Predatory loans prey on the poor and vulnerable

When an 81-year-old woman pays a 500 percent interest rate on a loan, something is wrong with the system.
This happened here in Southeast Texas. Coquese Williams, Parish Social Ministry coordinator for Catholic Charities of Southeast Texas, said this local case has been used nationally to push regulatory legislation for payday and auto loan businesses. Using this woman’s case for an example finally embarrassed the lender into forgiving her debt.
When you consider finance charges on some of these loans can be as high as $30 for every $100 borrowed, it becomes extremely difficult for the borrower to ever get out of the loan.
When Williams was asked how does anyone get out of this trap, she said that some are bailed out by a donation from a family member, friend or someone at work. Some trapped by this debt close the account from which payments are being drafted, some leave town without leaving forwarding addresses and some die without ever paying off the debt.
Catholic Charities of Southeast Texas can also help predatory loan victims through the Asset Building Case Management program. ABC helps victims develop budgets so these victims can pay off the loans, and by contacting the predatory lender to ask for lower interest rates for the victims. For details on this program call Matt Hopson at (409) 924-4425.
Regulation of the predatory lending industry would also help. To date 35 municipalities have passed local ordinances to regulate these predatory lenders. Beaumont is not one of those municipalities.
Predatory lenders here and across the United States trap vulnerable people in debt with payday and auto loans. People who have an immediate need for money agree to these loans and either leave postdated checks, account numbers for auto drafts or automobile titles as collateral.
Williams said these loans are structured so the person borrowing this money cannot pay back the principal, interest and fees on time, and then take on more debt. Williams said the borrower can go for a long time just paying fees and interest without ever paying on the principal.
The United States Conference of Catholic Bishops said “the typical borrower is in payday loan debt for seven months out of the year. She ‘rolls over’ a loan an average of eight times and pays an interest rate of about 400 percent.”
According to Carolyn Fernandez, president and CEO of Catholic Charities of Southeast Texas, “Our faith teaches us that we are our brothers’ keeper and that we are to care for the poor, the vulnerable, and the marginalized; that we are to love our neighbors as ourselves.
“Payday and auto title lenders prey on the very people whose care for which we are charged.
Consumers who utilize these products are desperately seeking financial assistance but in most cases do not have the capacity to get a loan or the money they need from any other source. So, they are the least among us who can afford to pay the excessive fees and interests tied to these loans” she said.
Government regulation of these predatory lenders is a priority for the USCCB as they seek protection for the poor and vulnerable. It is one of the subjects that will be discussed by Catholic advocacy groups when they visit the Texas Legislature in Austin on April 4, 2017.
The Consumer Financial Protection Bureau is collecting comments on payday and auto lenders while preparing to issue a resolution. It is important to comment because the payday and auto lending industry representatives will be making their comments also. Final comments are due by Oct. 7 at www.consumerfinance.gov.