7. Faith Leaders and Community Residents Respond to Payday Lenders in Missouri
PJR Vol. 9, Issue 5, 2019, Predatory Payday Lending:
A Public Justice Problem
Robert Reed is a member of University Heights Baptist Church in Springfield, MO. He served as Chairperson of the Board of Deacons when University Hope was conceptualized, developed, and implemented. Mr. Reed has since been active in the loan replacement program, education and advocacy.
Bob Perry is a retired minister and member of University Heights Baptist Church in Springfield, MO. In addition to other functions in the church Mr. Perry has worked with the University Hope program since its inception, working along with former pastor, Danny Chisholm and Bob Reed.
In the Spring of 2015, a preacher delivered a sermon at University Heights Baptist Church (UHBC). The sermon was based on Luke 4:18. In a portion of the passage, Jesus reads from the book of Isaiah: “The Spirit of the Lord is upon me, because he has anointed me to bring good news to the poor.” This sermon inspired members of the church to become more like Jesus. They wanted to bring “good news to the poor”, and out of their faith convictions, the group decided to come together and study some causes of poverty in Springfield, MO. The group studied issues like childcare, transportation, substandard housing and other community problems. Perhaps, not unlike others, UHBC decided that it was important to create a program that could help those in financial need get out of debt traps caused by payday loans because some if its members were victims and it affected the larger body. Whatever the impetus, they decided to develop a plan to help people escape predatory payday loans.
A payday loan, according to the Consumer Financial Protection Bureau, is “usually a short-term, high cost loan, generally for $500 or less, that is typically due on your next payday. Depending on state law, payday loans may be available through storefront payday lenders or online.” After determining the focus area for their collective efforts, members of the church designed a strategy. To support their efforts, the members of the UHBC congregation received support from the Board of Deacons, and with strong pastoral support, University Hope was established. University Hope had three areas of focus: (1) replacing high interest loans with guaranteed loans at lower interest, (2) financial education, and (3) issue advocacy.
Consumer lending is subject to state laws and regulations, with wide variations among states. Fifteen states and the District of Columbia prohibit extreme high-cost payday lending, with most capping interest rates at 36 percent. Missouri is among the states with the fewest restrictions, allowing payday and other personal loans to average annual percentage rates (APR) of about 350 percent. Borrowers often become trapped in a cycle of long-term debt because of temporary cash flow problems. Problems that fuel the need for payday loans are often related to automobile repairs, unexpectedly high utility bills or income gaps due to health issues or changes in employment.
A public justice framework calls upon government and the mediating institutions of civil society--families, schools, businesses, faith-based organizations--to all do their part to enable the flourishing and well-being of individuals in the political community. Predatory payday lending has a deleterious effect on the family, the welfare of individuals, communities, and the economy, and does not promote economic justice. The church has had, and continues to have, an enduring role in advocating for justice. To help address predatory payday lending, churches can advance awareness of the problem within their congregations and the community, can serve as a source of support and comfort during times of difficulty and finally, according to Faith for Just Lending principles, “churches should teach and model responsible stewardship, offering help to neighbors in times of crisis”. In addition, “government should prohibit usury and predatory or deceptive lending practices,” and “individuals should manage their resources responsibly and conduct their affairs ethically, saving for emergencies.”
Reducing interest on an individual loan from typical levels of 350-450 percent brought a measure of relief to borrowers, but University Hope could barely make a dent in the proliferation of payday lending in Springfield. More than eighty payday and title lending stores were identified in the city. In addition to high interest rates, payday loans also require the lender to have access to a borrower’s bank account, ensuring that payday loan payments take precedence over all other expenses. Lenders do not allow partial repayments of the debt, often resulting in repeated renewals and extensions of the original loan term. To make a meaningful impact, advocacy and education was necessary. Educating the public about predatory payday lending would provide support for advocacy efforts and engage other members of the political community and other institutions of civil society - churches, faith-based institutions, schools, etc.
Civil Society Institutions at Work
As an institution of civil society, the members of University Hope Baptist Church realized that the church had a vital role to play in the flourishing of God’s people and honoring the image-bearing of all individuals. They also realized that they would need to connect with other people and organizations to be impactful. To make this work, University Hope leaders made arrangements with a local credit union to issue, service and collect replacement loans. These loans are guaranteed by deposits made by UHBC.