“The rich rules over the poor, and the borrower is the slave of the lender.” – Proverbs 22:7
The Virginia Interfaith Center for Public Policy said today it strongly supports the Consumer Financial Protection Bureau’s (CFPB) proposed rules limiting predatory lending debt traps and will mobilize its membership in to offer comments during the public comment period.
Among the proposals are limits on how frequently borrowers can get payday loans and a requirement that lenders verify that people can repay the money without taking on new debt, avoiding the so-called “debt trap.” These are the first-ever federal rules on the payday, car title, and payday installment lending industry.
“These curbs are desperately needed to protect consumers, and are something the Virginia Interfaith Center for Public Policy has advocated for years,” said VICPP Board president Frank McKinney.
In the Commonwealth of Virginia, such lending is more than a billion-dollar per year industry. The Virginia General Assembly passed regulations of its own in 2008, limiting interest to 36 percent as VICPP and other consumer advocates had sought. Unfortunately many payday lenders simply morphed into car title lenders to avoid many of these new regulations. Since taking action in 2008, little has been done to close some of the lending loopholes. During that time, Virginia has become a hub of car title lenders.
Payday, car-title and other consumer loan companies are major donors to Virginia politicians — to the tune of $4.2 million in the past decade, and $650,000 in 2014-2015, the most recent year for which records are available.
A CFPB report issued in May found that one-in-five borrowers who take out a single-payment auto title loan have their car or truck seized by their lender for failing to repay their debt.
From a faith perspective, there are plenty of reasons to be critical of this abusive and deceptive industry. Just about every faith tradition has some kind of directive again taking advantage of others through us
From the Biblical viewpoint, usury is a serious sin. In modern parlance, “usury” has come to mean “an exorbitant rate or amount of interest in excess of a legal rate charged to a borrower for the use of money.” However, “usury” as used in the Hebrew Scriptures meant simply “the lending out of money with an interest charge for its use; the taking or practice of taking interest.”
The Quran says “Those who charge usury are in the same position as those controlled by the devil’s influence. This is because they claim usury is the same as commerce. However, God permits commerce and prohibits usury.” [2:275]
The CFPB’s announcement launches a 90-day public comment period on the rules.
A factsheet summarizing the proposed rule is available at: http://files.consumerfinance.gov/f/documents/CFPB_Proposes_Rule_End_Payday_Debt_Traps.pdf
The CFPB wants comments on other potentially high-risk loan products and practices that are not specifically covered by the proposed rules. The agency specifically asks faith leaders, journalists and those who have borrowed money from payday and car title lenders to weigh in.
The Request for Information is available at: http://files.consumerfinance.gov/f/documents/RFI_Payday_Loans_Vehicle_Title_Loans_Installment_Loans_Open-End_Credit.pdf
June 2, 2016
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Virginia Interfaith Center for Public Policy
1716 East Franklin Street
Richmond, VA 23223
(804) 643-2474