A group of religious leaders briefly protested outside a Payday America store in southern Minneapolis on Tuesday, hoping once again to spotlight a multibillion-dollar industry that profits from the exploitation of the nation’s poorest residents. Similar protests have taken place in the United States.
Study after study has shown that operations like Payday America – Minnesota’s largest payday loan company – thrive by charging fees and interest rates that often go up to 200% and more on short-term loans. . Those who use these “services” usually find themselves locked in a spiral of debt. Yet politicians in Minnesota and many other states have refused to pass legislation that would place even modest limits on lenders.
On the contrary, the political climate is less favorable today than in recent years. Yet groups such as ISAIAH – a coalition of more than 100 congregations of various faiths – and the Baptist Convention continue to struggle against the political winds, seeking new ways to tackle the problem.
Reverend Billy Russell, president of the Minnesota State Baptist Convention and pastor of the Greater Friendship Baptist Church, announced that the National Baptist Convention hopes to reverse some of the damage done by creating “our own national credit union.”
“We want to make a difference,” Russell said of his organization. “What is happening to our members is horrible. What they do is suck the life force out of the poorest in our communities.
Although details did not emerge until the spring, Russell, who sits on the board of the National Baptist Convention, said his organization is creating a system that would give the poor the ability to provide loans. through some sort of credit union as opposed to payday outfits.
The Holy Trinity Lutheran Church in southern Minneapolis is also set to offer a loan and education program. Church members started a fund for the loan program, called Exodus Lending, and the program received significant help with a grant from the Colonial Church in Edina.
But these well-meaning startups are bumping into what has become a well-established industry. According to a recent study by the US Consumer Financial Protection Bureau – an organization born out of the Dodd-Frank Reform and Consumer Protection Act of 2010 – more than 12 million Americans use the payday loan system each year. Typically, according to the CFPB report, loans are made to borrowers who “renew their loans so frequently that they end up paying more in fees than the amount borrowed.”
Leaders at the protest in Minneapolis and elsewhere are urging the CFPB to use all the powers at its disposal to impose tighter restrictions on payday loan operators. But the Dodd-Frank Act clearly states that the CFPB does not have the power to impose wear limits.
To date, few seem to have the will to tackle payday lenders. (In Minnesota, state law refers to these operators as “small consumer loan lenders,” which sounds nice and benevolent. It should also be noted that the Minnesota Department of Commerce has proposed legislation that would place limits on lenders.)
Minnesota lawmakers came close to meaningful action in the last session. The State House passed a bill that would have prevented borrowers from taking more than four loans per year (although it was not as strong as Commerce Department recommendations).
The bill sought to tackle a common problem: repetition that ends up burying borrowers and making lenders richer. The person applying for a loan of $ 350 for a period of two weeks pays a fee of $ 35. But quite often, another loan is needed to pay off the original loan, and the fees go up. In 2011, the Minnesota Department of Commerce reported that Minnesota residents who took out payday loans paid, on average, an amount equal to an annual interest rate of 237%.
Despite these ugly statistics, the Minnesota Senate only grudgingly addressed the issue last year. Senator Jeff Hayden, DFL-Minneapolis, finally got a very watered-down version of the House bill passed in the Senate. But the session ended before the House and Senate bills could be reconciled.
Given the Republican majority in the House, any effort to reignite a push to put limits on the payday lending industry may seem problematic; Republicans have been particularly reluctant to place limits on the payday industry, arguing that tighter restrictions could simply cause people to turn to loan sharks or internet operations for money. It could leave the poor an even more vulnerable place, say people like Senate Minority Leader David Hann.
And if money speaks in politics, payday lenders may be heard more clearly than their clients. Brad Rixmann, founder and CEO of Payday America, is a major financial contributor to Republican causes, but he has also distributed his money. The LDF legislative caucuses also received generous contributions from Rixmann.
Rep. Joe Atkins, who worked diligently to get the bill through the House in the last session, said he would reintroduce the bill soon. Hayden will also start pushing that rock up the mountain again.
At the federal level, US Representative Keith Ellison urges the CFPB to propose more stringent restrictions.
“We cannot give up,” said Reverend Runney Patterson, pastor of New Hope Baptist Church in St. Paul. “People are very affected. They are trapped in debt. They need help. “