It’s a Trap!: Faith Response to Payday Lending

Coyote & Trap

How people are getting trapped. . . (Nina’s Story)

Nina McCarthy applied for a payday loan out of desperation, yet over time this financial instrument morphed into a steel trap. The trouble began three years earlier when her car broke down one night on her way home from working the night shift at a group home for girls.

  • Salary: $14.42 an hour for 40 hours a week.
  • Cost of car repair: $600

To make the repair, she went to Check Into Cash, a small dollar lending company near her home in Richmond, Virginia. The company offered three options:

  1. Payday loan secured against a her paycheck
  2. Title loan secured against her car
  3. Open-end loan establishing a line of credit.

The loan required payment every four weeks. Nina needed only a checking account and a steady source of income to qualify.

Nina went for Door # 3, the open-end loan.  From that point on, every month for the next three years, Nina went into Check Into Cash on her payday and paid off the loan and immediately took out a new loan. No interest to pay. What a deal!

The trouble began when Nina’s overtime hours at work were cut. In response, she began making a partial payment, and at that point interest began to accumulate.

  • Interest rate: 24.9 %
  • Annual interest rate: 300%

In the first three-quarters of 2014, Nina paid roughly $1,100 in interest. Then in September, she suffered a stroke and stopped making payments. In January she entered the store and was told she owed $650 on the line of credit.

“I wish I would have never took it out,” McCarthy said. “I wish I would have asked questions, read the paperwork more thoroughly, and just didn’t feel so desperate.” The Washington Post reported on her story last January and how faith groups are trying to help people like her:

How faith groups are responding. . .

In May, a broad-based coalition of Christian groups calling itself Faith for Just Lending called for an end to the practice of predatory lending.

“We urge churches, lenders, individuals and government to each do their part to teach stewardship, offer responsible products, use credit wisely, encourage just lending and put an end to predatory loans. We call for an end to the exploitation of households and families through the payday debt trap.”

The signers represent all parts of the ideological spectrum, including:

  • Center for Public Justice
  • Cooperative Baptist Fellowship
  • Ecumenical Poverty Initiative
  • Ethics and Religious Liberty Commission of the Southern Baptist Convention
  • National Association of Evangelicals
  • National Baptist Convention USA
  • National Latino Evangelical Coalition
  • PICO National Network
  • United States Conference of Catholic Bishops

The group proposes principles that assign equal responsibility to individuals, congregations, lenders and lawmakers for eliminating practices that prey on the poor and vulnerable.

Principles for Just Lending

  • Individuals should manage their resources responsibly and conduct their affairs ethically, saving for emergencies, and being willing to provide support to others in need.
  • Churches should teach and model responsible stewardship, offering help to neighbors in times of crisis.
  • Lenders should extend loans at reasonable interest rates based on ability to repay within the original loan period, taking into account the borrower’s income and expenses.
  • Government should prohibit usury and predatory or deceptive lending practices.

What you can do. . .

  1. Endorse the Principles for Just Lending by signing online
  2. Submit stories on the dangers of payday lending
  3. Encourage Congress to support principles of just lending


Photo: Liborius, IMG_6699.  9.13.14.  Flickr Creative Commons.

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