The prophet Micah proclaims that the Lord requires his servants to act justly and to love mercy and walk humbly with God (Micah 6:8).
The Hebrew word for justice, “misphat,” used in Micah 6:8 appears more than 200 times in Scripture.
This reminds us that our faith (or humble walk with God) is to have practical implications beyond our personal salvation; it affects our relations with others.
The pursuit of justice is a mark of discipleship just as Bible study, prayer, evangelism and corporate worship.
In Isaiah 58, God demonstrates his seriousness about justice by rejecting other forms of sacrifice, such as fasting and burnt offerings, because the Israelites refused “to loose the chains of injustice,” “to share food with the hungry” and “provide the poor wanderer with shelter.”
This is not just an Old Testament command; it is present in the New Testament as well (for example, Luke 4:18-19, Galatians 2:10 and James 1:27).
Clearly, we have a responsibility to pursue justice for the poor and the vulnerable in our day as well.
One way we can pursue justice for the poor and vulnerable is to speak out against financial exploitation of the poor, which includes the practice of lending money at an unreasonable rate, for example, payday and auto title lending.
For those who may be unfamiliar, a payday loan is supposed to be a loan that a borrower pays back in about two weeks, usually the borrower’s next payday.
But, in practice, most borrowers are not in the financial position to payback the initial loan in two weeks. Instead, they pay a fee to rollover the loan for another two weeks.
Most borrowers think that some part of the money they pay to rollover (or extend) the loan will go toward paying down the principal like the way they might make a credit card payment. In reality, it does not.
Auto title loans work in a similar way, except that borrowers sign over their car title for collateral and borrow larger sums of money.
In Texas, the average annual percentage rate (APR) on a payday loan is 608 percent. That means a person that borrows $500 must pay $1,100 in order to pay off the loan two weeks later.
If they cannot pay the full $1,100, they pay a fee to roll the loan over for another two weeks, all while the amount they must pay in a lump sum to get out of debt grows.
As you can imagine, for the poor and financially fragile, this can quickly snowball into an insurmountable hurdle to financial freedom and independence.
Advocates seeking to reform the payday loan industry call this a “debt trap” because it is more financially lucrative for payday lenders to continuously rollover loans than to structure payments in a way that allows borrowers to pay back their loans.
For auto-title borrowers, this debt trap risks their means of transportation to and from work.
Payday and auto title lenders exploit the poor to the tune of almost $9 billion in payday loans and $3 billion in auto title loan fees. According to research, payday loans increase personal bankruptcy rates.
While the financially fragile may need quick access to a line of credit to cover unexpected financial emergencies, lenders should not take advantage of their dire straits by pushing them over the edge.
As Christians called to pursue justice and remember the poor, here are some ways we can stand in the gap for our financially fragile neighbors and friends.
1. Advocacy
We can demand our government implement laws and rules to prohibit the most abusive practices of the payday and auto-title lenders.
Currently, the U.S. Senate is considering the CHOICE Act, which is designed to roll back many of the consumer protections implemented as a part of Dodd-Frank, including a special carve out for payday and auto-title lenders that would prevent the Consumer Financial Protection Bureau (CFPB) from regulating the industry.
The CFPB is one of the few governmental entities successfully curtailing abusive practices so this carve out is bad for poor borrowers.
For more information on payday lending advocacy efforts, please contact me at kathryn.freeman@texasbaptists.org.
2. Financial education
Offer free financial education classes to church and community members. Curriculum units from Crown Financial Ministries or Financial Peace University can be used to teach budgeting and savings techniques that will protect the financially fragile from payday and auto title lenders should an emergency expense arise.
3. Promote alternative lending solutions
Some churches combat payday and auto-title lending in their communities by creating their own credit unions or employer-based loan programs that offer low-cost, small-dollar loans.
While every church may not be able to create loan programs, churches can advocate and partner with other local institutions to brainstorm alternative lending solutions.
Texas based nonprofit, Texas Appleseed, has created a great resource toolkit for cities to increase access to fair, low-cost loans, which can be found here.
Psalm 82:3 proclaims, “Defend the weak and fatherless; uphold the cause of the poor and the oppressed. Rescue the weak and needy; deliver them from the hands of the wicked.”
As Christians, we have a responsibility to uphold the cause of the poor, which includes preventing their financial exploitation at the hands of greedy payday and auto-title lenders.
Kathryn Freeman is director of public policy at the Christian Life Commission of the Baptist General Convention of Texas. You can follow her on Twitter @KathrynAnnette.
Editor’s note: This article is part of a series of articles focused on predatory lending practices within the payday loan industry. Previous articles in the series are:
Faith Community Fights for Payday Lending Reform
8 Ways Your Church Can Help Folks Escape Debt Trap
