By Maureen Smith
JACKSON – Despite opposition from faith leaders and financial advocacy groups, Governor Phil Bryant signed an expansion of so-called payday lending into law on Friday, May 15. The new law, officially called the “Mississippi Credit Availability Act,” paves the way for short-term lenders to charge as much as 297 percent interest on loans of $500 for six-months and allows for the same interest rates on 12-month loans of $2,500.
Bishop Joseph Kopacz of Jackson and Bishop Roger Morin of Biloxi sent a joint letter to the governor opposing the bill. “This bill runs counter to Catholic social teaching as well as biblical and legal traditions calling for restraint against usurious lending practices,” reads the letter.
It points out that these loans trap those already in need into a cycle of borrowing and mounting debt. “Scripture warns strongly against abusive lending to those in desperate circumstances saying, ‘if you lend money to my people, to the poor among you, you shall not deal with them as a creditor, you shall not exact interest from them (Exodus 22:25) and ‘do not rob the poor because he is poor’ (Proverbs 22:22).”
The Center for Responsible Lending, a group that advocates for financial justice and inclusion across the country, has been tracking this and similar bills across the nation. “This bill or one with a similar structure, was introduced in 11 states. Mississippi was the only state where it passed,” said Whitney Barkley, policy counsel for the center. “In most places the faith community was able to push back against it,” she added.
Barkley explained that the fees alone can double the payback amounts on loans taken out under this new law. “If you were to take out a $2,500 loan for 12-months, you would pay back $8,000, $5,500 of that is in fees,” she said. A $500 loan with a six-month term would cost $1,021 total.
“What we see is people getting caught in a cycle where they can’t make the payments so they take out another loan and another loan to make payments,” she said. “Research has shown that 75 percent of the fees being charged on these loans are coming from people who have 10 loans or more,” she added.
When someone finally cannot pay, lenders can then get access to borrowers’ bank accounts so they can draft money out before the borrower can pay for rent, food or medicine. Lenders can also sometimes access vehicle titles and personal property. Barkley suggests that people seek help from faith groups or friends before going to payday lenders.
She said often a church or faith-based group can help with smaller shortfalls such as utility bills or rent, but once a borrower has racked up thousands of dollars in fees and interest, the churches can’t help with the larger debts.
The Hope Policy Institute has opposed this law since the bill was introduced, saying in a blog post, “Of most concern are the high costs of borrowing money through this product and its structure, both of which – if kept in the current form – are likely to keep people in a long-term cycle of debt.”
The governor even acknowledged the high cost of payback when he signed the bill commenting, “After careful consideration, I am signing Senate Bill 2409, the ‘Credit Availability Act.’ While I do not believe an installment loan with a 297 annual percentage rate will appeal to most Mississippians, I do believe in greater consumer choice, personal responsibility, and free market principles. This legislation gives consumers another option when seeking emergency cash.”
Other groups opposing the law include the Mississippi Religious Leadership Conference, an ecumenical group, and the Christian Action Committee, which is an agency of the Mississippi Baptist Convention. The Christian Action Committee urged its facebook followers to oppose the law, saying, “There’s nothing wrong with making a profit. But God is opposed to taking advantage of the poor, the weak, and the vulnerable. (Exodus 22:21–24; Deuteronomy 24:10–22; Zechariah 7:8–14).
“Products like the loans authorized by SB 2409 trap Mississippi’s poor in a relentless cycle of debt, driven by unaffordable loans at 300 percent interest rates. In 2014 the Southern Baptist Convention passed a resolution against predatory payday lending, because we believe that the Bible means what it says.”
By Maureen Smith