The Southern Baptist Convention (SBC) ethics body applauded the enactment of new federal law overturning a rule that had the effect of allowing predatory lending nationwide.
President Joe biden enacted a measure on June 30 under the Congressional Review Act that repealed the “real lender” rule, which allowed payday lenders to collaborate with foreign banks and thereby avoid the ban on predatory lending in States that had banned them.
The repeal of the rule “is a welcome change, and we are grateful to Congress for passing this legislation and to President Biden for signing it,” said Daniel Patterson, Acting President of the Ethics and Religious Freedom Commission (ERLC). “Payday lenders will no longer be allowed to overturn existing state laws and exploit vulnerable people with outrageous interest rates on short-term loans.
“The Bible condemns usurious business practices, and the SBC messengers have denounced predatory payday loans. “
Messengers from the 2014 SBC annual meeting approved a resolution that opposed predatory payday lending, called for fair government policies to end the practice, and urged churches to provide financial management training .
At a signing ceremony, Biden said the schemes permitted by the rule allow lenders “to prey on veterans, the elderly and other unsuspecting borrowers … trapping them in a cycle of debt. “.
Payday loans, as it is popularly known, often lure the poor into large debt by charging exorbitant and often deceptive interest rates. For example, although an interest rate might be described by a lender as 15%, it may actually only apply for a period of two weeks until a person’s next payday. . The annual interest rate for payday loans is usually around 400%, which makes it extremely difficult for a borrower to repay the loan.
The Office of the Comptroller of the Currency finalized the rule for national banks and federal savings associations as lenders – which became the “real lender” rule – in October 2020. It came into effect at the end of December.
The rule was intended to clarify the identity of the “real lender” in a partnership between a bank and a third party. He said the bank is the “real lender” if it is “named as the lender in the loan agreement” or “finances the loan”.
Critics, however, pointed out that the regulation made possible “rent-a-bank” programs in which payday lenders could partner with banks in another state to avoid rate caps. Although nearly 20 states and the District of Columbia have 36% rate caps, according to the ERLC, predatory lenders could charge significantly more in those states under the rule.
Congress has the power to repeal federal regulations under the Congressional Review Act. The Senate passed the bill to overturn the rule by a 52-47 vote in May, while the House of Representatives voted 218-208 for the measure on June 24.
No Democrats voted against the legislation, while only four Republicans supported it. These GOP members were Sens. Susan Collins from Maine, Cynthia Lummis from Wyoming and Marco Rubio from Florida and Rep. Glenn Grothman of Wisconsin.
ERLC has worked to end predatory lending as a partner in the Faith for Just Lending coalition, which it helped launch in 2015. In its 2021 public policy agenda, the ERLC again called for regulation of the predatory lending industry. The commission supports the reintroduction of the Fair Credit for Veterans and Consumers Act, which would expand the current 36% annual rate cap for serving military personnel to all Americans.
In addition to the ERLC, the members of Faith for Just Lending, according to its latest press release, include the National Association of Evangelicals; National Baptist Convention, United States; National Latin Evangelical Coalition; Baptist Fellowship Cooperative; The Public Justice Center; The Episcopal Church; and faith in action.
(EDITOR’S NOTE – Tom Strode is the Washington bureau chief for Baptist Press.)