Monday, March 5, 2007

The following, paraphrased editorial is courtesy of The State:

“Lord, who shall abide in thy tabernacle? who shall dwell in thy holy hill? … He that putteth not out his money to usury, nor taketh reward against the innocent. “ - Psalm 15:1, 5

Uisury is banned by many religions, but it’s alive and well in South Carolina.

It’s called payday cash advance lending.

Shamefully, South Carolina law allows these lenders to charge fees that amount to an annual interest rate of 391 percent. Many of the borrowers who end up paying the outlandish interest are the poor, the elderly and minorities.

South Carolina payday loan lenders continually say they don’t target such groups, but studies suggest otherwise. The lenders say they target middle-income Americans, folks who make $25,000 to $50,000 a year. But it doesn’t really matter who their targets are. No one, whether they’re black or white or Hispanic, young or old, rich or poor, deserves to be subjected to a nearly 400 percent interest rate.

Payday lenders say they provide a needed service. They say their customers lack access to traditional forms of credit, although credit unions offer small loans at much cheaper rates. It’s even cheaper to use a credit card or go to a finance company.

Guarateed payday loan lenders seem to suggest it’s OK to charge an obscene rate because they cater to borrowers who are desperate and may have no where else to turn.

For centuries, the term “usury” described the lending of money for any amount of interest, no matter how small. But it has come to refer to the practice of charging excessive rates. The Bible doesn’t support usury; it’s considered a sin. Exodus and Leviticus prohibit instant cash loans with interest. Deuteronomy prohibits charging any interest. Consider these scriptures:

Deuteronomy 23:19, 20: “Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury of any thing that is lent upon usury: Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury: that the Lord thy God may bless thee in all that thou settest thine hand to in the land whither thou goest to possess it.”

Leviticus 25:35-37: “And if thy brother be waxen poor, and fallen in decay with thee; then thou shalt relieve him: yea, though he be a stranger, or a sojourner; that he may live with thee. Take thou no usury of him, or increase: but fear thy God; that thy brother may live with thee. Thou shalt not give him thy money upon usury, nor lend him thy victuals for increase.”

Exodus 22:25: “If thou lend money to any of my people that is poor by thee, thou shalt not be to him as an usurer, neither shalt thou lay upon him usury.”

God calls us to use the resources he has given us to help people in need. But I don’t believe the Bible prohibits charging reasonable interest. In two parables, Jesus told stories about men who went on journeys, each of whom left a certain amount of his wealth in the care of multiple servants. In both cases, Jesus refers to the men’s expectation that their servants would invest their money in a bank or with exchangers to yield a profit.

Payday lending is little more than financial bondage in which lenders charge desperate people usurious rates. Lenders lure borrowers in with the offer of quick, easy short-term loans. But many consumers end up in long-term cycles of debt, having to borrow from fast cash advance lender after payday lender to pay off previous loans.

Some lawmakers and consumer advocates are trying to rein the industry in. The best thing would be to ban it. That’s what Sen. Robert Ford, D-Charleston, and Rep. Lonnie Hosey, D-Barnwell, want to do. Both have proposed bills that would criminalize payday lending.

If lawmakers don’t ban the same day payday loans, they should embrace the compromise offered by Rep. Alan Clemmons, R-Horry. He proposes capping the interest rate for payday loans at 36 percent, allowing a $5 fee per loan and limiting the amount of outstanding loans a borrower can have with a given company to one.

Payday lenders say they can’t survive without the rate. If the only way for them to survive is to apply burdensome fees and plunge borrowers into deeper debt, they shouldn’t exist.

South Carolinians aren’t the only ones being duped. Folks across the country are being hit with outrageous rates, some as high as 1,000 percent. About a dozen states, including North Carolina and Georgia, have banned payday advances, and others are considering tighter restrictions.

Payday lenders see the writing on the wall and are trying to make changes to keep legislatures from cracking down hard. The Community Financial Services Association of America, a trade group representing about 60 percent of payday lenders, recently issued new best practices its members say they will follow. Among other things, they include allowing customers who can’t pay a loan on time a few extra weeks at no added cost; banning advertising that promotes loans for frivolous purposes; and launching a campaign to encourage the responsible use of payday loans.

Don’t believe the hype. This is only window dressing. It doesn’t address the real problem — the sky-high interest heaped on repeat customers.

In a word, faxless payday loan lending is usury, which is morally reprehensible and against God’s will. Why is it legal in South Carolina?

This entry was posted on Monday, March 5th, 2007 at 6:25 am and is filed under South Carolina.