predatory lending payday loans

Predatory Lenders at Large

From the street, they appear harmless, even enticing. Promising fast cash to cover everything from school expenses to doctor bills, payday lending stores — also known as check cashers — offer quick loans to be paid back in full in two weeks.

When her husband was out of work, Sandra borrowed $500 from a payday lender to pay her car insurance. Over the course of the next two years, Sandra and her husband borrowed a total of $2,510 and ended up paying $10,000 in fees! That’s because most payday lenders set outrageous interest rates, some starting at 390 percent APR! According to the Center for Responsible Lending, the average customer will end up paying $800 for a $300 loan.

Why would anyone do this? Well, you might if you didn’t have any other options. Of the 12 million Americans who take out payday loans, many have been turned down by banks or credit card companies because of poor or no credit score.

When you boil it down, it’s a financially vulnerable people that has fallen victim to human greed.

Many state governments have tried to enforce interest caps on predatory lending. And 16 states have even banned the business. Not surprisingly, these groups are experts at slithering their way around the laws, by transacting online, for example, or incorporating under the jurisdiction of Indian Reservations, which are immune to state interest-rate caps.

This could be one of the biggest justice issues of our day, and one that the church, as the leading defender of the poor and the vulnerable, needs to take seriously.

In Pittsburgh, one church has. Allegheny Center Alliance Church has confronted the problem head-on — not by going after predatory lenders, but rather by creating an alternative. Started in 2007 by Tony Wiles and Dan Krebs, two men connected with Allegheny Church, Grace Period, Inc., offers loans up to $500 with 13 days free. Working in partnership with a local credit union, Grace Period aims to turn its clients into savers rather than borrowers, by implementing a system in which they contribute to a credit account while paying off their loan. Members are free to dip into their credit accounts as they have need. To date, more than 3,600 people have accessed free loans through the company Grace Period.

Protecting Military Members from Predatory Lending | DoDLive

As a lifetime military family member, I’ve seen first-hand the devastating impact financial scams and predatory lending can have on our military families. I also spent 6 years as the head of the Better Business Bureau’s BBB Military Line program, and that was an education for me about the consumer issues and scams that impact the military. Unfortunately there are still too many young troops learning financial lessons through hard experience and years of paying off expensive debt.

At the Consumer Financial Protection Bureau’s Office of Servicemember Affairs, our job is: to educate and empower servicemembers to make better-informed decisions regarding consumer financial products and services; to monitor their complaints about consumer financial products and services — and responses to those complaints; and to coordinate the efforts of Federal and state agencies to improve consumer protection measures for military families.

In support of our mission, we signed a  Joint Statement of Principles  with the Judge Advocate Generals (JAGs) from all the service branches. This agreement coordinates the exchange of information concerning military consumer complaints and it coordinates actions taken to protect servicemembers. We’ve also set up a working agreement with the Department of Veterans Affairs (VA). We are now referring any military personnel or veterans who call the CFPB’s hot line claiming that they are in danger of foreclosure directly to the  VA Home Loan Program .

As to our educational mission, I think that it’s important to get out and hear from military families about the issues that concern them the most. I’ve visited bases all over the United States since I started my job last January. I’ve also met with the National Guard in Oklahoma, Ohio, Illinois, and Indiana.

So what are the issues that have come up? First, the housing meltdown has hit military families hard when they receive orders to move. Often they can’t sell their home for enough to pay off the mortgage; they can’t rent it out for enough to cover their mortgage payments; they’re told they can’t get a loan modification or short sale because they’re not yet delinquent; and they can’t refinance for a good rate because it will no longer be considered their principal residence once they leave. We’ve heard of a number of cases where the servicemember has opted to go alone to the new duty station, and that’s pretty tough when you consider that they may have just had an overseas deployment and the family is now facing another separation — this time for financial reasons.

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