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Today in Kansas City, Missouri, the Consumer Financial Protection Bureau (CFPB) announced a new federal rule for “small-dollar lending” that will apply to payday loans, auto title loans, and payday installment loans. Without commenting on the specifics of that rule, I’d like to explain why I think the reform of payday lending is a moral imperative. A statistic, a story, and a Scripture will help me explain why.
First, the statistic: According to a May 2015 report by the Board of Governors of the Federal Reserve System, “Forty-seven percent of [American adults] say they either could not cover an emergency expense costing $400, or would cover it by selling something or borrowing money.” In other words, nearly half of American adults do not have $400 cash on hand for an emergency. These people are our family, friends, fellow churchgoers, work colleagues, and neighbors. They may even be us. They are in need.
Second, the story: The Kansas City Star recently reported on the heartbreaking story of Elliott Clark. When his wife Aquila fell and broke her ankle, he took out a payday loan to help cover the bills. When he couldn’t pay off the first one on time, he took out another, and then three more in quick succession. Each time, the high annual percentage rate of the loan compounded daily. It took Clark five years to pay off the loans. The grand total: $2,500 in principal, $50,000 in interest.
According to remarks CFPB Director Richard Corday made in Kansas City, taking out another loan to pay off a previous one is common in small-dollar lending. “Indeed, the very economics of the payday lending business model depend on a substantial percentage of borrowers being unable to repay the loan and borrowing again and again at high interest rates, incurring repeated fees as they go along. More than half of all payday loans are made to borrowers in loan sequences of ten loans or more. For borrowers who are paid weekly or bi-weekly, one-fifth of these loans are in sequences of 20 loans or more.”
The statistic tells us that many of our fellow Americans have needs. Elliott Clark’s story tells us that some of them are being taking advantage of in their need. And that brings me to my third point, Scripture. Consider this commandment:
“If you lend money to one of my people among you who is needy, do not treat it like a business deal; charge no interest. If you take your neighbor’s cloak as a pledge, return it by sunset, because that cloak is the only covering your neighbor has. What else can they sleep in? When they cry out to me, I will hear, for I am compassionate” (Exodus 23:25–27).
It is tempting to dismiss this commandment. Some might argue that Old Testament law doesn’t apply to New Testament Christians. Others might say that in a modern, credit-based economy, the prohibition of charging interest on loans doesn’t work. Still others might claim that the commandment applies only to financial relationships among Christians, not financial relationships with nonbelievers.
The temptation to dismiss this commandment should be resisted. The commandment is part of the moral law, which is obligatory for Christians. With adaptation, it can be applied in a modern, credit-based economy by, among other things, prohibiting excessive interest. As for the notion that the commandment only applies to how Christians treat one another, I’d simply point you to the words of our Lord and Savior, Jesus Christ:
“And if you lend to those from whom you expect repayment, what credit is that to you? Even sinners lend to sinners, expecting to be repaid in full. But love your enemies, do good to them, and lend to them without expecting to get anything back. Then your reward will be great, and you will be children of the Most High, because he is kind to the ungrateful and wicked” (Luke 6:34–36).
What we see in both the Law of Moses and the Way of Jesus Christ is a moral principle that is both simple and universal: We should protect the poor, not profit from their need.
How should we do this? Regulatory and legislative reform is an essential element, but we do no one any favors when we focus on political solutions to the exclusion of other potential solutions. Alongside legal reform, we should consider other forms of action.
The National Association of Evangelicals (NAE)—of which the Assemblies of God is a founding member and on whose executive committee I sit—is a member of the Faith for Just Lending coalition. On the NAE’s website, you can read the coalition’s four principles of just lending:
Notice that these principles require something of everyone—the individual borrower, the church, lending institutions, and government. Everyone has a responsibility to be a good steward of the financial resources God has given them. Everyone has a responsibility to protect the poor instead of profiting from their need.
As general superintendent of the Assemblies of God, I especially encourage you to strategize about how you individually and your church corporately can do this. Does your budget have margin to help family and friends with small-dollar emergency needs? Does your church have a benevolence fund to help members of the community? Are you teaching financial stewardship as part of your discipleship programming? Are you partnering with other organizations, such as Convoy of Hope, to meet the needs of the poor around you? My prayer and hope is that every Assemblies of God church and adherent will answer the questions above with an enthusiastic, “Yes!”
In closing, I remind you of the words of Christ Jesus: “It is more blessed to give than to receive” (Acts 20:35). May our Fellowship be so blessed!
George O. Wood is general superintendent of the Assemblies of God (USA) and chair of the World Assemblies of God Fellowship
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