Legislature must properly address payday loans

Fr. David Randolph
Monday, March 3, 2008

In a recent guest column, Ken Compton, executive officer of Advance America, the nation’s largest provider of payday advance loans, claims that legislation restricting or banning such loans as hurts the consumer. He claims that such lending practices help people “particularly in emergency situations when a payday loan often stands between them and no heat or no transportation to a job.” He used the column to criticize an editorial on the subject by the Anderson Independent-Mail, stating that they “offer no alternatives.”

As a member of the clergy in this community, I am expressing our concern about predatory lending, in particular such companies as those who offer title loans, or payday advance and the like. Lenders profit if they can tempt households into borrowing at extremely high interest rates, and in many cases, leading the borrower into delinquency. Many of these households are less educated, with poor credit and low incomes. Their household financial status can be made worse by these “easy credit” transactions, as the lenders deceive the ones borrowing into believing that the transaction may “solve their financial woes.”

With the borrower’s inability to repay the debt incurred, many of these companies have a “roll-over” plan causing the debtor to increase his obligation thus leading to “debt trap.”

As clergy, we see this practice as a moral issue, as the lenders practice lending amounts over the ability to repay, overcharging interest rates and loan fees, and deceptive targeting of certain consumer segments that are vulnerable to being attracted as consumers. These practices although legal are in my view immoral. Today this business is booming and with the present economic problems facing many today, they will attract those who are suffering economically even more so.

Many states prohibit such loan practices outright or indirectly by imposing usury limits. In states where usury laws were enacted, most companies have closed and or relocated to areas that are more inclined to allow such immoral practices.

Therefore, as clergy who have a responsibility to address moral issues, we call upon our national, state and local legislators to develop and enact legislation to deal with this problem. Recently there were two bills before the South Carolina legislature, limiting lenders to $500 at a time or outlawing such lending practices altogether. The Senate sent the bill limiting the lenders to the House for consideration.

Education, charity and legislation should address this issue. In our communities throughout the state there are several charities that help the poor in emergency situations. Many of these agencies are supported by local faith communities. Thus there are alternatives offered to those in need. As clergy we will commit to educating the community. We call upon our legislators to commit to address this from a legal perspective.

We encourage all in our community to ask our representatives in the legislature to pass one of the bills under discussion.

Together we will be able to eliminate predatory practices in our community.