What is payday lending?
Payday and auto title loans are short-term, high interest loans for small amounts of money that are given to individuals without consideration for a person’s inability to pay. Loans are due in full, typically between two weeks or a month, or must be renewed with high fees and interest only payments. As individuals cannot repay the loans in full, interest rates skyrocket as loans are renewed over multiple terms, creating a cycle of debt that quickly snowballs into a crisis situation. While there is a legitimate business need for short term loans, the model in which these lenders operate prey on desperate people in desperate situations. Instead of alleviating the problem, the loan itself becomes a crisis of its own.
In Texas alone there are over 3,200 licensed and unregulated lending storefronts making over $3 billion in high-cost loans to Texas families each year. In Greater Waco, on average, these entities charge 586% APR. These are usurious rates. More than $10.5 billion is drained from our local economy each year because of excessive fees paid to payday lenders.
Several weeks ago, I had car trouble and found myself with an unexpected $500 repair bill for a new starter. Fortunately, I was able to cover the cost from my savings. But for those who are already living paycheck to paycheck, an unexpected expense like this can derail their budget. Yet, if their car doesn’t work, they cannot get to work, and the situation can quickly snowball. Payday lenders offer an attractive solution – a short-term loan that buys them some time to get to their next paycheck. However, if they are unable to cover that cost with that next paycheck, the cycle begins and they can end up paying hundreds and even thousands of dollars to clear that $500 debt, as the loan drains more and more fund from their monthly budget.
Give us your heart, O God…
"When I heard their outcry and these charges, I was very angry. I pondered them in my mind and then accused the nobles and officials. I told them, "You are exacting usury from your own countrymen!" So I called together a large meeting to deal with them and said: "As far as possible, we have bought back our Jewish brothers who were sold to the Gentiles. Now you are selling your brothers, only for them to be sold back to us!" They kept quiet, because they could find nothing to say. So I continued, "What you are doing is not right. Shouldn't you walk in the fear of our God to avoid the reproach of our Gentile enemies? 10 I and my brothers and my men are also lending the people money and grain. But let the exacting of usury stop! Give back to them immediately their fields, vineyards, olive groves and houses, and also the usury you are charging them--the hundredth part of the money, grain, new wine and oil." Nehemiah 5:6-11 (NIV)
"The Spirit of the Sovereign LORD is on me, because the LORD has anointed me to preach good news to the poor. He has sent me to bind up the brokenhearted, to proclaim freedom for the captives and release from darkness for the prisoners, to proclaim the year of the LORD's favor and the day of vengeance of our God, to comfort all who mourn, and provide for those who grieve in Zion-- to bestow on them a crown of beauty instead of ashes, the oil of gladness instead of mourning, and a garment of praise instead of a spirit of despair. They will be called oaks of righteousness, a planting of the LORD for the display of his splendor." Isaiah 61:1-3 (NIV)
"LORD, who may dwell in your sanctuary? Who may live on your holy hill? He whose walk is blameless and who does what is righteous, who speaks the truth from his heart and has no slander on his tongue, who does his neighbor no wrong and casts no slur on his fellowman, who despises a vile man but honors those who fear the LORD, who keeps his oath even when it hurts, who lends his money without usury and does not accept a bribe against the innocent. He who does these things will never be shaken." Psalm 15:1-5 (NIV)
"He does not eat at the mountain shrines or look to the idols of the house of Israel. He does not defile his neighbor's wife. He does not oppress anyone or require a pledge for a loan. He does not commit robbery but gives his food to the hungry and provides clothing for the naked.He withholds his hand from sin and takes no usury or excessive interest. He keeps my laws and follows my decrees." Ezekiel 18:15-17a (NIV)
Joining In
- Sign a petition calling our state legislators to adopt a 36% APR cap and cycle of debt protections for payday and auto title loans in Texas.
- Texas Fair Lending Alliance
- Citizens for Responsible Lending
- Christian Life Commission
