This is the part where we "Do justice"

Many progressive people of faith cite Micah 6:8 as one of their favorite verses of scripture: And what does the Lord require of you? To act justly and to love mercy and to walk humbly with your God. This is the part where we do justice...

Last Tuesday's Columbus Dispatch had an article about the B.R.E.A.D. Assembly I attended on Monday, May 7. It's a pretty decent overview of the meeting, attended by 2000 central Ohioans. My quibble is that the people representing the payday lending industry get the "last word" in the article, but I can counterbalance that by sharing the transcript of the part of the meeting where a B.R.E.A.D. representative answered those claims.

After sharing the story of one central Ohio resident who borrowed $500 to help her son in a time of financial hardship and ended up in a cycle of increasing debt, the article by Sherri Williams outlines what B.R.E.A.D. is trying to accomplish with this issue:

BREAD wants the state to cap the payday lending rate at an annual rate of 36 percent, the same limit a federal amendment passed last year used to cap interest rates on loans for military families.

The number of payday lenders in Ohio has increased from 107 in 1996 to 1,562 in 2006, and Franklin County has the most in the state with 183 such businesses, according to a Policy Matters report released in February. The nonprofit group is a policy-research organization designed to broaden the debate about economic policy in Ohio.

Tighter regulation of payday lenders is critical because the average 390 percent annual rate for the short-term loans is excessive, said Carol Roddy, chairwoman of BREAD's research committee on the working poor.

State Sen. Ray Miller, who previously introduced legislation to regulate the industry, said the paralyzing poverty of the payday lending cycle affects Ohioans across the state, including in rural areas and suburbs.

"We are trying to keep people from a position of financial ruin from going from one check casher to the next to try to pay for the first loan and eventually end up in a financial position" they can't get out of, said Miller, a Democrat from Columbus.

Miller, the only state senator at the meeting, proposes an interest-rate cap along with limiting the number of loans a person can have with payday lenders at one time, and developing a statewide database that would track the number of outstanding loans one has with payday lenders.

The Dispatch article includes information from their interview with Jamie Frauenberg, president of the Ohio Association of Financial Service Centers, but a lot of that was addressed in the mock interview with the "loan shark", so I'll conclude with my transcript of that. From the article:

There were no representatives from the payday-lending industry at the meeting last night. BREAD members had a man dressed in a shark costume with feet hanging from its mouth symbolizing a loan shark for a mock interview.

B.R.E.A.D. representative: Now, I don't speak shark, so, have you brought a translator? Good, good. By the way, I see that you're mouth's kind of full there. Working on another customer, eh? (Laughter)

Now, can you please tell us why you feel that your industry should *not* have these reasonable regulations in place?

Shark: Moneymoneymoneygreedygreedygreedymoneymoneymoney!

Interpreter Payday reform is unnecessary overregulation.

B.R.E.A.D. representative: This type of reform protects Ohio consumers from abusive practices, and levels the playing field between consumers and lenders. That's the traditional role of covernment, and this is how we expect our legislators to protect their constituents.

Shark: Powerpowerpowermoneymoneymoneygreedygreedy!

Interpreter Regulation is unnecessary because the industry is designed for occasional users in emergency situations.

B.R.E.A.D. representative: Really? The fact is that the industry *traps* borrowers in a cycle of debt. Ninety-nine percent of all users borrow more than once a year. The industry makes over 90% of their fees on people who borrow five times a year or more, and over half of their fees on people who borrow 13 times a year or more. If the industry is making over half of their money on individuals borrowing on an averge of more than once a month, how can you claim that your product is made to serve an occasional need, or pay for an emergency expense?

Shark: Moneymoneymoneygreedygreedygreedy--ME ME ME!

Interpreter Since the loans are only generally for two weeks, the Annual Percentage Rate, or the APR, is not a valid way to evaluate the cost of payday lending.

B.R.E.A.D. representative: Well, I think that the system you represent traps borrowers, by encouraging them to become frequent users. The majority of them use the service many times a year. APR is a fair way to compare the cost of payday loans with the other types of credit.

So listen to this example: If you borrow $500 using a credit card, you can pay it off in four months, and it will cost you about $550. To do the same with a payday loan, will cost the borrower up to $1200.

Shark: Gimmegimmegimme....!

Interpreter Payday lending is the only way for many of these people to get credit.

B.R.E.A.D. representative: Do you know that currently, twelve states have banned payday lending, (applause and cheers) and there are other options for these customers to get good credit. Also, we're proposing, like the federal government, to cap the rate at 36% APR. If these businesses are unable to operate at that interest rate, there is something wrong with the business!

Shark: Whinewhinewhinecomplaincomplaincomplain...NOOOO!

Interpreter If we regulate payday lending, people will go to illegal loan sharks.

B.R.E.A.D. representative: Payday lending IS legal loan-sharking. It's just a legalized form of usury. The majority of payday users are law-abiding citizens who would NEVER think of visiting an illegal loan shark. That argument is akin to saying that we shouldn't regulate illegal drugs, because that would send drug users to illegal drug dealers! Many banks, credit unions, faith-based organizations and military organizations offer products that are alternatives to payday lending. Regulating payday lending will level the playing field between this exploitative industry, and instead offer other options that are more beneficial to the customer.

So...did you have anything else to say?

Shark: Moneymoneymoney...greedygreedygreedy...me?

Interpreter I can't repeat that.
.................
If you live in Ohio, I hope you will write to your State Senator and let him or her know that you support the proposed legislation. But even if you don't live in Ohio, I encourage you to learn more about the issue of predatory payday lending, and find out what legislation your state has enacted or might be considering.

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