Christian Community Development Leaders: Pass Financial Reform to Protect the Poor
Christians Fight Predatory Lending Lobbying Efforts to Leave Out Protections for Low-Income Families
As the Senate prepares for decisive votes on critical financial reform legislation and faces a lobbying blitz from predatory lenders, Christian leaders are fighting back on behalf of the people they serve. In a letter delivered to Senators today, Christian leaders with decades of real-world experience providing housing services and financial counseling in the nation’s hardest-hit communities reminded legislators of the destruction wrought by predatory lending, and urged legislators to enact reform that “protects against abusive forms of lending that target low-income households including refund anticipation loans, payday loans, and unscrupulous auto lending.”
While faith leaders who see firsthand the effects of predatory lending practices press for fairness, transparency and accountability in financial services for low-income communities, dozens of payday lending company executives spent last week on Capitol Hill pressuring lawmakers to exclude their products from oversight. Meanwhile, the current bill’s ability to rein in the predatory and racially discriminatory mortgage lending that triggered the present crisis remains in doubt – making the faith community’s efforts all the more urgent.
“We recognize abusive lending as a breach of Biblical prohibitions against lending that exploits the poor,” the letter delivered to Senators today states, citing practices such as higher cost mortgage loans routinely sold to African-American and Latino borrowers than white borrowers, payday loans with 300-400% Annual Percentage Rates (APR), and targeting of low-income car buyers for high-priced loans and insurance. The full text of the letter with signatories is below.
“The red-lining (cutting off credit) of struggling communities is illegal, but easy credit at usurious rates has a similar effect and there is precious little legislation to correct it,” said Dr. Robert Lupton, a signatory of the letter and founder and director of FCS Urban Ministries in Atlanta, a coalition of faith-based housing, youth and neighborhood development services, in Atlanta, Georgia. “Lending is vital for all communities but it needs to have a conscience. And that is the legitimate responsibility of government.”
“The lobbying by financial institutions against reform make the faith community’s efforts to support it all the more urgent,” said Rachel Anderson, Director of Faith-Based Outreach at Center for Responsible Lending, which helped organize the letter. “Somebody has to speak for families rather than big-money special interests.”
Full text of letter with signatories:
May 11, 2010
Dear Senator:
As people of faith committed to building and renewing of healthy communities, we have long been involved in community development, financial education, and counseling and designed to enable low-income individuals build assets that can sustain themselves and their families.
Over the past several decades, we have seen countless deceptive and shoddy financial schemes strip wealth from our neighborhoods. Payday loans, refund anticipation loans, and high-cost mortgages all promise hope but ultimately peddle debt.
Too often, the worst financial products are targeted at the lowest income communities and communities of color.
• During the height of the recent mortgage boom, African American and Latino borrowers were more often offered high cost loans than white borrowers. In 2005, the majority of loans to African Americans were higher-cost (52%). 40% of loans extended to Latino borrowers were high cost as compared to 19% for white borrowers.[1]
• Every year, tax preparers target low income neighborhoods for Refund Anticipation Loans while absorbing significant portions of households’ refunds. 63% of the people who received Refund Anticipation Loans in 2008 were receiving the Earned Income Tax Credit – the nation’s largest benefit for low-income households.[2]
• There are now over 25,000 payday loan stores nationwide. Because of their high costs (300-400% APR) and short repayment periods (2-4 weeks), payday loans frequently trap borrowers in a cycle of debt in which new loans are taken out to repay old loans and exorbitant fees.
• Low-income car buyers disproportionately receive higher cost auto financing. A North Carolina study demonstrated that low-income buyers are 19% more likely than other buyers to be told that add-on products such as credit insurance, warranties, guarantees, which can add thousands to the cost of the car, are required.[3]
In the midst of a major financial and economic crisis, the last thing our communities need is bottomless debt, nor schemes that take unfair advantage of people in difficult circumstances, nor lending patterns that subject African American and Latino communities to discrimination. Our communities need banks and lenders that strengthen families rather than place on them a burden of debt they cannot bear
From the lens of our faith traditions, we recognize abusive financial practices as a breach of prohibitions against lending that exploits the poor. “If any of your kin fall into difficulty and become dependent on you, you shall support them… You shall not lend them your money at interest taken in advance, or provide them with food at profit.” (Leviticus 25:35-37)
We invite you to partner with us in efforts to educate and protect our communities from exploitation by ensuring that any financial reform legislation:
• includes protections against abusive forms of lending that target low-income households including refund anticipation loans, payday loans, and unscrupulous auto lending;
• restores basic values of transparency, fairness, and quality to the financial services market;
• addresses the mechanisms, such as broker kick-backs, that enable racially discriminatory pricing and steering .
If this recent crisis has taught us anything, it is that what affects one community affects everyone. Low-income communities and communities color cannot be excluded from basic standards of fairness – for their own sake and for the sake of our whole economy.
Rev. Linda Jaramillo
Executive Minister
Justice and Witness Ministries
United Church of Christ
Ron Sider
President
Evangelicals for Social Action
Dr. Mary Nelson
Board Member
Christian Community Development Association
Dr. Robert Lupton
Executive Director
FCS Ministries
Atlanta, GA
Steven McCullough
Executive Director
Bethel New Life (Chicago, IL)
Rev. Larry James, President
Rev. Gerald Britt, Vice President
Central Dallas Ministries
Dallas, TX
Jeffrey Bass
Executive Director
Emmanuel Gospel Center
Boston, MA
Rev. John Liotti
CEO / Founder
Northern California Urban Development
East Palo Alto, CA
Dr. David P. Gushee
Distinguished University Professor of Christian Ethics
Mercer University
Jim Winkler
General Secretary
The United Methodist Church – General Board of Church and Society
NETWORK, A Catholic Social Justice Lobby