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In KC, an uphill battle to curb interest rates on payday loans

In KC, an uphill battle to curb interest rates on payday loans

Bravo to the Rev. Susan McCann and others in Kansas City fighting a difficult battle to cap interest rates on onerous payday loans.


As part of Missourians for Responsible Lending, the group gathered the 90,000 signatures required to put a measure on the November ballot to cap those rates at 36 percent. Sadly, the Missouri Secretary of State ruled that too many of those signatures were invalid, so the measure won’t appear on the ballot. While supporters of the measure believe they collected enough signatures, they’ve decided to drop a lawsuit challenging the Secretary of State’s ruling. However, McCann says she and others will continue the fight to curb predatory lending in their community.

“I’m a person of faith, I believe it’s a gospel imperative, I think it’s a mandate,” McCann said. From KCTV5 in Kansas City:

People outraged at the decision to drop the measure from the ballot gathered in Kansas City Wednesday.

The people who gathered outside Speedy Cash Payday Loans are just a few of the volunteers who collected all the signatures and they’re saying the payday loan industry’s legal maneuvering kept the issue of rate capping off the November ballot.

“It wasn’t the will of the people we know if it had gone to a vote we would have won,” Rev. Susan McCann with the Grace Episcopal Church said.

McCann said 60 percent of Missourians believe payday lenders should have limits on what they can charge.

“We have no desire to shut down the payday loan industry, all we desire is a fair equitable interest rate,” she said.

KCTV5’s Justin Schmidt spoke with a payday loan customer. She didn’t want her name used, but said she would have liked to see rate caps.

“They’re high, interest rates are very high. A lot of us are there because we need the money. Kind of low till next payday,” the customer said.

The groups pushing for those regulations wanted to stop the cycle many payday loan customers fall into, of using a loan to pay off the last one. McCann said it’s part of her job as a church leader to fight this fight.

“I’m a person of faith, I believe it’s a gospel imperative, I think it’s a mandate,” she said.

McCann said more than 100 churches across the metro worked to take rate caps to a vote in Missouri. She said the current setback won’t be the end of the fight.

“We will absolutely not give up until we have achieved economic dignity for all people of Missouri,” she said.

Organizers put a lot of thought into where to hold the rally. They decided on Main Street between 39th and 40th, just a few hundred feet from St. Paul’s Episcopal Church and just a few hundred feet from three payday loan shops.

Read full story here.

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John B. Chilton

Gutless state legislators let these businesses thrive. The halls of state legislatures are crawling with lobbyists for the industry who have them eating out of their hand and/or shaking in their boots. At least that’s true in Virginia and South Carolina where I’ve seen it up close.

The same lenders thrive around military training bases.

Bill Dilworth

I’m amazed current laws against usury do not already forbid this sort of predatory behavior.

Maplewood

John: “…I’m just an ivory tower game theorist.” ROFLOL!!! 😀

Yes, you are right. It’s safe to say that most parishes don’t have the expertise to start this kind of program from scratch. But one wouldn’t need to start from scratch; you can go out and get the expertise. That, or have a diocese-wide program which supplies the T’s&C’s of the agreement, et al.

These kinds of loans – $100 to $1000 in size – banks don’t even touch. Too small. BTW, the rates on some of these loans can be 400% or higher at these pay-day joints. (ref: the story linked in the piece).

The problem of rolling over the loan is solved in this scenario by insisting that Loan #1 is paid before Loan #2 is made, and then limit the number of loans made per year until the client takes the “Hand Up!” financial training program.

We can also not loan to the risky. This is micro-lending, so to speak, not micro-giving. 🙂

No doubt, details would need to be ironed out, like maybe it might be necessary to charge a fee: $3.00 for any check under $250, $6.00 for under $500 or something. It’ll take time.

Kevin McGrane

John B. Chilton

Kevin –

I agree with your argument and I don’t.

You’ve stated your side well. I left mine unstated. Here’s go:

Most parishes don’t have the expertise to pick out the good from bad loans.

If you are picking out good loans then you making the same loans that banks would make although at better terms. Unless banks are stupid and not willing to make profit loans. Or it could be that credit unions have advantage over banks in their knowledge of the credit-worthiness within some of the small borrower segment.

I was also responding to the idea suggested that parishes lending at zero interest. At zero interest what incentive do I have to pay back? I just roll over my loan until you say I’m abusing the system. And at zero interest I go to you before I get a loan from a conventional lender — leaving none of the funds left over for the truly needy. Which means the parish would both have to figure if you’re creditworthy and needy.

You have me on experience in banking. I’m just an ivory tower game theorist.

Maplewood

Sarah: Thank you for citing the resolution. I was not aware of it! I will read it. It is very encouraging that the convention recognizes the problem.

John: “Empty pockets?”…Ummm, not necessarily. 🙂 Please consider the following…

Credit unions got their start in the US in churches in the late 19th/early 20th century. (Originally a German invention, which migrated to Canada, then to the US.) Parishioners pooled funds together and loaned them out at very low rates to people who otherwise could not get a loan from a bank, which was most people. My point: churches have a history of doing such things successfully.

Now, if we marry the notion of a credit union with the practices of micro-financing, we could come up with a way to maximize our charity dollars and relieve a tremendous burden on the poor. We replace pay-day loan sharks with parish-based micro-financing/charity. People get loans on their paychecks from the community, they pay it back with their paychecks without interest, and the money we’d normally just give away is re-circulated into the next transaction, leveraging the impact of our donations. The community eats the cost of the transaction in order to save the larger community from predator loan sharks.

We protect our program by not making bad loans. These loans are rather low risk, frankly. (Is it a little obvious I spent 10 years in banking???)

And yes, we could easily incorporate the “Hand Up!” program they have out west, where people get financial counseling.

Kevin McGrane

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