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Predatory loans rob from the poor

November 15, 2006 - Springfield, Missouri

It was about five years ago that I opened a very unusual letter. It was from a local Baptist pastor who was asking me to write a column about the payday and car title loan businesses springing up around town. Not only is it uncommon for other pastors to actually ask me to write about a particular subject, but this letter came to me from one of my most vociferous critics. I still remember one of his letters in which he said that he became nauseated every time he drove by our church by simply being reminded that I am a pastor in this community. A letter such as that even I can never quite forget.

But the tone of his letter of request was desperate. Members of his church were being trapped in a cycle of predatory loans from which they could not escape, but he did not feel that he could speak about the evils of these legal extortionists and not be fired. I've never taken this issue on in the way that he wanted me to, in part because my energies have always been committed to other issues and in part because I have naively believed that the state legislature would eventually close the loopholes that allow these businesses to get around Missouri's usury laws and charge more than 400 percent interest on loans which, when a borrower takes out multiple loans to pay off previous loans, can end up being as much as 1,950 percent. It is such an obvious form of robbery from the poor that it seemed impossible to me that they would not be legally forced out of business.

Through the years I have brought the subject up with Claire McCaskill in her capacity as state auditor, and with Jay Nixon, our state attorney general. I have spoken with legislators and lenders. Most recently, I attended a breakfast meeting held by Springfield's Urban Neighborhoods Alliance in which they were promoting a program called "Don't Borrow Trouble," which is intended to warn prospective borrowers about the dangers of predatory lenders.

Everyone seems to want to close down predatory lenders who are preying on the poor and the desperate, particularly the elderly, but there is strong opposition in the legislature from the banking lobby. What everyone seems to know but no one can really prove is that banks are the actual owners of the payday and title loan businesses and they are using their influence in Jefferson City to protect the existence of these despicable businesses. This year, a Kansas City legislator, John Burnett, introduced a bill which would have capped loans in Missouri at 36 percent, which is a terribly high interest rate but at least closer to sanity. The bill never made it to the floor. It is presently still legal in Missouri to charge as much as 1,950 percent interest on a small loan. The number of payday loan businesses has tripled in our area since the time that Baptist preacher wrote to ask for my help.

I believe that we need to find the means to discover and expose the banks that are profiting from predatory loan businesses in order to silence the banking lobby in Jefferson City, and then we need to find the legislative will to pass sane regulations that will stop these businesses from cannibalizing the poor of our state. It won't be easy. No legitimate business will willingly divulge its involvement in such an evil practice, and the profits being made from the resources of the desperate are so huge that these loan sharks will not give up easily. It appears that few have the stomach for the fight, but as of this writing, I am laying my own long-overdue hand on the plow. I'm waiting to see if anyone will join me.

News Source, Roger Ray, Editorial, Religion/Ethics Columnist

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