DELIVER US FROM DEBT
HAT IS USURY AND WHATS SO BAD ABOUT IT 7HY ARE SO MANY HARDWORKING PEOPLE TRAPPED IN CREDIT CARD DEBT 7HAT LONG TERM TOLL DOES IT TAKE ON THEMÂˆAND ON OUR COUNTRY (OW CAN #HRISTIANS LEARN TO BETTER MANAGE THEIR FINANCES (OW WOULD BETTER MONEY MANAGEMENT AMONG #HRISTIANS CONTRIBUTE TO THE GROWTH OF THE CHURCH
)F YOURE FAMILIAR WITH PRISM YOU KNOW WE LIKE TO ASK MORE QUESTIONS THAN WE COULD POSSIBLY ANSWER IN A SINGLE ISSUE "UT WE ALSO LIKE TO EQUIP YOU TO CONTINUE Âˆ AND ACT ON Âˆ THE CONVERSATIONS WE START IN THESE PAGES 3O JOIN US AS WE EAVESDROP ON A CHURCH BASED FINANCIAL LITERACY CLASS -EET A "APTIST PASTOR WHO LEADS A MULTI FAITH MOVEMENT TO ELIMINATE USURY AMONG CREDIT CARD COMPANIES (EAR FROM EVERYDAY FOLKS WHO ARE STRUGGLING TO GET AHEAD IN A LEFT BEHIND ECONOMY !ND FIND OUT WHAT YOU CAN DO TO HELP YOUR FINANCES REFLECT YOUR FAITH WHILE ENLISTING THAT FAITH IN A FIGHT FOR FINANCIAL JUSTICE FOR ALL PRISM 2010
FINANCIAL LITERACY TO THE RESCUE ! CHURCH LED DEFENSIVE STRATEGY AGAINST DEBT BY JESSE JAMES DECONTO
this happiness from me? How come nobody told me? I feel ripped off.You mean all this fun has been going on and somebody else has been having it?’” (See “What if Christians got their spending down and their giving up?” on page 11.) Crandall’s mother was an industrious farmer whose father had taught her to fill out her own tax return at age 5. Crandall’s own father taught her to hold tightly to her money, because the government, church, and charitable organizations would try to get their hands on it. As an adult, she lived that philosophy for nearly 20 years, graduating from Purdue at age 19 to save money, sewing her own clothes, and driving a Volkswagen Beetle with no heat and an undercarriage rusted clear through. A foreign language major, she learned sales and got a graduate degree through a paper company in Louisville, then moved near Kansas City, Mo., where she joined a firm that pioneered intellectual property agreements between scientists and phar-
“I’m going to plant a little seed here,” says the Rev. Maggie Crandall to her adult students.The 61-year-old former business consultant teaches a Tuesday night financial literacy class at Mt. Level Missionary Baptist Church in Durham, N.C.“Did anybody die 10 years ago if they didn’t have a Blackberry?” she asks. “I just want people to start thinking about phone costs, cable costs, stuff like that.” “Can I ask a question, too?” pipes up 35-year-old Tim Lattimore. He and his wife are the youngest members of the class.“Y’all’s decision may be different from ours — as a younger generation, we may have a cell phone, we may have cable, where y’all may be in a more settled position in life where you’re retired. Where would you be at when you were 25 or 30? Did you have cable?” “This is a fascinating thing that you’ve just done,” answers Crandall. “All of us do it. I might say, ‘Well, my sister doesn’t think you’re worth talking to if your blouse didn’t cost $300.’ Or, ‘My brother has a bedroom that is the size of my entire house.’ I have just made what is called a horizontal reference point — comparing myself to another human being’s lifestyle. In this class, we are going to work ourselves toward a vertical reference point: What does God want me to do? And that’s a big job, because the whole world wants to pull us horizontally.” In a concrete-walled Sunday school classroom, with colorful kids’ Bibles stacked haphazardly atop coat racks and folding tables, Crandall is spearheading what she calls a “defensive strategy” to rescue people from debt.While others, including a colleague at Mt. Level, work on an offensive strategy to limit bank interest rates (See “A Different Kind of Stimulus Program” on p. 13), Crandall is working to keep people from getting into debt in the first place. An atheist until she met Christ at age 37, Crandall proudly describes herself as a “Scottish tightwad of the first order.” When asked whether Jesus has made her less stingy, she says, “Oh, well, that Scottishness doesn’t go away. But now the excitement is to be thrifty in order to share. If I don’t waste money on something I don’t need, then I have more to give. Now I know that’s the most fun thing in the whole world. The first time I experienced it, I actually felt angry, because it was so much fun to give the Lord’s way, that I said, ‘Who kept
The Rev. Maggie Crandall left a lucrative business career to become a pastor. She now teaches finance classes at a Baptist church in Durham, N.C.
prison ministry. She preaches a few times a year at the church and spends most of her time visiting with prisoners all around central North Carolina. As she sees it, materialism — and the debt that often comes with it — is its own sort of prison, and what God offers is freedom. She launched the financial literacy class this past winter so she could share her knowledge of business and theology with people seeking financial freedom. “I have wanted to do this for so long,” she says. “I’m tired of the banks making people captive. Christ said, ‘I came to set the captive free.’” Churches around Durham are filled with Duke Divinity graduates like Crandall who were taught and deeply influenced by world-renowned theologian Stanley Hauerwas. Professor of theological ethics at Duke and a prolific author, Hauerwas seems to revel in making Christian ethical principles hard for mainstream America to swallow. He once argued, for example, that the Pentagon ought to worry more about Christian soldiers than gay soldiers in its “Don’t ask/Don’t tell” policy because Christian faithfulness demands peacemaking rather than killing. Crandall introduces her students to Hauerwas’ view of personal finance: “He likes to say that in a church that is really a church, everybody should feel free to pull out their checkbook and share it with everybody else in that church.” “Oh, really?” says 69-year-old Melvin Harper, suspicious but clearly intrigued. “Ohhhhh boy,” says a chuckling Lattimore. “That’s a new one to me.” “Everybody don’t know how to spend money,” protests Harper with a chuckle. He and his wife, both in their 60s, are still butting heads about money. He’s a saver; she’s a spender.
Tim Lattimore, 35, had satellite TV installed in his shop, but his financial mentors are urging him to drop his $70/month cable bill. maceutical companies. Using her fluency in French, Spanish, and German, she traveled the world negotiating those contracts. In the 1980s, her income perched her among the top 1 percent of working women. “I assure you I was focused on dollars —‘Show me the money’—and I was very clear about it,” she tells her class. “You’re not going to find anybody who knows materialism better than me. I’m ace, OK, and complete with MBA.”
FREEDOM FROM FINANCIAL PRISON
Crandall’s story parallels that of Larry Burkett, whose great legacy is the financial education program Crown Financial Ministries, which provides the curriculum for Crandall’s class. The textbook is Burkett’s How to Manage Your Money, one of 70-plus books he wrote, with over 11 million copies sold. A former electronics executive, Burkett became a Christian and left his company in the 1970s to work as a financial counselor with Campus Crusade for Christ.Within a few years, he founded Christian Financial Concepts, which finally merged with Crown in 2000. By the time of his death in 2003, Burkett’s radio programs had reached 1,100 stations. Crandall favors Crown materials because, she says, “they show that the Bible is simply packed with information about how we can reorient our spending and saving and be permanently out of debt while not missing the spending lifestyle at all.” Twenty-four years ago, Crandall had a Damascus Road experience, seeing Jesus in a vision. After she converted, she moved to North Carolina for a job in ad sales and eventually struck out on her own as a marketing and licensing consultant in the biopharmaceutical industry. She built her own business, along with another company that was given to her. She gave the profits to charities, but she felt God wanted something else from her. She entrusted her business to capable employees and enrolled at Duke Divinity School in 1996. After a few years as a Methodist minister, she convinced the Rev. Dr.William Turner, her old preaching professor and the senior pastor at Mt. Level, to license her as an unpaid staff member at his Baptist church, opening doors for her first priority:
In his late 60s, Melvin Harper is attending a budgeting class because he and his wife frequently disagree about money.
DELIVER US FROM DEBT
“A church that is truly the body of Christ should be so enmeshed in love and confidence of one another that they don’t have any problem showing a checkbook,” repeats Crandall. The class is silent. “I can tell this is a meeting stopper,” she says, sparking laughter.“And that checkbook should reflect the life of Christ,” she continues, “so it should begin with a tithe, and then it should show in every spending a careful consideration as to what is the greatest blessing to the earth. It should be based on need, not want, and on compassion for others guiding our decisions. What would a checkbook like that look like?” Lattimore already fretted about opening his checkbook every month to an older mentor in the church — never mind the entire church body. Long-time real estate agent Plummer Dillahunt had met Lattimore as they both volunteered with the Exodus Foundation, a nonprofit aimed at keeping black men out of prison. Lattimore himself had spent more than eight years locked up on a federal cocaine sales conviction. Released in 2005, he struggled to get hired as an ex-felon, so he learned to cut hair and opened his own barber shop. He soon became a mentor and motivational speaker to men in prison and youth who might end up there without intervention. Even as a drug dealer, Lattimore says, he had more ambition
7HAT IF #HRISTIANS GOT THEIR SPENDING DOWN AND THEIR GIVING UP
than his peers. “If you call me at two in the morning, I’m going to get out of bed and come see you,” he said during an interview in his shop, Bluetooth in his ear. He is clean-shaven, with short hair and an easy smile. “I use that same ambition for my work ethic. I’ll be here at 7:30 in the morning. I might not have no clients, but it’s just my work ethic.” Born to a teenage mother and raised by his grandmother, Lattimore grew up at Faith Christian Methodist Episcopal Church in the Hidden Valley neighborhood of Charlotte. He aspired to be a family man and as a teenager saw selling drugs as his best shot at escaping his neighborhood. “I always wanted to be an outcast from the street.That’s why I dress different,” said Lattimore, wearing a striped dress shirt, black V-neck sweater vest, and pleated gray slacks. “I want to be like corporate.That’s why I do these seminars and put myself around these people — to rub off on me.” Lattimore studied for his GED at a federal penitentiary in Estill, S.C. He read his Bible and attended church services. After his release, he committed to celibacy until he met his wife, June, last year. A justice of the peace married them within a month, and Mt. Level church threw them a reception soon afterward. Crandall’s is his third financial literacy
The Christian research and service organization Empty Tomb, Inc. provides information about church giving patterns on a national level. It attempts to make the inconvenience of following Jesus’ hardest teachings — to love our enemies and feed the hungry, for example — as convenient as possible. According to their research, church member giving continues to decline as a portion of income: In 1968, it was 3.11 percent of income; in 2007 it was only 2.56 percent. If Americans who identify with the historically Christian church increased their giving to a literal tithe — that is, to an average of 10 percent of income — an additional $161 billion could be made available to Christian work every year.1 An estimated $70-$80 billion would impact the worst of world poverty,2 and $5 billion would end most of the 9.2 million annual deaths of children under the age of 5.3 Seven billion dollars would be enough to provide primary education for the world’s children.4 One billion would address the costs of global evangelization.5 And all this would be on top of US citizens’ current church activities.6 If you’re interested in increasing your giving, check out the following resources: GenerousGiving.org shares the joy of stewardship through extensive video interviews with Christian leaders and stories from everyday Christians whose lives have been transformed through giving. MoralMoney.com focuses on helping Christians make investment decisions that align with their beliefs.They offer a free newsletter and a free stock-screening tool to determine whether a company deserves your investment dollars. (Endnotes for this article have been posted at esa-online.org/Endnotes.) PRISM 2010
“So you have peace,” says Crandall. “That’s one of God’s promises.” “If it’s not ragged and it’s clean, I’m satisfied. It might be the same thing for years,” continues Parker, “but is that normal?” Crandall answers, “The secular world, the people in the shoe business, want you to feel...” “Discomfort,” suggests 63-year-old Cornell Parker, unrelated to Priscilla, wearing a simple hooded sweatshirt. “Discomfort,” agrees Crandall. “God is promising peace, while the secular world wants you to feel discomfort.” She goes on to explain how advertisers earn their keep by instilling and feeding insecurity in the consumer, who then constantly doubts his value if he doesn’t have the latest brand or model. Lattimore returns to his earlier question, that “horizontal reference point” still tugging at his mind. “The younger generation, we’re into fashion,” he says. “We like to look a certain way. Is that wrong?” “What does the world deliver?” Crandall asks. “OK, the world delivers you a fashionable outfit, but if along with that it delivers you a debt that keeps you paying interest...” “I’ve never owned a credit card,” says Lattimore. “Okay,” says Crandall. “Ever in my life,” he says. “And never probably will.” “God be praised,” says Crandall. “But a lot of people have.” “The credit card companies actually have a segment of their customers that they label, and they like them,” Crandall goes on. “These are people who will die never having paid off the original price of the item. The credit card companies have done the analysis, and there are about 15 percent of their customers who will at age 25 charge a pair of tennis shoes and still be paying on them at age 80.” “Wow,” says Lattimore. “That’s why those bank buildings are as big as they are. And those people are engaged in what Dr. Turner refers to as wage slavery. They might pay for those tennis shoes 50 times over.They will never get past the minimum payment, and they will never pay down the original debt. And the credit card companies like those customers because, basically, it’s like a heroin IV. They’re mainlining your money. You are working for them. If you only pay the minimum payment, you may end up paying $500 for your pair of shoes. Or $1,000, depending on how long you let it run at that rate. “Show me the joy you get out of interest,” she continues to an attentive audience. “Can I wrap up interest and give it to you for Christmas? Can I give it to you for a birthday present? Can you cuddle up with it at night? Show me the interest that looks pretty in your living room.” Lattimore clings to one piece of wisdom Crandall has shared, based on the book A Woman’s Book of Money and Spiritual Vision by former banker and now women’s advocate
class since leaving prison. He has learned about managing a budget, building his credit score, and claiming deductions on his income taxes. Every month, Dillahunt helps him track his spending with QuickBooks — and chides him about his cell phone bill. For Lattimore, a cell phone is part of the “high society” lifestyle he is striving for. He thinks shopping at Crandall’s favorite thrift stores would “degrade” him and that a “professional image” can help him get ahead. He’s not convinced that older folks like Dillahunt and Crandall remember what it’s like to be in their 20s or 30s. As if to prove his point, classmate Priscilla Parker, 51, says she is not chasing fashion. “I can wear the same clothes over and over,” she tells her classmates.“It doesn’t bother me. I don’t have to just run to the store and buy all the time.”
A number of nationwide organizations offer biblical resources for personal finance: Crown Financial Ministries (Crown.org), founded by Larry Burkett, is the best known and most widely used. The website offers free budgeting tools, calculators, and resources to help couples discuss money issues. For small group discussions, check out their God Provides DVD series of short films, complete with study guide and facilitator tips. eChristianFinance.com offers articles on Christian finance and stewardship, dictionaries, and worksheets, among other resources. Financial Peace University (DaveRamsey.com/fpu) is a for-profit program run by evangelical finance guru Dave Ramsey. The Moving from Debt to Assets program, hosted by the Greater Boston Interfaith Organization (GBIO.org), is a groundbreaking national model that offers financial literacy classes, peer support, and financial counseling. The Institute in Basic Life Principles (bit.ly/dnJofD) offers biblical wisdom on finances from Jim Sammons. MasterYourMoney.com, Ron Blue’s site, features free videos that answer virtually every question you might have about handling your money. Wealth Watchers International (eWealthWatchers. com) offers resources to help consumers spend less and save more.
DELIVER US FROM DEBT
Rosemary Williams — that your feelings about money, often inherited from family or built through life experience, will dictate how you deal with your finances. Lattimore believes his life of crime and incarceration have shaped him, perhaps permanently. He still wakes at 5 a.m., with no alarm clock, according to the penitentiary schedule. Isolation from society taught him nothing about managing money, so, until these classes, everything he knew he learned from the street, where he once spent $8,000 on a new car stereo system without a second thought. “I could just go to my safe and get $40,000 or $50,000,” he says. “It came so fast and so good. To somebody else, $1,000 might seem like a lot. I’d just throw that away. It was dirty money, but I had a lot of it.” Today Lattimore seeks financial wisdom because he wants to “get ahead” and make more money so he can live the “professional,”“corporate” lifestyle he imagines. But Crandall and Dillahunt are trying to convince him he can live on the few hundred dollars a week he brings home as a barber; he just needs to manage what he has. He struggles to accept that,
especially when they suggest shedding his $70-a-month cable bill. He says he doesn’t party or go out to eat very often; he just wants to be able to watch his Los Angeles Lakers games after a long day at work. In fact, he added satellite TV at his barber shop in the midst of attending Crandall’s class. “So you think cable and stuff like that is not of God?” Lattimore presses. “I don’t know,” she says. “I’m just asking,” he responds, grinning, his eyes wide, palms opened at shoulder level, elbows tucked to his sides. “You don’t know if you don’t ask questions.” “We’re in a Baptist church,” says Crandall, gently grasping his shoulder. “You and God talk direct, right? Nobody comes between you and the Lord, so that’s a discussion that you have, and through God’s wisdom, that vertical axis you have, he will guide you in that decision, and that is a gradual process, a merciful process.” Q Jesse James DeConto is a staff writer with the News & Observer in Raleigh, N.C., and a contributing editor with PRISM.
A DIFFERENT KIND OF STIMULUS PROGRAM 4HE FAITH FUELED FIGHT AGAINST OPPRESSIVE CREDIT CARD RATES BY JESSE JAMES DECONTO
lus program. Along with several other scholars from Duke, Wake Forest, and other divinity schools, he crafted a theological position paper calling on banks to comply with millenniaold Jewish and Christian bans on oppressive interest.Two dozen theologians from nine seminaries in the Carolinas endorsed it, and the Industrial Areas Foundation (IAF), the community organizing group that trained Barack Obama in the 1980s, has been confronting Charlotte-based banks with the paper since last summer. In case banks can’t be convinced to lower their interest rates, Broadway is supporting a campaign to force them to. The “10 Percent Is Enough” campaign, led by the IAF, aims to legally cap credit card interest at no more than tithe. The campaign has been active in Charlotte, N.C., as well as other
About half of Americans carry a credit card balance, and among those the average balance is approximately $8,000. If they weren’t preoccupied with paying off their debt, these working folks might be able to help stimulate the economy. But instead of lifting their burdens, the federal government has used hundreds of billions in taxpayer dollars to prop up big banks. “Debt relief for millionaires and homelessness for working people — that’s not the kind of economy I believe in,” said the Rev. Dr. Mikael Broadway, preaching last fall at his home church, Mt. Level Missionary Baptist, in Durham, N.C. “We’ve not been warmed by the glow of their cash-burning recoveries.” A theological ethicist at Shaw Divinity School in Raleigh, N.C., Broadway has been promoting a different sort of stimu-
major financial centers throughout the East Coast, Midwest, and even in London, England. “God has a bailout plan for the Sabbath year and the Jubilee,” said Broadway. “It’s especially for making sure that people who fall on hard times don’t have to stay there forever.” Congress has been paying attention to the banking industry’s oppressive practices, enacting the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act last year. This requires lenders to give 45 days’ notice before raising a customer’s interest rate, bans rate hikes on existing balances,
encourages hard spending caps instead of over-limit fees, and mandates that payments go toward high-rate balances first, minimizing interest charges. Nine months passed between the law’s passage last May and its taking effect this February, and banks took advantage by raising the average rate from about 12 percent last summer to over 14 as of this March. With the average credit card interest rate at around 14 percent and some rates climbing above 40 percent, the campaign is a dark horse. But it gained traction last November Continued on page 16.
WHO GETS CAUGHT IN THE USURY TRAP? REAL STORIES FROM REAL FOLKS Four years ago, I purchased a manufactured home. While I was budgeting for my car payment and mortgage, I sometimes used credit cards as a way to make ends meet. Now that my home is paid off, I am looking to eliminate my credit card debt. Monthly payments for me were never an issue, and quite often I paid more than the monthly minimum. I now have three credit cards that still have balances on them. All have informed me that interest rates will be increasing. They started at zero, then it jumped to 8.24, then 12.99, and then up to 23.99. At the beginning of this month one increased to 28.24 percent — all of this in under two years. Chase doubled my interest rate without my knowledge and without notice. I became aware of the new interest rate when my bill arrived.When I called Chase to ask about the change, they told me that I should have gotten a letter, that the “opt-out” period had expired, and that I would have to pay the new rate.When I asked for a copy of the letter, they said that the bank was in a buyout transition, and duplicating the letter was not possible.This is the same bank that has now increased my rate to 28.24 percent. I’ve had the same job for seven years. I haven’t paid a bill late in over eight years. I’ve paid off my mortgage. I’ve had two car loans.Things were supposed to get better. It’s not supposed to be this way. A. Lamke, Howard County, Md.
I am a small business owner. I have always been very responsible about my credit, but the amount I owe has gone up considerably in the past two years due to the fact that I have been bailing my own business out to stay afloat in these difficult times. Even so, up until last winter I had considerable credit available on most of my cards. I was in no way maxed out. Almost all my cards then lowered my credit lines and made me seem maxed out. Then a few weeks later, based on the fact that I was “maxed out,” they raised my APRs. Now Chase has raised their minimum payments, making it impossible for me to keep paying the minimums. I face more and more difficulties in repaying them, even though I have always been a stellar customer. I have managed to find a location to move my business where I will be paying half in rent what I currently pay. I am raising all the money to pay for the move through friends, because my credit lines and cards were cut. I am succeeding in making my business survive despite the “backstabbing” from my bank and other banks where I had business credit cards and credit lines. C. King, Miami Beach, Fla. (These first-person stories were collected by the 10 Percent Is Enough Campaign and reproduced here by permission.)
MAXED OUT: #/.&%33)/.3 /& ! $%"4/2 .!4)/. BY KRISTYN KOMARNICKI
Want to get freaked out? Watch Maxed Out, a documentary by James Scurlock on American debt. Released in 2006, Maxed Out (MaxedOutMovie.com) predates the 2008 Wall Street meltdown and subsequent bank bailout, events that only made the financial landscape scarier. “Obscenely profitable” is how Harvard law professor Elizabeth Warren describes the industry of consumer lending. With disbelief we can all share, she explains that the most popular customers for banks are — ready for this? — those folks who have come through bankruptcy. She quotes a vice president of Mastercard who once told her, “We know two things about them — they can’t file for bankruptcy again, and they have a taste for credit. They are willing to make minimum monthly payments — forever. And that’s where we make our money.” In the film we also meetTrisha Johnson and Janne O’Donnell, two moms whose kids left home for college and ended up in the arms of credit card companies. Like so many college freshmen, they were targeted by the banks and were issued multiple cards, in spite of being 18 years old, having no credit history, and working only part time. United by their grief — both students committed suicide after a devastating tango with credit card debt — the mothers testified before Congress in 1999 for a bill that would have banned credit card companies from college campuses.“That bill didn’t have a chance,” they lament, noting that their testimonies were up against a powerful lobby of bankers known for their generous campaign contributions. Years after their tragic loss, the mothers say credit card offers addressed to their children continue to arrive in the mail. Suicidal feelings are not uncommon among people who are straddled with debt.Warren says that for many people death may be the “only form of debt discharge.” Debt creates great anxiety, she says, because it puts people in a position of great vulnerability. Warren, who coauthored The Two-Income Trap: Why Middle-Class Parents Are Going Broke, talks about how much harder it is for a family of four to survive today than it was in the 1970s. Their struggle to pay even for the basics is “driving
families right to the edge”— but she fears our leaders have no plausible solution. “I run into some very smart people in our Congress,” she says, “and I ask the question, ‘What’s the long term plan here? What do the grand thinkers have in mind?’ And all I ever get is this sort of blank half-smile.” That’s not surprising, perhaps, given that the “grand thinkers” are not only up to their hair follicles in national debt but also in bed with the big banks. We hear George W. Bush say, at his 2005 inaugural reelection address, “In America’s ideal of freedom, citizens find the dignity and security of economic independence. Instead of laboring on the edge of subsistence, we will build an ownership society to give every American a stake in the promise and future of our country.” Then we find out that MBNA, the country’s second largest issuer of credit cards, was Bush’s top campaign contributor. We are reminded that Ronald Reagan, George H.W. Bush, and Bill Clinton all raided Social Security to pay interest on the national debt; that George W. Bush upped the debt limit to $800 billion; that by 2005 the federal government had spent every penny of the Social Security “trust fund” just to make its minimum payments; and that by 2006 the US government was spending more on interest than on homeland security, education, and healthcare combined. Add to that the bank bailout of 2008, and you can see very clearly that there isn’t anyone steering this ship to safety. Not discussed in the film is the recent effort, supported by a number of faith-based organizations (including Evangelicals for Social Action), to return some protections to what has become a lawless credit marketplace. Elizabeth Warren is working at the sharp end of a movement to pass HR 3126, the Consumer Financial Protection Agency (CFPA) Act of 2009 (bit.ly/BJZqi), a bill that passed in the House but is currently stuck in the Senate. As envisioned by its proponents, the CFPA would make sure credit products aren’t booby-trapped, promote readable financial contracts, and make the government accountable to the people instead of the powerful financial institutions. In her overview of the CFPA bill,Warren cites the following reasons that such an agency is needed: One in five Americans is un- or under-employed; one in nine can’t make the minimum payment on his credit card; one in eight is behind on her mortgage payment or facing foreclosure; 120,000 families file for bankruptcy every month; American families have lost $5 trillion in pensions and savings since the start of the recession.
sponsored a bill to cap rates at 16 percent. Coakley, the Massachusetts Attorney General, later lost the special election to Republican State Sen. Scott Brown, but her support had helped garner some attention. IAF senior organizer Arnie Graf says the TierneySlaughter bill, H.R. 4300, would bring the campaign closer to victory, but it will take time. The IAF is focused on convincing state and local governments and religious denominations to move their assets unless their banks negotiate to lower interest rates for consumers. Graf said when the bill eventually gets a hearing, it will draw attention to the usury issue, which might spark grassroots support, even if the bill doesn’t make any progress in the near term. “That’s way, way, way down the road,” he said. The campaign is willing to compromise on the 10 per-
A Different Kind of Stimulus Program continued from page 14. when an IAF Massachusetts affiliate, the Greater Boston Interfaith Organization (GBIO), held a high-profile forum with Democratic candidates for the late Sen. Ted Kennedy’s vacant seat. Eventual primary winner Martha Coakley and her closest rival, US Rep.Tom Capuano, promised the GBIO they would support a 10 percent cap.Within days, The Boston Globe asked Citigroup CEO Vikram Pandit whether his bank would support interest rate limits. Pandit said it would, as long as every credit card lender was subject to it and preexisting accounts were exempt. Soon thereafter, Capuano, Rep. John Tierney (D-MA), Rep. Louise Slaughter (D-NY), chairwoman of the House Rules Committee, and more than 60 others co-
WHAT IS USURY? Usury is the practice of overcharging borrowers. It has been prohibited by religious, legal, moral, and social codes since the beginning of recorded human history. Both the Hebrew Bible and the Qu’ran are unequivocal in their condemnation of high interest rates and the people who charge them. At the founding of America, interest rates in all 13 original states were capped at 6 percent. In fact, usury was illegal in the United States until 1978. But now, just 32 years later, it is rampant. Modern forms of usury include:
and bad. (The recent credit card reform law signed by President Obama in 2009 mandates that credit card companies notify the consumer of interest rate increases, but does not limit how much interest they can charge.) s Banks that charge $50 or more for “overdraft protection” — essentially a high rate loan for the amount of the overdrawn check. s Check-cashing fees of 10 percent that are, in effect, exorbitant interest on the two-day period it takes for the check cashing agency to clear the customer’s check.
s Payday loans charging an annualized rate of over 300 percent. (In Maryland, the Baltimore IAF affiliate successfully organized for the statewide abolition of payday lending in 1998.)
The 10 Percent Is Enough Campaign (10PercentIsEnough. org) asserts: “It is enough to allow credit to flow to all worthy borrowers. It is enough to allow bankers their fair share of profit. It is enough to protect families from permanent indebtedness. And it is enough to divert our economy away from the speculative gambling that has caused our present economic crisis, and back towards productive wealth creation in the industries of the future: green manufacturing, sustainable energy, and others that the American entrepreneurial spirit has yet to imagine.”
s Adjustable rate mortgages with interest rates ballooning up to 14 percent. s Rapid-refund tax return companies that charge 50 percent of the customer’s tax refund for a two-month advance — or up to a 300 percent annualized rate. s Credit card companies that raise rates as high as 30 percent without reason or notification and add on fees for both good behavior
(With thanks to the 10 Percent Is Enough campaign for permitting reproduction of usury definition above.) PRISM 2010
DELIVER US FROM DEBT
cent target.Talks with executives at Wells Fargo and Citibank have convinced IAF leaders that lenders can cover their costs by charging no more than 14 to 15 percent on top of the federal funds rate. (That’s what banks charge each other to borrow; it climbed as high as 19 percent in 1981 but has been below a quarter-percent during the current recession).Anything above that is pure profit. “Banks can make plenty of money lending to responsible borrowers at a rate capped at 10 percent (indexed for inflation),” says 10 Percent spokesperson Ari Lipman. “Instead, they are trying to gouge customers with exorbitant rates and fees to make up for the losses from their risky lending that got our economy in trouble in the first place. If a big bank is only willing to make a loan to a person in difficult financial circumstances at an interest rate of 30 percent or higher, then that big bank is not the appropriate institution to service that person’s financial needs. Credit unions and community development banks are better matched for that sort of borrower. It’s not doing anyone any favors to trap them in a debt spiral from which they will never be able to escape.” Legislation failed to cap rates at 14 percent in 1991, and another proposal for a 15 percent limit failed last spring. But political success is not the only measure. For Broadway, fighting against oppressive interest is central Christian practice, whether politicians open their ears or not. In his theological
OVERHEARD “If 10 percent is enough for God, it’s enough for Bank of America.” Bishop C. Joseph Sprague, United Methodist West Ohio Conference, Columbus, Ohio “For most of human history, our religious sages and political leaders have condemned the practice of lending at exorbitant interest. We stand with them against the profiteers who have pillaged our communities.” Bishop Douglas I. Miles, Koinonia Baptist Church, Baltimore, Md. “So long as credit card agreements are unreadable, and car loans come with hidden kickbacks, and mortgages carry the seeds of their own foreclosures from the day they’re issued, then we need a change in the rules, period. When those are changed, people have to look hard at their own values and spending habits. But our failure to do that is not an excuse for someone else to cheat us.” Elizabeth Warren, Harvard Law Professor, head of Congress’ Troubled Asset Relief Program, and co-author of The Two-Income Trap (Basic Books, 2004) and The Fragile Middle Class (Yale University Press, 2001)
position paper, he cited Christian sources from Deuteronomy to the Gospels to theologians throughout history, all condemning lending practices that take advantage of those in need. Past societies have tightly restricted interest; some have even prohibited it completely. For most of US history, banks turned profits with interest rates held below 10 percent by law. Then, in the late 1970s, the Supreme Court ruled that banks could apply lax rules in one state to business transacted in another. Effectively, that means they can charge any rate they want. “[We must] reawaken Christian teachings lost in our modern economic system,” Broadway said. “We have sold our birthright for a bowl of pottage.” Q
The Rev. Dr. Michael Broadway (pictured right), rallied with hundreds of activists in front of Wachovia headquarters in Charlotte, N.C., last fall.
Learn more about HR 4300, track the progress, and submit your questions about it at GovTrack.us (bit.ly/dkWdBH). PRISM 2010
Sit in on a church-based financial literacy class, discover a multi-faith movement to keep the credit card companies in check, and discover...
Published on Dec 26, 2011
Sit in on a church-based financial literacy class, discover a multi-faith movement to keep the credit card companies in check, and discover...