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Forgive Us Our Debts

It seems particularly cruel to charge exorbitant fees to families and individuals already struggling financially. The Bible pronounces stern judgment on those who exploit the poor for profit. That same judgment falls on those who stand silent and let it happen.

According to American Consumer Credit Counseling Inc., Americans have over $1.6 trillion in personal debt. This figure does not include home mortgages. Of this amount, nearly $700 billion is credit card debt, with an average interest rate of 18.9 percent.             <?xml:namespace prefix = o ns = “urn:schemas-microsoft-com:office:office” />
A credit survey conducted by Visa found that 48 percent of credit card owners only pay their minimum monthly payment. On a balance of $3,900 with an interest rate of 18.9 percent, paying only the minimum monthly payment, it will take 36 years to pay off the balance. The card holder will have paid $10,000 in interest. No wonder that since 1996 more than a million households have had to seek relief from their debts in bankruptcy.             
Unfortunately there is an ugly underbelly of debt that these numbers do not reveal. In addition to credit card debt, billions of dollars turn over weekly in the so-called payday loan industry. Patrons of payday loans are typically folks who are not able to secure credit from banks, loan companies or credit cards.           
If, however, they have a regular job and a checking account, they are probably eligible for a short-term cash advance. The patron signs a post-dated check made out to the loan company for the amount of the loan and a fee. The amount of the fee varies, but can range as high as $20 on a $100 loan. At the end of the loan period, usually one or two weeks, the loan company simply deposits the check.           
I will let you do the math yourself, but if a $100 loan costs $20 for a week, how much would it cost for a year? If you come up with an annual rate of about 500 percent, you are pretty close.           
Looking at these return rates it should not come as a surprise that payday loans have become big business. First Community Bank of Lacey, <?xml:namespace prefix = st1 ns = “urn:schemas-microsoft-com:office:smarttags” />Wash., owns several payday loan shops in Alabama and Arkansas. After only one year in the business, the payday loan department accounted for 20 percent of the bank’s total earnings. Twenty percent!             
There are multiple issues at work here that faith communities might help to address. The use of credit cards is driven by both a compulsive consumerism, as well as poor cash management. The resulting debt, whatever its source, saps the financial strength of families and leaves them balanced precariously on the edge of bankruptcy and poverty. Houses of worship that offer money management and debt counseling provide a useful ministry to families trapped in these insidious debt cycles.           
Payday loans are more complicated. Patrons of these services have often already slipped under the wire of so-called credit worthiness. In many instances, the issue is not compulsive spending, but simply not having enough cash to meet basic needs. Families who turn to payday lenders often do so as a desperate last resort.           
It seems particularly cruel to charge exorbitant fees to families and individuals already struggling financially. The Bible pronounces stern judgment on those who exploit the poor for profit. That same judgment falls on those who stand silent and let it happen.   
James L. Evans is pastor of Crosscreek Baptist Church in Pelham, Ala.