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.
