November 15, 2011. The Courier-Journal.
FLORENCE, KY. — Kentucky’s largest religious denomination joined Tuesday in a growing call for regulations on payday lenders, saying such loans cost the annual equivalent of nearly 400 percent in interest and amount to “usury” decried in the Bible.
At its annual meeting, the Kentucky Baptist Convention adopted a resolution without dissent calling for state and local regulations that would cap interest on short-term loans at 36 percent.
It’s the first public statement in recent memory by the state affiliate of the Southern Baptist Convention on regulating financial institutions, and it puts it on the same page with several other religiously affiliated organizations that comment more regularly on economic issues.
Legislation calling for such payday-lending curbs has fallen short in recent years in the Kentucky General Assembly but is expected to be reintroduced in 2012.
The resolution approved by the convention cites Bible verses that prohibit taking interest from the poor and says the “Christian faith has historically opposed and deemed usurious loans at exorbitant rates of interest, especially to those who are poor.”
It describes payday-lending products — made in advance of anticipated wages — as fitting that bill.
Critics of payday lending say the industry hooks the poor into a cycle of debt through a series of short-term cash loans, charging fees that they say amount to nearly 400 percent in annual interest.
The industry, which has mounted well-financed lobbying efforts to maintain state regulations , says opponents’ claims are misleading. Industry representatives say that the costs for a short-term loan reflect one-time fees and that it doesn’t make sense to extrapolate annual interest rates for loans designed to be paid off over a much shorter term.
They say a 36 percent cap would effectively end payday lending and deprive people of short-term credit they couldn’t get otherwise.
The Baptist resolution cites statistics from the Kentucky Coalition for Responsible Lending, which analyzed a state database. It reports that borrowers are indebted for 160 days on average and that a typical Kentucky payday borrower was “trapped in 10 payday transactions in 2010.”
Several states have imposed curbs on short-term interest for payday loans, and the federal government has similarly restricted interest on loans to military service members.
Other religiously affiliated groups opposed to payday lending include the Kentucky Council of Churches, the Catholic Conference of Kentucky, CLOUT (Citizens of Louisville Organized and United Together) and BUILD (Building a United Interfaith Lexington through Direct-Action).
The Baptist convention says it has nearly 2,400 churches with more than 750,000 members.
Some 791 messengers, or church representatives, were registered as of Tuesday afternoon for the convention’s one-day annual meeting, held at Florence Baptist Church at Mt. Zion.
The Kentucky Baptist Convention has strongly opposed the expansions of legalized gambling and alcohol sales, as well as abortion and same-sex marriage. But it’s less common for it to call for government economic regulation.
The Rev. Richard Sullivan, pastor of St. Michael Catholic Church in Louisville, said he was thrilled with the result.
“This gives you a lot more clout,” he said.
Sullivan co-chairs an economic justice committee of CLOUT — a group of Louisville-area congregations that pushes for change on current social problems.
But Stephen House, who operates Checks Etc., with five outlets offering payday loans and other financial services in Bowling Green and Owensboro, said the Baptists’ resolution was well-meaning but misguided.
“I don’t think anybody could do that (charge the 36 percent annual rate) and stay in business,” he said. “If the Kentucky Baptist Convention would like to make loans like that, more power to them.”
House urged church members to visit his businesses and talk to customers.
Under state law, payday lenders may charge $15 per every $100 lent. Borrowers are limited to two loans at a time, for no more than $500, to be repaid within 14 to 60 days. In 2009 lawmakers agreed to establish a database to track payday lending.
Critics say the short-term loans often leave borrowers short of funds, so they take out new loans as they pay off old ones — sometimes repeatedly.
But Tres Watson, spokesman for the Community Financial Services Association of America, said the creation of a state database “is stopping the sorts of abuse of the system that were leading to the so-called ‘cycle of debt.’ ”
He said current regulations are sufficient to “protect consumers while still making affordable, short-term credit available.”
Christopher Peterson, a law professor at the University of Utah, said he was encouraged by the vote in light of findings in a 2008 study he co-authored.
It concluded that there were higher concentrations of payday lenders in areas where religious conservatives are politically powerful — the Bible Belt and the Mormon West — than elsewhere. In recent years, however, Southern Baptist-affiliated conventions in South Carolina and Virginia have approved similar measures.
“Some of the Baptist organizations have been a little bit slower to adopt these resolutions” than other groups, Peterson said. But given the historic religious opposition to usury, “this is just an example of people of faith recognizing the implications of their faith and sacred texts and taking some time to recognize the consequence of a particular commercial practice on the people in their communities.”
Also Tuesday, the convention elected Adam Greenway, a professor at Southern Baptist Theological Seminary in Louisville, as its next president, with 73 percent of the vote over Lexington pastor Derek Coleman.
Greenway — a professor of evangelism and applied apologetics, or a defense of the faith — is the fourth Southern Seminary professor in to be elected state convention president since 2004. Greenway is also interim pastor at the host Florence Baptist Church, which draws about 1,250 worshippers a week.
Greenway said he would maintain ties to the grass roots through regular visits to churches throughout the state. It’s natural for there to be “a strong relationship” between Southern Seminary and the state convention, he said.
“As somebody who’s been privileged to walk in both circles, are there times when there may be tensions? Perhaps, but I think (the seminary) is fortunate to be located … where we have such a strong and vibrant state convention,” he said in an interview.
