. 5 giving voters the chance to limit the number of payday lenders in our city and to increase their licensing fees considerably.
On behalf of the group I have written an op/ed piece about this matter for the Clay County Courier-Tribune, our local weekly newspaper, and I am expecting that to be in the Oct. 24 issue.
A Long-term Struggle
Missouri Faith Voices (MFV) is a multi-faith, multi-racial, statewide, nonpartisan organization committed to empowering and transforming the lives of ordinary citizens who have been targeted by unfair policies and practices and oppressed by racial and economic injustice.
In Missouri, only the state legislature can cap the interest rates that lenders can charge. In 2017 MFV made a concerted effort to get the state legislature to place a ceiling on the exorbitant rates now allowed. But they were unsuccessful in their valiant attempt to get approval for a bill that would do that.
Those directly involved in that effort told me that the payday lenders’ lobbying activities—and their generous contributions to state legislators—make it difficult for any substantial changes to be made.
There are twelve states (and D.C.), including Missouri’s neighbor Arkansas, that prohibit payday loans. But in most states payday lending is legal and in some states the interest rate is completely unregulated. There is a limit in Missouri—1,970%!
For us in Missouri and in many other states, seeking new and just legislation limiting the interest rates payday lenders can charge is of great importance.In 2006 the federal Military Lending Act capped the interest that could be charged military personnel and veterans at 36%. Surely, that needs to become the law for all.