Pope Francis once called usury, the practice of lending money at unreasonably high interest rates, a “dramatic social ill.” The Pope went on to say, “when a family has nothing to eat, because it has to make payments to usurers, this is not Christian, it is not human.” Unfortunately, predatory lenders are allowed to flourish behind the walls of Louisiana's varied storefront payday lenders. With a bill to increase high-cost loans before the Louisiana State House and Congress possibly voting soon on resolutions to repeal the Consumer Financial Protection Bureau’s “payday loan rule,” lawmakers could give payday predators their blessing.
Predatory lending and usury date back to ancient times, with storefront payday lending representing just the latest iteration. While much has changed over the centuries, the concept remains the same — provide high-cost loans that exploit people’s financial hardships.
At triple-digit interest rates, payday lenders take a big bite with on each individual loan. But they don’t stop there. These predatory lenders count on needy borrowers’ inability to repay their loan and meet the next month’s expenses, forcing people to reborrow or “roll over” their loan — for a sizable fee. A study conducted by the Consumer Financial Protection Bureau (CFPB) found 80 percent of payday loan borrowers either roll over their loan or re-borrow within 14 days.
Louisianans living in poverty are ripe for exploitation by predatory lenders. It is payday predators’ concerted targeting of the most vulnerable among us that led the CFPB to issue its “payday loan rule.” The rule would force payday lenders to assess the borrower’s ability to repay their loan, much like credit card companies must do.
The Louisiana Budget Project reports that the annual percentage rate for a payday loan in our state can be as high as 780 percent, compared to an annual percentage rate of 24 percent for major credit cards. Thus, applying some of the same consumer protections as credit cards to payday loans makes sense.
But payday lenders are digging deep into their pockets to shield their predatory business practices from commonsense reform. The sponsors of the resolution to kill the Consumer Bureau’s rule in the House (H.J. Res.122) have taken $471,725 from the payday loan industry, while the sponsor of the Senate resolution (S.J. Res. 56) has received $35,800.
But money can’t buy a clean conscience. As the Catechism of the Catholic Church teaches: “those whose usurious and avaricious dealings lead to the hunger and death of their brethren in the human family indirectly commit homicide, which is imputable to them.”
Lawmakers in Washington and Baton Rouge must reject efforts to pull back consumer protections from payday loans — efforts tantamount to throwing vulnerable Louisianans to the wolves.
professor, University of Louisiana