Payday Loan Reform in Rhode Island
QUOFLECTIONS™
ON SPIRITUALITY AND ETHICS
“He lends at interest
and takes a profit.
Will such a man live?
He shall not!”
Ezekiel 18:13
Like Jesus and many Hebrew prophets, Ezekiel passionately proclaims woes upon those defrauding the destitute. Usury, exacting enormous profits from loans to the needy, is an economic plague. So Ezekiel declares usury an abomination and, in his fury, calls for corrupt moneylenders’ deaths.
This sinister debt system began 1000 years before Jesus. Scams persisted. All arrearages must be paid. A debtor’s children might even be enslaved.
Rhode Island’s interest rates for exploiting debtors often exceed the greedy practices of the ancients: Incredibly, the legal annual percentage rate (APR) is 260 percent. With recurring loans, former Representative Frank Ferri states, “An initial loan of $350 could turn into a debt of $1260.”
Reverend Don Anderson, Executive Minister of the Rhode Island State Council of Churches, explains, “The whole business model is designed to keep people renewing their loans week after week. This is the insidious part—it’s designed to suck people into a debt trap.”
This debt trap is accomplished by requiring a post-dated check for an upcoming payday. If the borrower is short, about 14 days hence, an additional loan with exorbitant fees and interest increases the debt. Only two percent of loans are paid on time. An average of eight loans are needed to pay the initial loan.
Moreover, if the check bounces, both the payday creditor and the bank can charge hefty fees. Including rapid redeposits, these bounced checks can cost $200 or more.
Some lenders illegally threaten prosecution for a bounced check. Actually, prosecution is illegal unless the debtor closes the bank account.
Poverty abounds. Rhode Island payday debtors in 2011 totaled 183,000. The Center for Responsible Lending reports their spiraling debt is often stopped only when borrowers receive their annual tax refunds. Debtors’ earned income tax credits are frequently devoured by major payday businesses who transfer their perverse surplus out of state.
Governor Gina Raimondo’s 2012 assessment is blunt: “It’s a predatory product.” She adds that those seeking loans should be able to obtain one “that is safe and reliable and doesn’t trap you.”
Payday loans throughout New England are illegal—except in Rhode Island.
Payday Loans Favored by Pols
“Despite bipartisan support from 80 legislators in both legislative chambers, House Speaker Nick Mattiello won’t allow the General Assembly to vote on the bill,” predicts Margaux Morisseau, Co-Chair of the Rhode Island Payday Lending Reform Coalition.
Rev. Anderson states that William Murphy, a former House Speaker, is paid $50,000 a year to lobby for payday vendors—and Murphy’s support helped elect Mattiello Speaker in March, 2014.
The Speaker’s tremendous powers include blocking legislation. Since 2011, bills limiting the APR to 36 percent were killed by Speaker Gordon Fox for three years and Mattiello last year.
Despite extensive high-level discussions held for months in 2013, Morisseau explains, “Once again insider deals and longstanding political relationships have trumped good policy and common sense consumer protection.”
Will the Speaker allow payday loan reform a vote this year?
Mattiello writes on the House webpage he wants a government “in which all its citizens can be proud.” Economic exploitation of poor Rhode Islanders negates this goal: Who can be proud of a government preserving predatory lending?
Your opinion matters. Rhode Islanders can voice their views by calling the Speaker’s office at 222-2466.
Morisseau states, “If Congress established a 36 percent rate cap for our military members and their families because of the economic hardship created by payday loans, then the General Assembly should provide the same protection to Rhode Island’s citizens for the same exact reasons.”
Know someone needing money? Tell them to try anything but a payday loan. The destitute don’t need loan sharks and, as every major faith group agrees, Rhode Island reform of payday loans is essential.
As in biblical days, usury severely impacts people already in poverty. Ezekiel’s prophetic outrage is appropriate.
©2015 Harry Rix. All rights reserved.
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