No Such Thing as a Free Loan

The truth about payday lending and what some Christians are doing about It

by Amy L. Sherman

In Culture Making, author Andy Crouch reports that his kids don’t like his homemade chili.

They want to bring about reform in the household, he explains, but since he and his wife love chili, it’s on the dinner rotation; the kids can either eat it or go to bed hungry. Protest is insufficient. Change is possible, however, says Crouch; all the kids have to do is to prepare an alternative meal on chili night, and he’ll be delighted to eat whatever substitute they offer.

Crouch’s “Chili Principle” offers a vital guide for a contemporary struggle of far greater weight than dinner table discontent. Some 12 million Americans, many from the ranks of the working poor, are trapped in debt through payday lending. Around the country important, necessary policy battles are being waged against the $40-billion-plus industry. But shutting down the bad guys is only one step on the path towards justice for the poor. The bigger need is for widespread, viable alternatives to these short-term, high-cost loans.

For the past year my research assistant and I have been looking for such models—particularly alternatives offered by churches or Christian nonprofits. We have discovered that while there are currently very few, those few offer promising approaches that are worth imitating.

We’ll examine them in the following pages, but first it’s important to understand what payday lending is and who’s engaged in it.

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“Protest is not enough to end the vicious cycle of predatory lending to the working poor.”

How payday lending works

own may be maxed out. Other payday borrowers fear credit More payday lending stores exist in the US today than all Mc- card debt, not realizing that the APR on a cash advance is far Donalds and Burger King fastless than that of a payday loan. food outlets combined. The Many have been turned down Payday lenders put a Sisyphean burden on their clients. industry’s dizzying rise—just for a loan already—perhaps by since the 1990s—is explained their employer, their bank, or by both the high demand for their family and friends. Or they quick cash and the significant simply need the cash faster than profit to be made in offering it anyone in their social network via payday advance loans. The can provide it. typical payday loan has to be The ease of obtaining cash repaid in full within about two from payday lenders also plays weeks (at the recipient’s next a role in explaining their popupaycheck). Since most recipilarity. Payday stores are very ents cannot do so, the loan is accessible—drive through any extended multiple times, with economically distressed neighnew fees at each “flip.” (Several borhood in your city and you’ll studies indicate that two-thirds find plenty of them. Most offer or more of payday borrowers highly convenient hours, staying extend their loans; the average open on nights and weekends. number of “flips” annually is nine.1) Triple-digit interest rates are Moreover, customers report feeling less intimidated by payday the norm, with the national average at 419 percent APR. store staff than by bank personnel. Industry spokesmen delight “It’s like a sandpit,” says Teresa* from Richmond, Va. “You in extolling the high levels of customer satisfaction reported by keep trying to get a step up, but you’re falling down. You think borrowers about their experience in applying for and receiving a you’re making progress, but you’re not.” She and her husband loan. got into financial trouble when she had to quit her job due to a physical disability. Under the pressure of medical bills, one less Protest is not enough paycheck, and a car that died, she and her husband turned to a When I initially learned about payday lending, my first thought payday lender. was that it is no different from bonded slavery in India. Through Stories like Teresa’s are repeated daily. A single mom in my volunteer work with International Justice Mission (IJM.org), Arkansas working full time faces an unexpected car repair and I knew that much contemporary slavery is rooted in the poor’s needs $500 quick. Eight months later, she has paid $2,240 in indebtedness to moneylenders who will not accept repayment in interest and rollover fees to her payday lender. A grad student installments but only in a single lump sum. Since most peasants in North Carolina takes out a new payday loan to pay off an old cannot acquire such a sum, they are trapped in debt, weighed one. When he tries to work out a pay-by-installment plan, the down by exorbitant interest rates. The moneylender then relender threatens to send the sheriff over. Sandra Harris, a disc quires their labor in payment. I was horrified to learn that payday jockey profiled on CBS’ 60 Minutes, took out a $500 payday lending was such a similar injustice in America and eager to see loan to cover her car insurance bill when her husband was laid this predatory industry shut down. off and money was tight. Over two years, the couple borrowed This urge to get rid of the bad guys is very strong and has $2,510 from payday lenders—and paid $10,000 in fees. Accord- led to successful reforms in several places. Fifteen states and the ing to research from the Center for Responsible Lending, on District of Columbia have outlawed payday lenders or passed average a customer borrowing $300 will pay back $800, with regulations that dramatically decreased their numbers. North $500 going towards interest and fees.2 Carolina and New Hampshire have passed laws capping interest Individuals turn to such lenders for a variety of reasons. rates at 36 percent APR. Others have restricted the number of Researchers using data from the Federal Reserve’s Survey of repeat loans, mandated “cooling off” periods in between loans, or Consumer Finances have found that “payday loans are taken out set loan amount caps based on borrowers’ income. primarily for convenience, to cover an emergency, and to pay Sometimes such policy reforms have caused payday lenders for basic consumption needs such as gas and food.”3 The same to pack up and move out of state. This was the story in North study showed that payday customers were more likely to have Carolina and Oregon, for example. Other times, as in Virginia, less income, lower wealth, and fewer assets than were Americans payday lenders have changed tactics, navigating around payday who don’t use payday lenders. Some customers don’t have a loan restrictions by offering different products such as car title credit card to turn to when they need money, or the cards they loans.

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LaTonya Reed, policy analyst for the Virginia Interfaith Cen- partnerships—in ways that do not victimize or entrap borrowter for Public Policy, sums it up: “Every time there is a legislative ers. The problem is that not many organizations are stepping in effort, there is also an attempt to circumvent that effort on to supply it. Consequently, until viable alternatives are available, the part of the industry.” Advocates the bad guys in the payday loan in Virginia have succeeded in passing “Short-term credit must be provided—through business retain a very persuasive piecemeal reforms, but a straightfor- creative thinking and community partnerships—in argument to policymakers about ward interest cap or outright ban on ways that do not victimize or entrap borrowers.” how they fulfill a much-needed payday lending has proven elusive. service. They also retain a host Legislators supportive of the industry, Reed explains, “claim that of high-paid lobbyists to help keep their exceedingly profitable if you get rid of payday lending and car title lending, folks will companies in business. In the face of this powerful, multi-billion have nowhere to go—that they’ll go to the ‘back alley’ dealers.” dollar behemoth, what’s to be done?

There’s no evidence that the working poor in states where payday loans are no longer available are turning to Guido the Another path Loan Shark, at the risk of both their wallets and kneecaps. Enter Grace Period, a nonprofit organization in Pittsburgh, Pa., However, studies have attempted to determine whether the ab- which, if replicated around the nation, could prove to be the best sence of payday lending has created financial stress for vulner- weapon in this fight for justice. There, customers can borrow up able households, and some show troubling results. Dartmouth to $500 for free—for up to 13 days. If they cannot repay in that economist Jonathan Zinman studied the situation in Oregon, time, they are enrolled in a yearlong repayment and emergencyone of the first states to be successful in kicking out payday fund-creation plan. lenders. He concluded that “the Oregon cap reduced the supply Grace Period’s storefront is situated smack in the battle of credit for payday borrowers, and that the financial condition zone, on the corner of E. Ohio Street in Pittsburgh’s Northof borrowers (as measured by employment status and subjective side neighborhood. If you stand outside the shop, you’ll spot a assessments) suffered as a result.” 4 Money Mart store to your right and to your left two Rent-aThat payday lending often victimizes vulnerable people is a Center stores and a Jackson Hewitt tax office offering “refund reality Christians must be concerned about. But so, too, is the anticipation loans” at exorbitant interest rates. less palatable reality that things don’t magically improve for the Grace Period grew out of some powerful preaching by working poor when the payday stores close down.

Rock Dillaman, senior pastor of Allegheny Center Alliance The takeaway from Zinman’s findings is not that preda- Church (ACAC). As he worked his way through the book of tory lenders should continue to exist but that short-term credit Matthew four years ago, Dillaman lamented several contempomust be provided—through creative thinking and community rary injustices in urban America and exhorted his parishioners

Duped by a Title Loan Company Pauline Charles is a community leader with Baltimoreans United in Leadership Development who has helped successfully address serious safety, recreation, and environmental needs in her neighborhood, one of the most violent districts in Baltimore City. But when Charles borrowed $1,000 against her house title from a company called Lomax, she became trapped in a spiral. The initial payment was $300 per month. When she fell behind, the payment went to $600. When she fell further behind, the payment ballooned to $2,000 per month. She ended up paying back a total of $11,000 on the $1,000 loan. That is not a misprint. $11,000.

When legislators make changes to the payday lending rules, many payday companies simply move into the title loan business, which is just as usurious.

“The stress was unbelievable,” says Charles. “The loan put tremendous stress on my family relationships. I remember the day that I brought to the Lomax office a $4,000 check to pay off the loan. I looked around. There were so many innocent people. Some were elderly. It made me so sad. I wish someone had stopped me. And now it is time for us to stop them.”

This story was adapted from the 10 Percent Is Enough Campaign (10PercentIsEnough.org) and appears by permission.

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Building a “rainy-day” account nership—like the fact that the credit to take action. This type of exhorkeeps the lenders at bay. union wanted to help moderate-income tation wasn’t anything new at the people in the Northside neighborhood vibrant, multi-ethnic church, which and that ACAC was ready to stand behas demonstrated love for its neighhind the fledging nonprofit. borhood through such practical ini“We were taking a risk on a newly tiatives as the Northside Christian formed business,” Dan Moon admits.

Health Center, educational and recBut when he visited ACAC and met reational programs for hundreds of the leadership and church members at inner-city youth, and its partnership an open house showcasing the Grace with Christian Legal Aid. Longtime Period initiative, “We saw this whole member Dan Krebs listened to church committed to this. They were Pastor Dillaman and decided the ready to back these loans up.” congregation should be able to do something about payday lending.

How Grace Period works Krebs and fellow ACAC memGrace Period operates as a cooperaber Tony Wiles, an ex-cop who tive. A typical club member (who is grew up in the Northside commuemployed and paid bi-weekly) will bornity, thought initially of launching row $350. She establishes an account a new, church-based credit union at Pittsburgh Central and agrees to that could provide affordable loans. have $60 dollars deducted from her After six months of spotty progress and significant frustrations, they changed tactics, seeking a paycheck each pay period for the next 12 months. Initially, most partnership with an existing credit union. Krebs knew something of that $60 transfer is applied to the principal balance owed. about financing, having worked in his family’s car dealership. He The other part goes toward club dues. (Loans can be paid back sketched out a model for a cooperative through which short- more quickly if desired.) When the loan principal is paid off (at term loans could be made to club members, with a workable about week 27), the transfers continue but now go into the club member’s “rainy-day” account. Additionally, Grace Period begins repayment schedule and built-in savings incentives.

Krebs and Wiles approached Dan Moon, then-CEO of the refunding the borrower the dues she paid earlier on the loan, at Pittsburgh Central Federal Credit Union, about a partnership. the rate of $8 per pay period. On paper, when the borrower hits They brought not only their creative model for Grace Period but week 52, she will have paid off the loan in full, begun recouping also a pledge of $850,000 in new deposits. Pastor Dillaman had dues she paid, and have several hundred dollars in her reserve led a membership drive at ACAC, explaining Krebs’ vision and fund. Grace Period’s model enables its members to avoid future encouraging parishioners to consider opening new accounts at predatory loans: They will have learned the discipline of regular the Credit Union. ACAC itself pledged to move $100,000 it had savings and accumulated assets to cover emergency needs.

In reality, most club members, like most payday loan cussitting in a bank account (funds earmarked for building renovatomers, end up borrowing additional funds beyond their initial tions) over to Pittsburgh Central.

Grace Period loan. But, unlike customers of payday lenders, “We were trying to say, ‘Everybody has got a couple hunGrace Period members are not sucked into a debt trap. For dred dollars sitting around for a rainy day, but let’s put your one thing, if customers’ adrainy day money where it ditional borrowing occurs afcould help somebody,’” Krebs ter the initial loan principal explains. ACAC’s flock rehas been repaid (i.e., late in sponded enthusiastically. the 12 months of their club Opening a new account was membership), they’re actuno big deal, and there was ally “borrowing” their own no financial risk, since credit funds from their reserve acunions ensure deposits up to counts. No interest or dues $100,000. are charged. What’s more, Since Pittsburgh Central Grace Period charges no rollis a modest-sized credit union, over fees, and the payments with total assets around $7 are kept manageable by admillion, ACAC’s ability to justing the term to keep the bring in another $850,000 in borrower on track. deposits was attractive. But The dues system proother factors were also im- Grace Period founders Tony Wiles (standing) and Dan Krebs. (Brian Kaldorf vides cash on hand to cover portant in generating the part- Photography)

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RECOMMENDED READING Broke, USA: From Pawnshops to Poverty, Inc.—How the Working Poor Became Big Business (HarperBusiness, 2010) is lively, accessible, and often horrifying.

Journalist Gary Rivlin describes the world of marginal finance to which the 40 million working poor are prey. Through candid, probing interviews with industry insiders, consumer activists, and customers, he offers a penetrating look into what CNN Money calls “vulture finance”— subprime mortgage lending, payday advance stores, car title loans, check cashers, and pawn shops. This $150 billion “poverty industry” outweighs casino gambling ($60 billion) and cigarettes ($40 billion) and is equally or more deleterious to customers than casinos.

Payday industry defenders say they are there for people in emergencies who have nowhere else to turn. Their admittedly high-interest credit, they argue, saves people money (e.g., from hefty overdraft fees or utility reconnection charges). This might be defensible if most customers were one-timers, or if they had freedom to repay in installments. But Rivlin shows how payday’s business model is built on creating and serving repeat customers. For example, trainers urge store employees to call former customers who haven’t been in lately—and suggest this is no different than the reminder notices dentists send out! No wonder Obama is launching a new Consumer Financial Protection Agency.

—A.L.S. the operating expenses of Grace Period. New club members are constantly being added into the loan pool; meanwhile, older customers pay off their loans but remain in the club. The latter’s capital is then available to help out new members, turning previous debtors into creditors.

Since it launched three years ago, Grace Period has loaned (through its partnership with Pittsburgh Central Federal Credit Union) over $1.5 million to over 2,300 individuals. Patricia Morrissey, the current CEO at the credit union, is highly satisfied.

“What [we] were hoping to achieve was to help serve the underserved. And I think the partnership has worked so well with that.”

Changing the mindset

For the Grace Period team, the ultimate goal is getting borrowers to change their patterns. As Dan Krebs often says, “The whole [payday] industry wouldn’t even exist if everybody just had a couple of hundred dollars saved.” Grace Period’s model is structured to help members confront the folly of unrealistic optimism; Krebs continues: “A very large percentage of the people that walk in here believe that they have a payday problem—that it will be fixed by next payday. So all they need is just one loan.

That is why the industry is so insidious. It preys on those people saying, ‘Sure. Sure. Tomorrow will be better.’ And when it isn’t better, they just say, ‘Pay us. It’s okay. It will be better next week, and next week, and next week.’ And people get stuck in this rut.”

Grace Period offers borrowers 13 days to repay their loan in full, with no interest charges at all. “But only 5 percent of our members end up doing that,” Krebs reports. The other 95 percent can’t, which helps them recognize that their problem is bigger than they thought it was and requires a change in habits.

Grace Period staff point their customers beyond the crisis that brought them in for a loan, noting that the real issue wasn’t

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the unexpected medical bill or car repair but the fact that the customer wasn’t financially prepared. Krebs explains: “What we really concentrate on is saying: ‘The thing that you really need to do is have a systematic savings program, and we have a systematic savings program.’”

“This isn’t a sprint,” he tells them. “It’s a marathon. It is about getting in the savings habit and letting this habit work for you.”

Grace Period counselors show borrowers where they can trim expenses to make the $50 “forced savings” each paycheck manageable. Tony Wiles will review a customer’s bank statements, and show him where, for example, he’s spent $30 or more on ATM fees. Or he’ll talk to him about saving money by buying sodas in bulk rather than from the vending machines or taking a sandwich in to work rather than buying lunch at a fast food joint.

I sat with Grace Period associate Sam Yeboa as he walked Trina* through the application process. “I have issues saving,” she admitted. “I’m interested in the club because it will force me to save.” Yeboa was understanding—he himself had been a Grace Period member before he started working for the nonprofit.

Other alternatives

Grace Period is by far the largest and most mature faith-based alternative to payday lending that my researcher and I found in our lengthy investigation. A smaller scale program is underway in Richmond, Va. There, the Jubilee Assistance Fund partners with two United Methodist churches—Wesley UMC and Lakeside UMC—and the Virginia United Methodist Credit Union (VUMCU). Through this initiative, the credit union makes short-term loans available to church members, with those loans backed by collateral provided by the churches.

Rev. Charles Swadley of Lakeside Methodist has been in-

Preparing the Next Generation to Avoid Payday Lenders

by Amy L. Sherman

The delightful aroma of pancakes wafted through the air as I opened the doors at Brinkley Heights Urban Academy in northeast Memphis. Jennifer Combs’ first graders were serving up breakfast in the front hallway, and for $1.50 you could get coffee and a short stack. At lunchtime, the fourth graders were selling popsicles in the cafeteria, and after the final bell that afternoon, the fifth graders were hawking nachos.

It was “special projects week” at Brinkley, one of several “street schools”—Christian private schools reaching at-risk and high-risk youth—that have implemented “Infusionomics.” The three-year program engages urban schools in teaching economic and financial literacy and encouraging youth entrepreneurship. Principal Tim Cox chose to implement Infusionomics because his school aims to help students escape generational poverty. “ “When I heard how the kids would be able to start learning basic economic and financial literacy skills, I just thought it was a great idea,” he says. “It was exactly what we needed to be doing because I’ve seen families falling into the same things over and over. We were looking for ways to break the cycle.”

During my visit, Cox and I drove about the neighborhood. Within two miles of the school, there are 13 payday lenders, six car title loan stores, three rent-to-own stores, and four pawnshops. Just up the street from the school sits Mo’ Money Tax Services, which entices low-income parents with immediate tax returns but charges them exorbitant interest rates. “Close to 100 percent of our parents are negatively impacted by predatory lending practices,” Cox reports.

In the first year of Infusionomics, teachers learn basic economic principles like opportunity costs and scarcity and how to weave those ideas into their mainstream curriculum—math, science, language arts. The idea is not to teach economics as a stand-alone subject but to help youth recognize how economic principles show up in many aspects of life.

In the second year, participating schools teach several weeks of financial literacy mini-lessons and implement a school-wide virtual economy called “Economis.” The online program was developed by Central Ohio Youth for Christ for its CityLife Center in Columbus, Ohio. Through Economis, students earn virtual currency for attendance and good behavior and then can spend their “paychecks” in an online store—or save their earnings in an interest-bearing savings account or CD. Older students can invest in a virtual stock portfolio. In year three, teachers “infuse” entrepreneurship concepts into their lessons and implement special, handson projects that engage youth in product design, pricing, and marketing.

Rhonda Becerra has four kids enrolled at Brinkley Heights. She thinks it’s great for kids to learn basic finances at an early age and says the Economis program’s incentives have helped her sons and daughters learn the discipline of saving.

Infusionomics is a collaborative effort between the Street School Network, the Powell Center for Economic Literacy, and the Sagamore Institute’s Center on Faith in Communities. Its penultimate vision is for thousands of low-income youth to know and practice the essential life skill of making good choices—based on cost-benefit analysis, opportunity costs, risk assessment, and discernment of short- and long-term consequences. Its ultimate vision is to see low-income kids climb out of poverty by being empowered with knowledge and skills that help them integrate successfully into the mainstream economy.

Only seven schools are enrolled in the full three-year Infusionomics initiative at present, but earlier iterations of the program engaged several other street schools and over 30 Christian after-school programs reaching over 1,100 urban youth in five targeted cities. Preliminary assessments have shown a 26 percent increase in financial literacy among participating youth.

“We need to help the children to be the best prepared for society that we can,” Principal Cox stresses. “It’s great to give them an education, but if you’re not teaching them life skills, real world kind of stuff, then our children will have problems when they get out into that real world.”

Brinkley Heights first-graders sell breakfast and get a lesson in economics as part of the school’s Infusionomics program.

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to one year to repay.

LaTonya Reed of the Virginia Interfaith The ultimate goal is freedom—not just Center is thrilled with the fledging JAF but from payday lenders but also from one’s hopes to see many more congregations creown unhealthy financial habits. ate alternatives. “In addition to dealing with the policy issue,” she emphasizes, “there’s also a need to provide concrete resources to borrowers.”

We found two other Virginia churches involved in efforts to provide help to cashstrapped families.

St. James Episcopal Church in Richmond has recently partnered with Goodwill Industries and the Virginia Credit Union to offer the “GoodChoice” program. It is set up much like a payday loan, except that borrowers have 45 days (rather than the usual two weeks) to repay the loan. Only two rollovers are allowed and the fee is $12 per $100 borrowed. That’s much steeper than the loans offered by Grace Period or the JAF, but only about half the cost of a typical payday loan in Virginia. Borrowers are encouraged volved in social justice advocacy efforts for about 10 years. He to take free financial education classes provided by GoodChoice, was upset by the devastation he witnessed among payday loan and those who complete the course can receive a one-time inborrowers. He watched Teresa and her husband go bankrupt centive grant (which can be used to pay down their loan). The and saw a young disabled man he knew from a group home get program also offers borrowers one-on-one financial coaching. “swamped” in payday debt. “That raised my hackles,” he says.

Queen of Peace Arlington Federal Credit Union (an initiaSwadley’s friend Rodney Hunter from Wesley UMC shared tive of Our Lady Queen of Peace Catholic Church in Arlington, his concerns. Rev. Hunter argued that the churches needed to Va.) offers “Grace” alternative payday loans for members who find a way to help—beyond their policy advocacy efforts. Invigorated by the idea of debt relief from the Jubilee passage in are having trouble accessing needed credit. Members who have Leviticus 25, Hunter proposed a model of church-backed loans been at the credit union for at least four months can borrow up that could be administered by a credit union. He brought the to $600 for a $10 application fee and an APR of 16 percent. idea to Carol Mathis, CEO of VUMCU, who quickly embraced Under this program, borrowers have three months to repay.

Several more credit unions around the nation have designed it. She reports that it wasn’t a hard sell to her board. “The credit union philosophy is to help people help people,” she says loan products to compete with payday lenders. Alternatives simply. “We’ve always tried to develop programs for the needs Federal Credit Union in Ithaca, N.Y., for example, offers a “Payday Credit Plan.” This loan is structured like a line of credit and of our members.”

The Jubilee Assistance Fund (JAF) is capitalized by do- is available to members who’ve been at the credit union at least one year. It’s not cheap. nations solicited by the It carries a $40 annual church leaders. This fee and an 18 percent pool of money is then APR, but 5 percent available for loans of of each loan is deposup to $500 to persons ited into a savings acin need who have been count for the borrower active members of one to build funds to cover of the participating future emergencies. In churches for at least Appalachia, the Mounsix months. Six loans tain Association for have been made since Community Economic the program began in Development has partJuly 2007. Each loan nered with Appalachian is individually tailored. to right: Rev. Charles Swadley (LakeThe Jubilee Assistance Fund is the brainchild Federal Credit Union The interest rate hovers Left side UMC), LaTonya Reed (VA Interfaith of Rev. Rodney Hunter of Wesley UMC in to provide affordable around 6 percent, and a Center for Public Policy), and Dana WigRichmond, Va., who suggested the idea of gins (VA Poverty Law Center) church-backed loans.

“Save It!” loans. Ofborrower can have up

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“Congregations can participate in a positive solution by finding the right credit union with which to partner, getting behind the initiative by bringing in new deposits, and supporting visionary laity.” fered through participating employers, it is a 10-month loan with an automatic savings component. Loans are repaid through payroll deductions.

The National Federation of Community Development Credit Unions, whose membership serves low-income urban and rural communities, is very active in the campaign against payday lending. Over the years it has offered special grant programs and training seminars to help member CDCUs develop alternative loan products to compete with the unscrupulous lenders preying on their communities. The APPLe (Alternative Products to Payday Lending) loans that were developed by grant recipients are mostly installment loans, with some line-of-credit and single payment loans. Interest rates average 16 percent APR, and fees average $15. A dozen federation members participate in the PRIDE (Predatory Relief and Intervention Deposits) initiative. Under this initiative, the National Federation of CDCUs helps underwrite loans to credit union members who have been victims of predatory lending.

Dallas pastor takes twopronged approach to financial health Rev. Frederick Haynes of Friendship-West Baptist Church fights for financial as well as spiritual freedom for his congregants. He does this in two ways.

He partners with Faim Economic Development Corporation (FEDC) , a nonprofit that strives to economically emancipate, educate, and empower the community. Haynes opens the church’s doors to FEDC’s educational program during Money Madness Mondays, biweekly meetings that help participants eliminate debt and bad financial habits and instead develop habits that generate wealth and fiscal responsibility.

Haynes is also part of a group of Dallas pastors who are battling car title and payday loan businesses that target their low-income members. When a Texas Car Title and PayDay Loan Service store, one of 200 locations in the state, opened down the street from the church, Haynes went into action.

Haynes told the local NBC affiliate that “a payday loan store is just like weeds in the midst of a beautiful garden that we’re trying to create.” He says these types of businesses are “economic predators” that are “literally crippling our community.” Haynes and his associates are actively pressuring state lawmakers to impose greater regulation on usurious loan businesses.

Strange bedfellows

Shared concerns about usurious practices by predatory lenders have created unique religious coalitions. In Virginia, leaders from evangelical, mainline, and Catholic congregations are shoulderto-shoulder in advocacy efforts to pass an interest rate cap and tighten regulations on car title loans. In Utah, the Coalition of Religious Communities joins Buddhists, mainline Protestants, Mormons, Jews, and Baptists in efforts to fight payday lending. In Dallas, white and black ministers have banded together to protest car title and payday lenders that have targeted distressed neighborhoods. “They are preying on our community,” complained Rev. Frederick Haynes of Friendship West Baptist Church to the local NBC affiliate (see sidebar on this page).

These efforts and earlier ones in states like North Carolina and Oregon, where religious coalitions played key roles in closing down the industry, indicate that it’s possible to ignite the church to action in protesting this injustice.

Unfortunately, the Christian community currently lacks a similar level of passion, energy, and collaboration to create workable long-term solutions. Dan Krebs’ friend O’Dell Merryman has met with numerous church leaders to explain the Grace Period model and spur them to action, but most respond that they’re just “not interested in doing loans.”

That’s frustrating, since that’s not what the Grace Period model requires. As ACAC has shown, congregations can participate in a positive solution by finding the right credit union with which to partner, getting behind the initiative by bringing in new deposits, and supporting visionary laity.

The model takes effort and time, of course. Krebs and Wiles spent months setting up Grace Period as a formal nonprofit corporation, putting into place software systems for tracking loans, setting up a storefront, hiring and training personnel, and advertising their services. They’ve learned some lessons along the way and have identified potential ways to trim costs while deepening services. Partner congregations, they envision, could train budget counselors to work with their clients and provide free “branch locations” in an office on church property. They could also help spread the word by referring needy individuals who come to the church for benevolence aid.

So far, just one church + credit union team, from Fort Wayne, Ind., has begun the process of replicating the Grace Period model. Hundreds more are needed if the church is to imitate the righteousness of Job and “break the jaws of the wicked and snatch the prey from their teeth.”

Dr. Amy L. Sherman is a senior fellow at the Sagamore Institute for Policy Research, where she directs the Center for Faith in Communities. Sagamore research assistant Rose Merritt contributed significantly to this article. * Names have been changed to protect individuals’ privacy.

(Editor’s note: due to space limitations, the endnotes for this article have been posted at EvangelicalsforSocialAction.org/PRISM-endnotes)

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