Catholics in the US are pushing for a national, bipartisan bill that would limit the interest rate on payday and car title loans.
“Payday lending is modern day usury. These short-term, high-interest loans prey on the financial hardship of poor and vulnerable consumers – all for the sake of big profits, which only come when consumers fail,” the Montana Catholic Conference said in a Feb. 12 statement.
“This practice directly contradicts our Catholic understanding that the role of the economy is to serve people, not the other way around.”
The conference is urging Catholics in Montana to contact U.S. Rep. Greg Gianforte, who represents Montana’s at-large congressional district, to urge him to support the Veterans and Consumers Fair Credit Act of 2019. (H.R.5050).
Introduced by Jesús "Chuy" García (D-IL) and Glenn S. Grothman (R-WI), the bill would expand the 2006 Military Lending Act rate cap - which only covers active military members and their families - to all consumers. The bill would cap all payday and car-title loans at a maximum of a 36% APR interest rate.
“That means that payday loan sharks would not be able to charge sky-high, triple-digit interest rates on their deceptive loans,” the conference further added.
It was introduced to the House of Representatives last November. In the near future, a companion bill will be introduced to the U.S. Senate by Senators Chris Van Hollen (D-MD), Jack Reed (D-RI), Jeff Merkley (D-OR), and Sherrod Brown (D-OH).
According to a statement from Grothman, 12 million Americans take out payday loans per year, and the average interest rate is currently 391 percent. As online loans have continued to exacerbate the problem, states have had a more difficult time regulating payday loans.
“We already protect military service members under the Military Lending Act, which means that we have recognized the predatory nature of high-interest loans to our men and women in uniform. This raises the question – if it is wrong to allow predatory lenders to target our service members, why is it right to let them target the rest of the community?” he wrote.
Last month, the US bishops' Committee on Domestic Justice and Human Development signed a letter supporting the bill which was sent to the House Committee on Financial Services.
The Jan. 10 letter from the Faith for Just Lending coalition said that nearly 16,000 payday or car title loan stores operate within the United States taking advantage of loopholes and circumventing traditional usury laws.
“Each year, many households face financial crises. Over the last several decades, high-cost lending to those in need has increased significantly,” the letter said.
“Far too often, the result is families trapped in a cycle of debt with even less ability to pay the bills, keep food on the table, save for the next emergency, or provide for their children,” they said.
There are already 16 states, as well as the District of Columbia, who have capped the interest rate at 36% percent or lower, they said, noting that residents of these states now “use various methods to address budgetary shortfalls – such as utility payment plans and credit cards.”
As usury is often condemned in the Bible, they said, the issue is a concern of the Church. They urged parishioners, Church leaders, and government officials to take a stance against payday loans. They said actions should be taken to educate people on stewardship and responsible credit use.
“Scripture condemns usury and teaches us to respect the God-given dignity of each person and to love our neighbors rather than exploiting their financial vulnerability. Thus, just lending is a matter of Biblical morality and religious concern. Fairness and dignity are values that should be respected in all human relationships including business and financial relationships.”
The Church has consistently taught that usury is evil, including in numerous ecumenical councils.
In Vix pervenit, his 1745 encyclical on usury and other dishonest profit, Benedict XIV taught that a loan contract demands “that one return to another only as much as he has received. The sin rests on the fact that sometimes the creditor desires more than he has given. Therefore he contends some gain is owed him beyond that which he loaned, but any gain which exceeds the amount he gave is illicit and usurious.”
In his General Audience address of Feb. 10, 2016, Pope Francis taught that “Scripture persistently exhorts a generous response to requests for loans, without making petty calculations and without demanding impossible interest rates,” citing Leviticus.
“This lesson is always timely,” he said. “How many families there are on the street, victims of profiteering … It is a grave sin, usury is a sin that cries out in the presence of God.”