Russell Moore is at it again
More liberal social agendas with liberal partners
Dr. Randy White
The left-leaning Ethics and Religious Liberties Commission of the SBC has recently partnered with seven denominational and/or ecumenical organizations to end Payday lending through social pressure and governmental regulation. While the ERLC assures me that no Cooperative Program funds are going into this partnership, the expertise of staff and the energies of the ERLC (all of which are funded by CP) are certainly going to this partnership. The co-belligerency, according to ERLC staff, “has no budget or operating expenses,” (which, I suppose, included this nice website with what must be a free domain name).
What is Payday Lending?
In short, Payday lending is about the worst kind of debt a borrower can incur. It is an expensive loan of last resort. It is designed to be a small-dollar cash-advance given to a customer who writes a post-dated check for the amount needed plus the service fee. For example, I could go to the Payday loan company in need of $100 for gas to get to work, write a $115 check to the loan company, postdated for two weeks from today, and the company would give me $100. If I have the $115 to cover the check when the date arrives, all is well and the check cashes, the loan costing me a hefty 15%, but my crises averted. However, those who use Payday loans often have a problem when the date arrives. If they do not have the money to allow the check to be cashed, they extend the loan (for another $15 fee, now making a 30% cost of borrowing) or they get hit with an insufficient funds fee from their bank (possibly $30) in addition to still owing the lending company. Very quickly, the cost of borrowing can exceed the amount borrowed.This kind of borrowing is, as I’ve said, the “loan of last resort.” However, in states where this lending has been outlawed (15 of them), the New York Federal Reserve reports that there are more bounced checks and higher rate of filing for Chapter 7 bankruptcy. The report of the Federal Reserve states that, “payday credit is preferable to substitutes such as the bounced-check ‘protection’ sold by credit unions and banks or loans from pawn shops.” In other words, this “loan of last resort” is actually a necessary form of credit for some borrowers, and, when used wisely, can save people from utility cut-off (with its high reconnect fees), NSF charges (which can be exorbitant compared to the amount of the check), lost wages (furthering the financial problems), and more.Fixing the problem to help the poor
No conservative would ever lobby Government to fix this problem. A government fix will only make matters worse for the poor. When the facts are gathered, one finds that a small loan to a high-risk borrower for a short time is an extremely risky and high-cost venture. Therefore, the cost to the borrower for that kind of loan is going to be very high. While government could (and has, in some cases) limit the APR of such loans to some fixed percentage (often 36% on existing laws), the fee for a two-week $100 loan would only be $1.38. Therefore, the in-need borrower would be forced to the pawn-shop to sell valuables for pennies on the dollar, or to the “bounced check protection” offered by his bank (likely much more expensive than the Payday loan), or to suffer the consequences of no gas, no electricity, or no food.Government is not the solution. Church-based community organizing is not the solution. Free enterprise is the solution. There are companies trying to be socially responsible in lending. For example, LoanNow has written an informative post on “The Challenges of Building a Payday Loan Alternative.”In 2005 the often left-of-center think tank, Brookings Institute, noted that “virtually all of the practices complained of [fusion_builder_container hundred_percent="yes” overflow=“visible”][fusion_builder_row][fusion_builder_column type=“1_1” background_position=“left top” background_color=“” border_size=“” border_color=“” border_style=“solid” spacing=“yes” background_image=“” background_repeat=“no-repeat” padding=“” margin_top=“0px” margin_bottom=“0px” class=“” id=“” animation_type=“” animation_speed=“0.3” animation_direction=“left” hide_on_mobile=“no” center_content=“no” min_height=“none”][in predatory lending] are already against federal law,“ and that, "additional statutory measures at the state and local level…run a significant risk of unintentionally cutting off the flow of funds to creditworthy borrowers.” If this was true when this was written 10 years ago, I doubt that there is a government solution today.My Frustration with the ERLC
I think Russell Moore and the ERLC are consistently looking for big-government, nanny-state protections for the poor. Further, they consistently align with the left in their social agenda. The Payday lending crusade is just one more example of how this SBC organization is out of touch with real solutions that provide real help to the poor. Moore’s continued efforts toward “economic justice” are disturbing, to say the least. “Justice” is never defined, and the only times I see it in use it means “socialism.” I hope that Trustees at the ERLC will begin to reign in the rhetoric of Dr. Moore and change the direction of the ERLC.Questioning the Payday Lending Crusade
In conversation with ERLC staff who read the draft of this article, one response was, “I’m quite surprised to see you taking what is functionally a pro-payday lending position.” What I do hold is a non-government solution to the problem, as I’ve stated above. To those who prefer a “central planning committee” approach to economics, I ask these questions:- Why is 36% the “moral” rate of interest? (This is the interest rate often promoted by those in the “just lending” movement.) I have a feeling that if I loaned money to my neighbor at 36%, the same forces would call this “usury.” The coalition believes in “reasonable interest rates” but does not define what is reasonable. Some would argue that any interest charged would be unBiblical, according to Psalm 15:5.
- If the Central Planning Committee succeeds at eliminating Payday loans, is the result beneficial for the poor? What becomes of those who need a few dollars to avoid utility disconnect, for example? My water bill ($87.47) has a $60 reconnection fee if it is not paid and the water disconnected. The water district gives a 10-day notice. For someone on a 15 day pay cycle, they may go several days without water and pay what would amount to 69% interest for a reconnect.
- Why doesn’t the coalition or the ERLC develop financially viable alternatives to PayDay lending. If 36% is “moral” and economically viable, then they should encourage socially responsible citizens to establish a new, “socially responsible” way to help the poor.
- Why does the coalition feel that further laws are needed. There are laws that prohibit payday loans to military, the Dodd-Frank bill established the “Consumer Financial Protection Bureau,” there are plenty of laws against predatory lending and extortionist tactics for loan repayment, and, furthermore (and most important), this is constitutionally an issue for state governments, not the Federal government (read the 10th Amendment).