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Predatory Lenders
Photo: Cezar Perelles
Predatory lenders dot the urban landscape. Signs advertising “payday loans” are widely visible, especially in lower economic neighborhoods. Sad to say, these are not the only institutions preying on people who struggle financially—regardless of where they live.

It is no secret that it can be a challenge to make ends meet, but it is astonishing to learn to what extent lenders go to take advantage of the situation. Lest one assume that only the urban or rural poor are being targeted, banking practices now include a variety of service fees that add up rapidly. Consider the following statistics found in a cover story of the AARP Magazine for September-October 2006:
  • At least $3.4 billion a year is paid by families in the United States to repay payday loans (an industry that has grown tremendously in less than 20 years), at interest rates that top 300%. (Center for Responsible Lending)

  • "The typical payday-loan customer has a steady job, a checking account, poor credit, and an annual income of less that $50,000.” (University of North Carolina’s Kenan Institute of Private Enterprise)

  • Overdraft protection service is a privilege for which bank patrons pay. The bank makes good on debit card or checking account overdrafts. The $35 fee may seem reasonable to someone in a pinch until one understands that is “per transaction.” According to the Center for Responsible Lending, more than $10 billion is paid annually for overdraft fees.

  • Another banking practice that is of concern is that ATM receipts may have the overdraft limit listed instead of the checking account balance—without any indication that it is not the actual account balance.

  • Some lenders target automobiles, requiring owners to sign over title and submit a vehicle key. In order to get the car or truck back, the owner has to pay back fees that often multiply many times as a result of interest rates that exceed 300% and easily exceed the value of the vehicle.
Examples of “loans/fees paid” cited in AARP Magazine article include:

1. Initial loan of $19.45; final tally:  $1,194

2. Initial loan of $300 loan; final tally:  $1,780.

3. Initial loan of $150; final tally is not available yet because the woman cannot pay in full (as required by the payday loan lender which will not accept partial payments). She continues to borrow increasingly larger amounts in order pay back the previous loan and interest. She has nothing left after paying off the loan so she borrows more in order to live. In the process she was forced to move out of her apartment and now lives in a trailer in her brother’s backyard.

For more details, check this link:  www.aarpmagazine.org

With this information in mind, review your financial habits. Then look around as you travel through your community. What kind of financial institutions exist? How do they contribute—either negatively or positively—to the economic climate in your community? Research the voting record of your government representatives on financial issues that affect you and your neighbors. Let these elected officials know of your concerns about the impact of these exorbitant fees.

Jesus said that in the last days "...people will love only themselves and their money.They will be unloving and unforgiving; they will slander others and have no self-control; they will be cruel and have no interest in what is good" (2 Timothy 3:2,3).

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Center for Metropolitan Ministries. Copyright © 2006 by GraceNotes. All rights reserved. Use of this material is subject to usage guidelines. Scripture taken from the NEW LIVING TRANSLATION ©.

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