By Marty Denzer
Catholic Key Associate Editor
KANSAS CITY — The chanting could be heard blocks away: “Go down people, way down in every land! Tell those payday lenders ’Let my people go!’” About 100 people, led by two victims of the payday loan industry processed from Grace and Holy Trinity Episcopal Cathedral to Barney Allis Plaza. They were joined by Kansas City – St. Joseph Bishop James V. Johnston, Jr. and Western Missouri Episcopal Bishop Martin Field, both wearing black cassocks. Another 150 people waving signs and chanting “Got to beat back the shark attack,” met them at the plaza. The groups met in support of proposed changes by the Federal Consumer Finance Protection Bureau (CFPB) to rein in payday lenders.
Those changes would impede high cost, “instant loan” providers — payday, vehicle title and high cost installment lenders — forcing them to verify a borrower’s ability to repay a loan, limiting the number of times a loan can be rolled over, with interest and new fees and, requiring that after two failed debit attempts are made to a borrowers bank account, the lender would have to reach out to the borrower and seek another payment means, helping keep the borrower out of a financial hole.
What is a payday loan? A payday loan is a small-dollar loan whose total balance is typically due on the borrower’s next payday. Since 1998, when the Missouri General Assembly deregulated the “instant loan” industry, costs and fees associated with the loans have surged ever higher. The CFPB states that the median fee on a storefront payday loan is $15 per $100 borrowed, or an annualized rate of 391 percent. The CFPB also found that 4 out of 5 payday loans are rolled over (re-borrowed), most within 30 days, often repeatedly. Each time the loan is re-borrowed, additional fees are incurred, on top of the original fee.
Before the procession to the Barney Allis Plaza rally, a prayer vigil, organized by Communities Creating Opportunities (CCO) was held at Grace and Holy Trinity. CCO invited area clergy members, including Bishop Johnston, Bishop Field, Rev. Susan McCann of Grace Episcopal Church, Liberty; Mayor of Kansas City, Kansas, the Rev. Dr. Mark Holland, senior pastor of Trinity Community United Methodist Church; Father Steve Cook, pastor of St. Peter and St. Therese Little Flower parishes.
In his remarks, Bishop Johnston said, “It’s a great blessing to be with you all today.” He had been thinking about “phrases connected with boxing: low blow, sucker punch, hitting someone when they’re down — all about actions that are unfair, taking advantage of the vulnerable.” The unfair practices and policies of payday lenders —high interest rates, fees and collection activities — “affect not only the victims, but their families too. Often they can’t pay their rent or utility bills, not because they can’t afford to, but because they have fallen into the debt trap of payday lenders.”
He added that, as an example of the spread of the industry, inside the parish boundaries of St. Peter and St. Therese Little Flower parishes (a total area of 5.1 square miles) there are a dozen different payday loan stores. To put that in perspective, there are four grocery stores, two in the Brookside area.
Bishop Field defined usury: “the taking advantage of those who are desperate for your own advantage. Usury does not abide with the holy writings of any religion.”
Blue t-shirts declaring “We WILL not give up! Stop the Debt Trap!” were worn by many at the prayer vigil. CCO stickers were also prominently displayed on clothing. The message was as clear as the chant repeated as the procession moved toward the rally at Barney Allis Plaza.
There Bishop Johnston took the microphone, calling predatory lending “one of the most atrocious things that still exists in our society.” Other speakers recounted experiences with payday lenders or actions to curb them, including Rabbi Alpert; Liz Ryan Murray, Policy Director of National People’s Action; Marla Marantz, a member of Faith Voices of Southwest Missouri, and Elliott Clark of St. Therese Little Flower in Kansas City.
Organizations at the rally supporting the proposed rules included the NAACP, PICO National Network, AARP, the Kansas City-St. Joseph Diocesan Human Rights Office, Faith Voices of Southwest Missouri, National People’s Action, Catholic Charities of Kansas City-St. Joseph and of Northeast Kansas, and more.
Marantz said that predatory lenders view people as marks to be exploited. “It’s time to end psychopathic economics. The market isn’t moral; we need to be. Let’s reclaim our future!”
Elliott Clark, a Marine veteran and St. Therese Little Flower parishioner, fell into the debt trap, as payday loans are often called, in 2003 when his wife slipped on ice, breaking her ankle, leaving her unable to work at her retail job. Hospital bills mounted up, totaling $22,000. Unable to secure a conventional loan to pay off the bill, as a last resort, Clark turned to payday lenders. “I had nowhere else to go,” he said. “I had a family, a daughter in college, bills to pay. I’m an honest man.” He shook his head. “Usury violates faith traditions. It’s just glorified loan sharking!”
Over several months, he took out five $500 loans from five different stores. The lenders withdrew two payments of $95 each month on each loan, a situation that went on for five years. It wasn’t until Clark received disability benefits from Veterans Affairs and Social Security benefits that he was finally able to pay off the loans and the hospital debt. He had paid more than $50,000 in interest and fees over the course of the years, with little or no reduction on the loans’ principals.
Liz Ryan Murray reminded the crowd of efforts to curb payday lending. “We take Elliott’s story and multiply it 12 million times! We need rules to stop rollovers and predators reaching into bank accounts and holding car titles hostage. This is not the end of our fight. We have just gotten started.”
As Bishop Johnston, Marantz, Murray and Rabbi Alpert spoke, the applause from the crowd increased in volume. Now chanting “Hey, hey; ho, ho; payday lenders got to go!,” the group moved away from Barney Allis Plaza and entered Municipal Auditorium’s Music Hall across the street. By the time the hearing began, almost 1,000 people, both supporters of the CFPB’s proposed rulings and supporters, including paid supporters, of the payday loan industry, filled the hall.
Kansas City Mayor Sly James spoke briefly saying, thanks to predatory lending, “$26 million yearly is drained from the Kansas City economy; money that could be spent on food, clothing and shelter for Kansas Citians. Interest rates that go from 36 percent to more than 455 percent are legislative sanctioned rates and are obscene, incomprehensible, immoral and should be illegal!”
Consumer Finance Protection Bureau CEO Richard Cordray told the audience that payday lenders set borrowers up to fail. The new rules proposed by the CFPB, he said, will protect against consumers being trapped in debt, due to repeated rollover of loans, high interest rates and lenders debiting borrowers’ bank accounts often twice monthly without reducing the loan’s principal.
David Silverman of the CFPB added that “The proposed rule will finalize the regulation that payday lenders would have to ascertain if a consumer can repay a loan, and still have the funds to meet other living expenses. After two failed debit attempts, the debits would have to cease, to avoid mounting bank fees for the account holder and the risk of the bank closing the account.”
Several payday lending executives touted “the service they provide to people in need.”
Darrin Anderson, CEO of QC Holdings in Overland Park, Kan., argued against the proposed rulings saying they presume that 70 percent of small dollar loan stores would go out of business. But the rules don’t presume that consumer need for the loans would cease. “The vast majority of our clients are well satisfied with our services,” he said. “And they are well able to pay back their loan. Complaints are nearly non-existent due to state regulations. So far in 2016, we have received only 409 complaints, most due to unlicensed lenders.”
He said the CFPB must answer three questions: 1) Why do so many people use payday loans, 2) Why do companies like QC Holdings (Quik Cash) report high customer satisfaction and 3) What will replace payday lending if they are forced out of business by regulations?
Kirk Chartier of Chicago’s Enova International, an online lender, insisted that his company is “subject to the same laws and regulations as Citi and Wells Fargo.” He added that “40 percent of Americans don’t have prime credit scores. The default experience with subprime loans is higher than with prime loans.”
Furthermore, “of subprime borrowers, 50 percent don’t have $500 saved for emergencies, and only 15 percent can borrow from friends or family. Federal Reserve findings indicate that short-term loans are needed for consumers to stay on top of debt,” he said.
Mayor James had said in his remarks that the number of storefront lenders has spun out of control in Missouri. There are more payday loan shops than Wal-Marts, McDonald’s and Starbucks combined.
Wade Henderson, CEO of Washington, D.C.’s Leadership Conference on Civil and Human Rights, said that the ability to obtain credit is an essential human right. Communities of color have been subject to red lining and abusive consumer lending practices. Saying that a payday loan company verifies that borrowers can repay loans does not verify that they can repay a loan and still pay basic living expenses, such as food, shelter, utilities and transportation.
He quoted the Dodd-Frank Act of 2010, the Consumer Financial Protection Act, which created the CFPB: It is a moral imperative to determine that the financial cure isn’t worse than the illness itself.
Kerry Smith, with Legal Services of Philadelphia, said Pennsylvania is one of 14 states and the District of Columbia that ban payday lending. “Pennsylvanians don’t miss payday loans,” she said. “They are the equivalent of financial quicksand —easy to fall into but almost impossible to escape from. Research shows that consumers in areas where predatory payday lending is banned feel better off.”
Garland Land of Independence, a delegate to the Community of Christ World Conference, said he supported a Conference resolution stating “Predatory lending is offensive to God,” advocated strong rules to curb the industry, and pointed to alternatives to payday loans available in the Kansas City area, including the Community Services League of Independence, which works with Holy Rosary Credit Union to provide loans at lower interest rates than payday or vehicle title lenders.
Galen Carey, executive vice-president of government relations for the National Association of Evangelicals described predatory lending succinctly. “Someone driving down a treacherous mountain road does not need access to the ravine below.”
The CFPB proposed rulings are now subject to a 90-day comment period, before going forward. The Bureau has created a web link for people to share their payday lending experiences. Micah Chrisman of CCO said this is the first time internet comments will make a difference. “Although CFPB as an agency cannot cap the interest rates, it can institute a checks and balances system which is a step in the right direction.” The Bureau is expected to issue a final rule in 2017.
For more information on the Federal Consumer Finance Protection Bureau visit www.consumerfinance.gov.