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ERLC continues call for protections against predatory loans

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WASHINGTON (BP) – The Southern Baptist Convention’s ethics entity is again urging Congress to extend protections against predatory loans to all Americans.

The Ethics & Religious Liberty Commission (ERLC) joined other organizations Monday (Nov. 8) in calling for passage of the Veterans and Consumers Fair Credit Act, which would broaden to military veterans and other Americans the annual percentage rate (APR) cap of 36 percent now in effect for active-duty members of the armed services.

Payday lending, as it is commonly known, often draws poor people into deep debt by charging exorbitant, and often misleading, interest rates. For instance, though an interest rate may be portrayed by a lender as 15 percent, it actually may be only for a two-week period until a person’s next payday. The APR in payday lending averages nearly 400 percent, making it extremely difficult for a borrower to repay the loan.

In a virtual news conference three days before Veterans Day, public policy specialist Chelsea Sobolik told reporters the ERLC “opposes unjust lending practices that exploit the vulnerable, are predicated on consumer loss and trap families in cycles of debt.”

“A business that leaves most of its customers worse off than before does not contribute to the common good,” said Sobolik, the ERLC’s director of public policy.

Southern Baptists, she said, “are opposed to predatory lending practices that target financially unstable persons.”

Messengers to the SBC’s 2014 meeting approved a resolution that opposed predatory payday lending, called for the adoption of just government policies to end the practice and urged churches to provide training in financial stewardship.

“We believe that Scripture offers guidelines for us as we think through honorable lending and borrowing practices,” Sobolik said, citing biblical passages. “We are instructed not to take advantage of the weak. We are instructed not to charge usurious interest. … We are also instructed to seek the good of others.”

The ERLC has worked to end predatory loans as a partner in the Faith for Just Lending coalition, which it helped launch in 2015. The commission again called for regulation of the predatory lending industry in its 2021 public policy agenda.

Other leaders of organizations that are part of the Faith for Just Lending coalition were among those who spoke during the news conference.

Gabriel Salguero, founder of the National Latino Evangelical Coalition, told reporters predatory lending presents “a question about the nation’s moral ledger.”

With enactment of a 36 percent cap, “could you imagine how many people we’re helping buy monthly groceries, how many people we’re helping not be evicted from their homes, how many people we’re helping make ends meet,” he said.

Sobolik said, “Something that seems as minor as a parking ticket, a car breakdown, an unexpected medical bill – those families that don’t have savings, that is kind of the trigger for them to use these payday lenders.”

Predatory loans are “disproportionately affecting veterans,” said Corey Titus, an Army veteran and director of veteran benefits and guard/reserve affairs for the Military Officers Association of America. “What we see is that veterans … are taking out these loans at six times the rate of their civilian counterparts.”

Opponents of predatory loans gained a victory in June, when President Biden signed into law a measure under the Congressional Review Act that rescinded the “true-lender” rule. The regulation, which had become effective last December, enabled payday lenders to collaborate with out-of-state banks and thereby avoid bans on predatory loans in states that had outlawed them.

Critics pointed out the “true-lender” rule made possible “rent-a-bank” schemes in which payday lenders could partner with banks in another state to avoid rate caps. Though 19 states and the District of Columbia have rate caps of 36 percent, according to the ERLC, predatory lenders could charge much more in those states under the rule.

In addition to the ERLC and National Latino Evangelical Coalition, Faith for Just Lending’s steering committee, according to its website, includes the National Baptist Convention, USA; National Association of Evangelicals; Cooperative Baptist Fellowship; The Center for Public Justice; U.S. Conference of Catholic Bishops; Catholic Charities USA; The Episcopal Church; United Church of Christ; Ecumenical Poverty Initiative; and Faith in Action.