Payday loans and car titles need reform
By Rabbi Gary S. Creditor
When my wife and I applied for our first credit card, I eagerly waited for it to arrive. When we applied for our first car loan, I had no doubts that we would be approved. When we applied for our mortgage, I was also certain, but amazed at the amount of paperwork involved and the amount of information required. Never in our lives have we needed short-term loans or had to give title to our car as security for a loan.
We have been blessed.
But for so many Virginians, their financial reality makes it impossible to get the loans and mortgages I received, so they have to go to the nearest payday lender. Then they often find themselves trapped in a terrible scenario from which there is almost no escape. In the Commonwealth, payday and car title lenders can charge interest rates of 200 and 300%. Although borrowers intend to take them as short-term loans to tide them over in the event of an emergency cash crunch, it often doesn’t turn out that way.
People who already struggle to pay their grocery bills or keep the lights on end up paying more interest and fees than the original amount they borrowed. For example, in Virginia, the average car title loan is $1,116 and the average reimbursement cost is $2,700. Virginia also has one of the highest car foreclosure rates in the country. Those in the weakest financial situation often sink deeper into poverty. For those who lose their car titles lose their means of transport to work in order to earn money to repay loans! Virginia has the dubious distinction of having one of the highest car repossession rates on title loans in the country because our laws have unusually weak consumer protections.
Any cursory reading of Scripture, especially Leviticus and Deuteronomy, finds numerous commandments whose ultimate goal is the alleviation of poverty and the elevation of the poor to equitable financial status. Just substitute current terminology for agricultural terms. While the main objective may be utopian, namely to eliminate poverty completely, in the meantime; The scriptures compel us to care for and care for the poor, the needy, and those unfamiliar with the intricacies of modern finances.
How clear are the following verses: “Do not put a stumbling block before the blind”, [Leviticus 19:14] and “Cursed be he who leads the blind astray.” [Deuteronomy 27:18]. “Don’t steal from the poor because he is poor! [Proverbs 22:22]. While scripture was composed centuries ago, its words echo with force and urgency to our legislators in Virginia. They must regulate this industry and put an end to these practices that can cause financial ruin and lead to eviction and homelessness.
The countless religious communities of the Commonwealth of Virginia can find endless quotations in their sacred texts that echo the words of Leviticus, Deuteronomy and Proverbs. In unity, religious communities raise this issue and together demand that the General Assembly adopt laws to remedy this situation.
As a member of the Virginia Interfaith Center for Public Policy, I thought we were successful in championing this cause. In 2008, certain limits on payday loans were adopted. But lenders quickly turned to offering “open credit,” like a credit card but with 300% interest, exploiting another part of Virginia’s legal code where they aren’t required to obtain a license. and can charge unlimited rates. Virginia is one of six states whose lending laws are so weak that payday lenders operate that way. Our state legislators have attempted reforms over the years, but lenders have successfully blocked or circumvented the rules, so now we must redouble our efforts and demands.
While our economy appears to be thriving with low unemployment rates and a strong stock market, the truth is that the gap between the weakest members of our society and those with the highest incomes has widened to epic. Vulnerable people are more vulnerable than ever. I realize that there will always be people who need access to immediate capital and liquidity and companies who will accept different levels of risk to make it available. These lenders don’t need to rip people off with such usurious rates.
Evidence from other states shows that carefully crafted laws can ensure strong safeguards for these businesses while allowing widespread access to lower-cost credit. In fact, some of the same companies operating in Virginia today charge up to 300% interest charge less in other states. Why should our laws allow our citizens to be exploited? The scriptures command: “There shall be one law for the citizen and for the stranger who dwells among you. [Exodus 12:49]
The possibility of a fair market where all loans have affordable payments, reasonable prices and strong consumer protections is already a reality in other states. It’s a goal that church leaders in Virginia have long been calling for, and the time has come.
The Virginia Interfaith Center for Public Policy and the Virginia Poverty Law Center are working with partners and lawmakers to take action to protect consumers rather than predatory lenders. Bills demanding comprehensive predatory lending reforms have been introduced by Senator Mamie Locke (SB421) and Delegate Lamont Bagby (HB789) and proceed towards the passage.
This legislation will finally fix the problem and put money in the pockets of Virginia families who live paycheck to paycheck. Faith communities across the state are being mobilized to make sure they do.
Scripture, respected and honored by all religious traditions, requires: “Justice, justice you shall pursue [Deuteronomy 16:20].” The time has come. The Virginia General Assembly is the venue.
Rabbi Gary Creditor is a board member of the Virginia Interfaith Center for Public Policy and Rabbi Emeritus of Temple Beth-El in Richmond. ([email protected]).