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Bishop calls for end to payday loans


United Methodist Bishop Minerva Carcaño spoke to congressional lawmakers about “unscrupulous, predatory payday lenders” in a June 4 hearing.
UMNS photos by Michelle C.M. Brooks.

A UMNS Report
By Kathy L. Gilbert*
June 5, 2009 | WASHINGTON (UMNS)

When she became ill, a widow living on $500 a month couldn’t pay her medical bills and still meet her basic cost of living. She didn’t want to be a burden to her children so she got a "payday loan," thinking when she was well enough she could earn some extra money by sewing clothes or making tamales to sell.

She never got well. The stress of the illness and the worry of a loan that kept spiraling out of control cost the widow her home, her independence and eventually her mental well being.

United Methodist Bishop Minerva Carcaño wanted congressional lawmakers to hear that story and others of people she knows who have been victims of "unscrupulous, predatory payday lenders."

The bishop spoke at a June 4 hearing to brief lawmakers on why all families should be covered by a 36 percent rate cap on consumer loans. Payday lenders charge as much as 400 percent interest on loans that usually average $500. For a $500 loan at 36 percent, fees are $180 over one year; at 391 percent, fees are $1,955 over one year.

"Payday lenders are on this very day contributing to the destruction of persons, families and communities all across this country," Carcaño said. She is the bishop for The United Methodist Church in the Desert Southwest Annual (regional) Conference. Last fall Arizona voters rejected an effort by payday lenders to gain exemption from the 36 percent cap.

"Payday lenders are on this very day contributing to the destruction of persons, families and communities all across this country."
-- Bishop Minerva Carcaño

"Arizonans did the right thing in fighting and opposing payday lenders and their deceptive self-serving campaigns," she said. "I pray that Congress will do no less. It is the responsibility of good government to develop and implement sound and just monetary policies that provide for the economic life of corporate entities but also of individuals."

A bill to protect consumers from "unreasonable credit rates" was introduced by Reps. Jackie Speiers, D-Calif., and William Delahunt, D-Mass., in March. The bill states "cash-strapped consumers" pay on average 400 percent annual interest for payday loans, 300 percent annual interest for car title loans, up to 3,500 percent for bank overdraft loans and up to 500 percent annual interest for loans secured by expected tax refunds.

A national cap that includes all interest rates and fees is needed to eliminate "predatory" lending, they said. At the federal level in 2006, Congress passed a 36 percent cap for service members and their families.

Religious, civil rights and consumer groups provided personal accounts about payday loan centers.

"In California, payday centers are two and half times closer to Latino and African American neighborhoods," said Alan Fisher of the California Reinvestment Coalition. The coalition focuses on working with banks to open up lending to minorities and low-income communities. Fisher called payday lending a "debt trap" where people get caught in a cycle of perpetually increasing debt.

Many of the panelists noted that lowering the rate to 36 percent is not the solution to this problem, but is a first step in decreasing the excessive fees on payday loans.

"We need [financial] products that allow sustainability, allow people to continue to live in grace and dignity without being lured into a long term trap," said Hilary Shelton of the National Association for the Advancement of Colored People.

Carcaño said "in civil society, persons, men, women, the elderly, young people and children, always come before profits. Always."

*Gilbert is a news writer for United Methodist News Service in Nashville, Tenn. Michelle C.M. Brooks, digital communications director, the United Methodist Board of Church and Society, provided information for this story.

News media contact: Kathy L. Gilbert, Nashville, Tenn., (615) 742-5470 or newsdesk@umcom.org.

Audio: Rita Haynes, Faith Community United

"...God doesn’t want us to take advantage of anybody..."

"...we also educate and have our members save..."

"We’ll help our members to pay off debts…"

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SC gov vetoes payday lending industry restrictions

United Methodists call for stewardship over greed

Resources

Desert Southwest Conference

United Methodist Board of Church and Society

HR 1608: Protecting Consumers from Unreasonable Credit Rates Act of 2009

Center for Responsible Lending

400 Faces of Payday Lending

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