From a Union perspective, take a note of how many “Cash-Advance / Payday Loan” stores that you notice over the next few weeks. These are the businesses that loan people money based on a post-dated check, anticipated weekly salary, or regular paycheck. What you will notice, and perhaps note, is that there were nowhere near as many of these businesses ten to fifteen years ago as there are today. The Cash-Advance/Payday lending industry has exploded through this prolonged recession. Payday lending customers are largely the working poor that may need a $300 to $1000 dollar loan to repair a car, pay an electric bill, or to simply put food on the table to make it to the next payday. Take a moment to consider the Cash-Advance/Payday loan industry and how we as Union members should see it.
Typically, a Cash-Advance loan for $300 from one of these ‘lenders’ may charge interest and fees of $60 for a 14-day loan, when the $360 is due in full. The borrower may pay off the $360 or the debt can be rolled-over to the next payday for a $60 payment, then pay $360 two weeks later. This may be done up to four times, then the borrower may refinance the debt by paying $90 (interest and fees plus 10% towards the principal) and refinance $270 until the next payday when $348 will be due. Considering that the customer base of payday loans are largely the working poor, many borrowers on very tight budgets are compelled to pay the minimum payment. It’s easy to see how this system could entrap those with limited resources and their debt could spiral out of control.
There are various types of payday/cash-advance loans, but the commonality is the exorbitant rates of fees & interest. In the example above, the interest rate and fees equal close to a 600% APR. This is usury. It is exploitation of the working poor, which is wrong on every level.
Usury’ is defined as the lending of money at a very high rate of interest. Consider this…The only time in the New Testament that Jesus became violent was when he overturned the moneychangers’ tables in the temple. Throughout the Bible and the Qur’an, the practice of usury is expressed with disdain or forbidden. Aristotle, Cicero, Cato, and Martin Luther all condemned it. In 340 BC at the height of the Roman Empire, usury and interest rates for loans had been banned. When Rome fell, usury was rampant. For thousands of years religions, cultures, and people all over the world, have understood the ruinous implications to their societies if usury is allowed to exist and be common practice. Yet, Texas has embraced payday Lending/Usury as lassie faire capitalism and in order with the free market. There are no specific usury caps for consumers here in Texas.
Our membership has the financial options and are savvy enough to avoid these predatory lenders; yet, as Union members – aside from our obligation to demand responsible social policy – we have a vested interest in a public policy that impacts others in a class that is statistically two paychecks away from ours. We can look out for others in this case simply by conversation to raise awareness. At your next cookout or family get-together, a mention about payday lending, and the usury these businesses perpetrate could go a long way towards raising the awareness of this blight that has infested our communities. (Do a Google map search of “Payday Lending in Texas” and see how many locations pop-up.) Perhaps in conversation, you can explain to your family and friends that these businesses are bordering on mafia-type loan sharking and that America is bigger and better than this. FDR said, “The test of our progress is not that to provide more to those who have much, but that we provide enough to those who have little.”
The industry’s argument, and a counter you may hear, is that payday loans provide a needed service in the community and that the default rate justifies the high fees and interest. In reality, it is a $42 billion dollar industry built on the backs of the poor with a 600% APR yoke. Texas needs to highly regulate, if not ban, these ‘loan sharks’. If enough people come to understand what true evil this practice is, eventually public awareness will become the catalyst for change in Austin, and Texas public policy will begin to protect the working poor – not exploit them.
Transport Workers Local 591