Predatory Lending
Religion News Service Photo
The Cooperative Baptist Fellowship and the Southern Baptist Convention are among a coalition of faith groups applauding the recent repeal of a government rule that they believe would have expanded predatory lending.
Opposition to payday lending and other forms of high-interest-rate loans to low-income people is the focus of Faith for Just Lending, an unusually diverse group that includes Catholic Charities, CBF, the SBC’s Ethics and Religious Liberty Commission, Faith in Action, National Association of Evangelicals, National Baptist Convention USA, National Latino Evangelical Coalition, the Episcopal Church, and the United States Conference of Catholic Bishops. [Editor's note: While church-wide agencies aren't listed among Faith for Just Lending's supporters, many United Methodist congregations work locally to stop predatory lending, often through organizations such as Faith in Action).
On June 30, President Joe Biden signed into law a measure that rescinded the “true-lender” rule promulgated by the Office of the Comptroller of the Currency in the last days of the Trump administration. That administration — and many of its Republican allies in Congress — had sought to undo several protections previously enacted against predatory lending.
In short, the last-minute rule adopted in October 2020 enabled payday lenders to collaborate with out-of-state banks and thereby avoid bans on predatory loans in states that had outlawed them.
Eight state attorneys general had sued the federal government to stop the rule from taking effect, arguing that it sanctioned “high-cost lending schemes devised to evade state usury laws.”
“No longer will payday lenders be allowed to subvert existing state laws and exploit vulnerable people with outrageous interest rates on short-term loans.”
The Senate was first to pass the bill to annul the rule, which it did by a 52-47 vote in May. The House of Representatives passed the bill on a 218-208 vote June 24.
Among both houses of Congress, only four Republicans supported the repeal effort, which was favored by all Democrats. The four Republicans who crossed over to vote for the repeal were Sen. Susan Collins of Maine, Sen. Cynthia Lummis of Wyoming, Sen. Marco Rubio of Florida, and Rep. Glenn Grothman of Wisconsin.
Passage of the bill to repeal the rule is “great news,” said Stephen Reeves, who leads advocacy efforts for CBF and has sought for several years to educate congregations about the dangers of payday loans.
The rule’s repeal “is a welcome change, and we are grateful to Congress for passing this legislation and President Biden for signing it,” Daniel Patterson, acting president of the SBC’s Ethics and Religious Liberty Commission told Baptist Press. “No longer will payday lenders be allowed to subvert existing state laws and exploit vulnerable people with outrageous interest rates on short-term loans.”
For his part, Biden said the short-lived rule would have allowed lenders “to prey on veterans, seniors and other unsuspecting borrowers, … trapping them into a cycle of debt.”
Payday loans and other similar products often carry effective interest rates of 400% or more. They also typically trap desperate lenders in schemes that keep them rolling over the loans from payday to payday, often with no viable path out of what could have begun as a loan of a few hundred dollars.