Payday and car title loans need reform
By Rabbi Gary S. Creditor
When my wife and I applied for our first credit card, I waited with trepidation until it arrived. By the time we applied for our first car loan I had no doubt that we would be approved. When we applied for our home mortgage, I was also certain, but amazed at the amount of paperwork it involved and how much information was required. Never in our lives did we need short-term loans or have to give our car’s title as collateral for a loan.
We were blessed.
But for so many Virginians, their financial reality makes it impossible to obtain the loans and mortgages I received, so they must go to the nearest payday lender. Then, they often become trapped in a terrible scenario from which there is nearly no escape. In the commonwealth, payday and car title lenders are able to charge interest rates of 200 and 300 percent. While the borrowers intend for these to be short-term loans to tide them over during an emergency cash shortage, it often doesn’t turn out that way.
People who are already struggling to pay their grocery bills or keep the lights on end up paying more in interest and fees than the original amount they borrowed. For example, in Virginia, the average car title loan is $1,116 and the average repayment cost is $2,700. Virginia also has among the highest car repossessions rates in the country. Those in the weakest financial position are often driven deeper into poverty. For those who lose their car titles lose their means of transportation to work to earn money to repay the loans! Virginia has the dubious distinction of having one of the highest car repossession rates on title loans in the country, because our laws have unusually weak consumer protections.
Any cursory reading of scripture, particularly Leviticus and Deuteronomy, find many commandments whose ultimate goal is the alleviation of poverty and elevation of the poor to an equitable financial status. Just substitute current terminology for agricultural terms. While the chief aim is perhaps utopian, namely to eliminate poverty completely, in the interim; scripture mandates our care and concern for the poor, the needy and those unfamiliar with the complexities of modern finances.
How clear are the following verses: “Do not put a stumbling block before the blind,” [Leviticus 19:14] and “Cursed be he that causes a blind man to stray.” [Deuteronomy 27:18]. “Rob not the poor because he is poor!” [Proverbs 22:22]. While scripture was composed ages ago, its words echo strongly and demandingly of our Virginia legislators. They must regulate this industry and stop these practices that can cause financial ruin and lead to eviction and homelessness.
The multitudinous faith communities in the Commonwealth of Virginia can find endless citations in their holy texts that echo the words of Leviticus, Deuteronomy and Proverbs. In unity the faith communities raise this issue to the fore and together demand that the General Assembly pass laws to address this situation.
As a member of the Virginia Interfaith Center for Public Policy, I thought that we had succeeded in championing this cause. In 2008, some limits on payday loans were passed. But the lenders quickly shifted to offering “open-end credit,” like a credit card but with 300% interest, exploiting a different part of Virginia’s legal code where they are not required to get a license and can charge unlimited rates. Virginia is one of just six states with lending laws so weak that payday lenders operate in this manner. Our state lawmakers have attempted reforms over the years, but lenders have successfully blocked or sidestepped the rules, thus we now must make renewed efforts and demands.
While our economy appears like it’s thriving with low unemployment rates and a strong stock market, the truth is that the gap between the lowest income members of our society and those with the highest incomes has widened to epic proportions. The vulnerable are more vulnerable than ever. I realize that there will always be people who need access to capital and immediate cash and companies who will accept different levels of risk to make that available. Those lenders do not need to gouge people at such usurious rates.
Evidence from other states shows that carefully crafted laws can ensure strong safeguards for these companies while enabling widespread access to lower-cost credit. In fact, some of the very same companies that are operating in Virginia today charging up to 300% interest charge less in other states. Why should our laws allow our citizens be taken advantage of? Scripture commands: “There shall be one law for the citizen and for the stranger that dwells among you.” [Exodus 12:49]
The possibility of a fair marketplace where all loans have affordable payments, reasonable prices and strong consumer protections is already a reality in other states. It is a goal that Virginia faith leaders have long been pushing for, and the time has come.
The Virginia Interfaith Center for Public Policy and the Virginia Poverty Law Center are working with partners and legislators to take action to protect consumers rather than predatory lenders. Bills to mandate comprehensive predatory lending reforms have been introduced by Senator Mamie Locke (SB421) and Delegate Lamont Bagby (HB789) and are advancing toward passage.
This legislation will solve the issue at long last and put money in the pockets of Virginia families who live paycheck-to-paycheck. Faith communities across the state are mobilized to ensure that they do.
Scripture, respected and honored by all faith traditions demands: “Justice, justice shalt thou pursue [Deuteronomy 16:20].” Now is the time. The Virginia General Assembly is the place.
Rabbi Gary Creditor is a board member of the Virginia Interfaith Center for Public Policy and Rabbi Emeritus of Temple Beth-El in Richmond. ([email protected]).
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