Nebraskans vote to limit ‘exploitative’ payday loans
Voters in Nebraska have sided with efforts to limit payday lending, adopting an initiative on Tuesday that the Nebraska Catholic Conference approved as a way to protect the poor from debt.
More than 80% of Nebraskan voters supported Initiative 248, which caps payday loans at an annual rate of 36%, reports the Lincoln Journal-Star. Previously, the legal loan rate was set at 400%.
Sixteen other states have similar limits or completely ban payday loans.
The Nebraska Catholic Conference was among the supporters of the initiative.
“Payday loans too often exploit the poor and vulnerable by charging exorbitant interest rates and trapping them in endless debt cycles,” Archbishop George Lucas of Omaha said on October 7. “It’s time for Nebraska to implement reasonable interest rates for payday loans. Nebraska Catholic Bishops urge Nebraskans to vote for Initiative 428. ”
Nebraskans for Responsible Lending was another supporter of the voting initiative, which was entered on the ballot after receiving over 120,000 signatures of support. Opponents of high payday loan rates attempted to push through similar limits through legislation, then turned to ballot measurement when that route proved unsuccessful.
Religious leaders, veterans groups, the American Association of Retired Persons, the American Civil Liberties Union of Nebraska and other welfare groups have supported the initiative, the Journal-Star reported.
Critics of the measure said the caps would lock in credit for people who can’t get loans anywhere else and bankrupt the businesses that serve them.
Tom Venzor, executive director of the Catholic Conference of Nebraska, explained the need to cap payday loans in an Oct. 9 statement.
“In 2019 alone, payday lenders collected more than $ 30 million in fees from borrowers,” Venzor said. Those who apply for payday loans tend not to have a college degree, to rent rather than own a house, to earn less than $ 40,000 a year, or to be separated or divorced. African Americans are also disproportionately looking for payday loans.
“They look to payday loans to cover basic living expenses like utilities, rent or mortgage payments, food or credit card bills,” Venzor said.
The Nebraska Department of Banking and Finance’s 2019 annual report on payday lending practices shows that the average borrower was charged 405% at an annual percentage rate on a loan of $ 362 and took out 10 loans in one single year.
“When borrowers are unable to repay their loan after two weeks, they usually have no choice but to take out a second loan to pay off their first,” added Venzor. “This inability to repay a loan can lead to a vicious ‘debt cycle’ that can last for years.”
Venzor explained that Catholic education rejects abusive loans.
“Catholic social education is very clear on this issue,” he said. “He recognizes that it is both morally acceptable to make reasonable and equitable profits in economic and financial activities, and morally reprehensible to lend money at unreasonably high interest rates (a practice also known as usury name). “
Venzor noted that the Catechism of the Catholic Church rejects usury as a violation of the commandment “Thou shalt not steal”. Saint John Paul II, during a general audience of February 4, 2004, denounced usury as “a scourge which is also a reality in our time and which has a stranglehold on the lives of many people”.
In February, the Montana Catholic Conference supported federal limits on payday loans and auto titles. He encouraged voters to ask their congressman to support the 2019 Fair Credit for Veterans and Consumers Act. The bill that would limit the interest rate on payday loans and car titles. The bill would extend the rate cap of the Military Loans Act of 2006 – which only covers serving military personnel and their families – to all consumers. It would cap all payday loans and car titles at a maximum annual interest rate of 36%.
American Catholic bishops supported the bill.
In July, the Consumer Financial Protection Bureau, a government agency responsible for consumer protection, revoked federal restrictions on payday loans, sparking objections from the U.S. Conference of Catholic Bishops. The rules were announced in 2017, but the office said their legal and evidentiary bases were “insufficient.” The office said removing the rules would help “ensure the continued availability of low-value loan products to consumers who need them.”
The industry collects between $ 7.3 billion and $ 7.7 billion a year from practices that would have been banned, the office said.
Archbishop Paul Coakley of Oklahoma City, chairman of the United States Conference of Catholic Bishops’ internal justice committee, opposed the changes in a July 10 letter that called payday loans “usury of money.” modern times”.
The Church has consistently taught usury to be evil, including in many ecumenical councils.
In Vix perverts, his encyclical of 1745 on usury and other dishonest profits, Benedict XIV taught that a loan contract requires “that one returns to the other only what he has received. Sin is based on the fact that sometimes the creditor wants more than he has given. Therefore, he claims that a gain is owed to him in excess of what he lent, but any gain that exceeds the amount he gave is illegal and usurious.
In his address to the general audience on February 10, 2016, Pope Francis taught that “the scriptures constantly urge a generous response to requests for loans, without doing small calculations and without charging impossible interest rates,” citing Leviticus.
“This lesson is still relevant,” he said. “How many families there are in the street, victims of profit … It is a serious sin, usury is a sin that cries out in the presence of God.”