By Bob Allen
Members of the Kentucky Baptist Fellowship rallied Tuesday, Feb. 24, at the state capitol in Frankfort, after a Monday afternoon seminar on the “debt trap” created by payday lending.
Speakers at a press conference in the capitol rotunda included Chris Sanders, interim coordinator of the KBF, moderator Bob Fox and Scarlette Jasper, employed by the national CBF global missions department with Together for Hope, the Fellowship’s rural poverty initiative.
Stephen Reeves, associate coordinator of partnerships and advocacy at the Decatur, Ga.,-based CBF, said Cooperative Baptists across the country opposing abuses of the payday loan industry are not anti-business, but, “if your business depends on usury, depends on a trap — if it depends on exploiting your neighbors right when they are at their most desperate and vulnerable — then it’s time for you to find a new business model.”
The KBF delegation, part of a broad-based group called the Kentucky Coalition for Responsible Lending, voiced support for Senate Bill 32, sponsored by Republican Sen. Alice Forgy Kerr, which would cap the annual interest rate on payday loans at 36 percent.
Currently Kentucky allows payday lenders to charge $15 per $100 on short-term loans of up to $500 payable in two weeks, typically used for basic expenses rather than an emergency. The problem, experts say, is most borrowers don’t have the money when the payment is due, so they take out another loan to pay off the first.
Studies show the average payday borrower takes out 10 loans a year. In Kentucky, the short-term fees add up to 390 percent annually.
Kentucky is one of 32 states that allow triple-digit interest rates on payday loans. Previous efforts to reform the industry have been hindered by paid lobbyists, who argue there is a demand for payday loans, people with bad credit don’t have alternatives and in the name of free enterprise.
Lexington Herald-Leader columnist Tom Eblen, a critic of the industry, said Feb. 22 that in fact there are alternatives, and poor people in 18 states with double-digit interest caps have found them.
Some credit unions, banks and community organizations have small loan programs for low-income people, he said. There could be more, he added, if Congress would allow the U.S. Postal Service to offer basic financial services, as done in other countries.
A big-picture solution, Eblen said, would be to raise the minimum wage and rethink policies that widen the gap between the rich and poor, but with the current pro-business Republican majority in Congress he advised readers “don’t hold your breath for that.”
Kerr, a member of CBF-affiliated Calvary Baptist Church in Lexington, Ky., who teaches Sunday school and sings in the choir, said payday loans “have become a scourge on our state.”
“While payday loans are often marketed as a one-time, quick fix for people in trouble, payday lenders’ public reports show they depend on getting people into debt and keeping them there,” she said.
Kerr acknowledged that passing her bill won’t be easy, “but it is urgently needed to stop payday lenders from taking advantage of our people.”
Reeves, who lobbied for payday-lending reform for the Baptist General Convention of Texas before being hired by CBF, said “a sad story has played out” in other states where a courageous lawmaker proposes real reform, momentum builds and then at the last minute pressure from the right lobbyist brings it all to a halt.
“It doesn’t have to be that way here today,” Reeves said. “Money doesn’t have to trump morality.”
“The time is now for Kentucky to have real reform of its own,” he said. “We understand there are people in D.C. working on reform, but I know folks here in Frankfort don’t want to wait around for Washington to do the right thing.”
“A return to a traditional usury limit of 36 percent APR is the best solution,” he urged Kentucky lawmakers. “So give SB 32 a hearing and a committee vote. In the light of day lawmakers know what is right, and we’re confident they will vote accordingly.”
