Payday Loans: The Tragedy of Bill, Part 2

So What About Bill?

So is Bill’s story isolated?  Did he just get himself into a mess that he could have avoided had he been wiser?  No.  Amy Shir wrote in an op-ed for the Courrier Journal that Bill’s case is more normal than we would like to think.  She shares some staggering statistics about payday loans:

The numbers nationally: $25 billion of $29 billion earned by the payday loan industry annually comes from loans taken out back to back. Kentuckians paid an estimated $158 million in fees in 2008. Kentucky payday loan borrowers use an average of nine loans per year and thereby pay an estimated $822 on a $350 loan — a whopping $472 in fees!

She goes on to say that:

This isn’t an aberration. It is the intentional business model on which the payday loan industry flourishes. “You’ve got to get that customer in, work to turn him into a repetitive customer, long-term customer, because that’s really where the profitability is,” said Dan Feehan, CEO of Cash America, a major payday lender.

The Heart of the Matter

You might be reading this thinking that the statistics are interesting.  You might be thinking that it’s a shame that there are places like this that exist.  You might be thinking of ways that you can vote for legislation that would put a cap on the interest rates that payday loan places can charge.  But is that all we’re shooting for?  Is the best we can do is shut these businesses down?  It’s telling at this point where our energy begins to focus–on the payday lenders.  Is this a bad place to focus?  No.  In fact, it would be great if more people stepped in and worked toward encouraging their government officials to pass legislation that would begin driving these places out of business.

But what about Bill?  What about all the Bills in our city who are paying 400% interest on loans that they can’t afford to pay back?  What about all the Bills in our city who keep on taking out loans because they don’t make enough money to pay back the original loan?  What about the Bills who are going to churches and pleading for help?  How do we as the church respond?  Do we blame Bill for being naive and falling for such an obvious scheme?  Do we tell him that he should have been wiser with his money?  Do we assume that he knew better, and now he has to live with the consequences of his actions?

Or do we point him to Christ?  Not just with our words, but with our actions?  Do we tell him and show him the beauty of the gospel?  Tim Keller offers a helpful insight:

…at first, we should show mercy to anyone in need, as we have opportunity and resources.  We should not turn them away by analyzing them as “underserving,” even if sin is part of the complex of their poverty.  Of course we should be on the lookout for fraud, and we must not give aid naively, in such a way that it is immediately abused.  We must give as a witness to the free grace of Christ and as an effort to turn rebellious hearts to the Lord.

But we cannot stop there.  The goal of mercy is not simply to provide spot relief or to stop the suffering.  Our real purpose must be to restore the poor person. We must carefully build up the individual until he or she is self-sufficient, and that means we must, in love, demand more and more cooperation.  Mercy must have the purpose of seeing God’s lordship realized in the lives of those we help.  We must give aid so that people grow in righteousness. We must not give aid so as to support rebellion against God.[1]

So what will all this look like for Bill?  It will not look like a handout and a pat on the back as he walks out of the door.  If we want to help Bill in his need, we must address all his needs.  While his most obvious need is to get out of the strangling hold of the payday lenders, there are deeper needs that Bill has.  He needs to be part of a community that loves him where he is.  He needs assistance in finding a job that can allow him some freedom to save for crises that arise.  He might need someone to help train him in new skills so that he might attain that better job.  But most of all Bill needs to be reconciled with God.  A handout, a tract, and a pat on the back will not accomplish this.  It will take time and effort to get to know Bill.  It will take time and effort to train Bill.  It will take time and effort to help Bill find a job.  It will take time and effort to meet with Bill and point him to Christ.  It will take time and effort.  But if we leave Bill broken on the side of the road while we make more time for our religious activities, we are no better than the priest and the Levite in the parable of the Good Samaritan.

So…do you have the time to help Bill?

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[1] Tim Keller, Ministries of Mercy: The Call of the Jericho Road, (P&R:Phillipsburg, 1989), 96-97.

Payday Loans: The Tragedy of Bill, Part 1

If you drive from any point in Louisville, you don’t have to go far before you will see a building with signs advertising cash for checks.  “NEED MONEY NOW?  WE CAN HELP!”  the bright, flashy signs promise.  These bright yellow, green, and neon signs bedazzle the Louisville cityscape, and they seem to multiply by the day.  When I was a bit younger (and a lot duller), I wondered how exactly these places that seemed so scuzzy could stay open.  The premise seemed simple to my naive mind: you write them a check for two hundred dollars, you spend the two hundred dollars, and the next week you give the money back to them when your paycheck comes in.  It didn’t seem like these places could stay in open while holding this philosophy of business.  I was right.

Taking a Look at Bill

As most of you are probably quite aware, these places make their money on the poor, on those living from paycheck-to-paycheck, by charging outrageous interest.  And all it usually takes is one check to hook someone to the point of ruin.  Take my hypothetical friend Bill, for example.  Bill lives paycheck-to-paycheck, making enough to pay his bills and have some food at the end of the week, but that marks the end of his check.  He doesn’t make enough to store anything away in case a crisis arises.  But, as we all well know, it is only a matter of time before something goes wrong.  In this case, Bill’s car breaks down.  This might not be such a big deal, if the plant he worked at was within the city limits and was reachable by taking the city bus–but, alas, it is not.  So, Bill hits a crossroad, and he is forced into  an impossible decision that is no decision at all–he must fix his car or lose his job.

Bill has no extra money set aside to pay the $400 it will take to fix his car, so what will he do?  He will do the only thing he knows to do.  He will go to the crummy building with the bright neon signs and write a check for $400 that he doesn’t have.  Bill knows that there is a price for this, and sure enough, there is.  He will owe $460 in two weeks.  Sure, this seems like a bullet he can bite, but think about it this way–if Bill can pay the money back in two weeks (which is not very likely since he barely scrapes by as it is), he has paid almost 400% APR.

The problem:  Bill is not going to be able to pay the money back on time.  The solution:  He will take out another loan to pay for the first one he took out.  The bigger problem:  Bill dug himself into a hole that is going to be difficult, if not impossible, to get out from.

So what will happen to Bill?  What are the big issues that we need to think about in this situation?  Where does the church begin to weigh on in a situation like this?  Tune in tomorrow to find out…