Payday lending is just a gentle term for loan sharking. Payday lenders give signature loans to people against future paychecks, locking them in with incredibly high interest rates. Missouri's laws are some of the most lax on the books.
According to a Missouri Better Business Bureau study (PDF) published in 2009, Missouri's state laws allow interest rates of 1950 percent to be charged on a two-week loan of $100.00, while most neighboring states' laws limit those rates to around 400 percent, which is not wonderful, but not as obviously impossible as Missouri's.
A report published by National Public Action this month has even more devastating details of the effects of this type of predatory lending, and link payday lenders to big banks' profits:
- Payday lenders take at the very least $3.4 billion from our communities every year in fees alone. This figure represents some $3.1 billion in wealth stripped from desperate borrowers -money that could have gone to buy needed groceries or school supplies- to pump up the payday lenders' fat bottom lines.
- Nationwide, revenues for the major payday loan companies (Advance America, EZ Corp, First Cash Financial, Dollar Financial, Cash America, QC Holdings) have risen to their highest level - $1.48 Billion per year- more than before the financial crisis.
- Big banks like Bank of America, Wells Fargo, JPMorgan Chase, and US Bank finance approximately 42% of the entire payday loan industry, providing the industry the capital for usurious and predatory loans.
Needless to say, the CFPB could not be investigating these loan sharks any sooner, particularly when they prey upon the working poor who are already struggling. These types of loans are typically targeted at minority communities, but also military families and other struggling groups. But while the CFPB investigation continues, a coalition of churches, bankers and nonprofits are working to create an alternative around a microlending model. In addition, petitions are being circulated for voter initiatives to limit interest rates on payday loans to more - ahem - reasonable rates.
At least two bills capping interest rates are pending in the Missouri General Assembly. Neither is expected to get much traction, but industry critics in Missouri are mounting a statewide campaign to limit the amount of interest payday lenders can charge customers, an effort that they think will resonate in an anti-big-business political climate that has spawned groups like Occupy Wall Street.
“The general populace see triple-digit interest rates as wrong,” Schulte said.
Though proponents have yet to gather the signatures necessary to put their measure before the voters, payday lenders and their sister industry, the installment loan business, are already fighting back. According to campaign finance records, they’ve collected more than $1 million so far from donors for an effort to keep the measure from being put on the ballot.
All of the $850,000 donated to the payday lending group, Missourians for Equal Credit Opportunity, as of Jan. 5 has come in chunks of $200,000 to $250,000 from Missourians for Responsible Government, which lists a Kansas City post office box and is not required to say where it gets its cash.
Money talks, and so does thuggery, sadly enough. In addition to throwing hundreds of thousands of dollars at initiatives designed to slow down payday lenders' money trains, they're actually threatening churches circulating petitions to limit their thievery.
The payday loan industry is looking a bit desperate in its attempt to derail an initiative petition in Missouri seeking to more strictly regulate short-term lending.
This week, a law firm in Grapevine, Texas, of all places, sent a letter to some Kansas City area churches, issuing dark and dishonest warnings about the perils of getting involved in the movement to clamp down on businesses that can legally charge interest rates of up to 1,950 percent for a loan.
The initiative petition drive to change state law and set a cap of 36 percent on the annual percentage rate of a short-term loan is being led by faith-based and community groups in Missouri.
The letter from the Texas law firm, Anthony & Middlebrook, advised churches in bold letters that “strict statutes carrying criminal penalties apply to the collection of signatures for an initiative petition.”
That’s true, of course, if one distributes a false affidavit or signs someone else’s name to a petition. No one has accused the payday loan opponents of doing any of those things.
The letter also warns churches that their tax-exempt status could be threatened if they engage in lobbying or attempts to influence legislation. The letter interprets “influencing legislation” to include “supporting or encouraging action with respect to the (payday lending) petition.”
Interestingly, Anthony & Middlebrook advertises themselves as a law firm specializing in the boutique needs of non-profits. A subgroup inside of Anthony & Middlebrook is the "Church Law Group", billing itself as follows:
The Church Law Group is a practice area of Anthony & Middlebrook, P.C. that focuses on the specific legal needs of churches, ministries, faith-based organizations, and clergy throughout the United States. The work of the Church Law Group includes both the creation of new nonprofit organizations and consulting with existing ones. We advise our clients on legal questions relating to general corporate and business matters, as well as a broad range of other issues that often have unique application in the religious nonprofit environment.
Oh, also? According to the KC Star Article, Anthony & Middlebrook, P.C. represents Missourians for Equal Credit Opportunity, the astroturf organization set up to receive $850,000 in contributions from the industry to oppose efforts to limit their astronomical profits at the expense of those least able to afford such ridiculous rates. The turnkey website set up for this organization has 'mythbusters', informing consumers that really, they're not paying such crazy rates, because really, the payday lending industry is benign and most consumers pay their loans off in two weeks.
Sure. That's why the National Public Action report shows that in Missouri, the estimated wealth stripped from the 99 percent and handed off to the 1 percent is about $117 million dollars in one year. Nationally, it's about $3 billion dollars per year. And guess who gets part of that pie? Five big banks -- Wells Fargo, Bank of America, US Bank and JP Morgan Chase, who keep about $1.3 billion transferred to them by the largest payday lending franchises in the form of fees.
Isn't it funny how conservative Texas lawyers aren't afraid to threaten churches' petitions when client profits are at stake, but they're perfectly fine with churches leaving anti-gay marriage petitions in their lobbies or personhood amendment petitions?
It's all about the money, always, and no one plays thug tactics better than the banker money boys. Nothing is sacred, not even churches.