POSTED ON DECEMBER 7, 2011:
Annual Percentage Robbery
Oklahoma leads the way in high-rate payday lenders
Imagine you lived in a world where nearly one in five of your neighbors are so desperate for cash that they willingly take out loans that impose interest rates of between 200 and 500 percent.
Imagine you lived in a world where nearly four in 10 of your neighbors rely almost exclusively on high-cost check-cashing centers for routine banking services.
Imagine you lived in a world where nearly half your neighbors earning less than $30,000 annually are left with few choices but payday lenders to obtain credit.
Actually, you don't have to imagine such a place. You already live there. It's a serfdom called Oklahoma.
If your face isn't red-hot with embarrassment, then you ought to dispatch an All-Points-Bulletin for your missing conscience.
Sadly, Oklahomans in general and their legislators in particular are mostly either ignorant of -- or indifferent to -- the plight of our fellow citizens that are routinely victimized by the so-called alternative financial sector.
A recent report authored by the Oklahoma Policy Institute's Kate Richey casts a spotlight on the obscene financial bludgeoning of those who can least afford it -- the average payday loan borrower in Oklahoma paid the equivalent of a whopping 349 percent annual percentage rate on a 14-day loan in 2010.
"People are just absolutely dumbfounded that this is legal," says Dr. Bruce Prescott, a Norman minister who serves as executive director of Mainstream Oklahoma Baptists, a coalition of moderate Baptists.
At a meeting last month in Oklahoma City, Prescott and nearly 50 other Baptists of varying stripes agreed to join forces in a quest to end the legalized usury, hoping at the very least to persuade the state Legislature to cap interest rates at 36 percent -- a limit Congress imposed several years ago on payday loans to military families.
"It's highway robbery to pay that much," Prescott said, "but at least it's not 400 percent."
The anti-usury effort is an outgrowth of a series of meetings convened nationally by the New Baptist Covenant, which according to its website is an "informal alliance of more than 30 racially, geographically and theologically diverse Baptist organizations from throughout North America that claim more than 20 million members."
The diverse group united in hopes of finding ways they could work together to express traditional Baptist values, "including sharing the gospel of Jesus Christ and its implications for public and private morality, as well as their obligations as Christians to fulfill the biblical mandate to promote peace with justice, to feed the hungry, clothe the naked, shelter the homeless, care for the sick and the marginalized, and promote religious liberty and respect for religious diversity."
It didn't take long for those attending the Oklahoma City session to zero-in on the unconscionable interest imposed by payday lenders for short-term loans that usually range between $50 and $500.
Prescott, for one, decided to do some first-hand research: He went to the payday lender closest to his home to determine what he would pay if he took out a $50 loan. With fees and interest: 403 percent.
"Who is it that's struggling with $50 or $100 until the next pay day? It's people with no money," he said -- typically non-white, single women with meager incomes and lower-than-average education.
Richey's report, funded by the Ford Foundation and First Nations Development Institute, indicates the problem is particularly acute in Oklahoma where there are 404 payday lending storefronts -- more than the number of WalMarts, McDonalds and QuikTrips combined.
With such easy access, Oklahomans use the alternative financial services at significantly higher rates (17.5 percent) than the average American household (11 percent).
Those who attempt to justify the payday loan rates blame them, of course, on the cost of doing business with an especially risky clientele. And Richey's report suggests there are plenty of risky clients in Oklahoma -- a state whose average credit score -- 666 -- is 44th worst in the nation, 17 points below the national average.
Perfect symbolism, eh? 6-6-6.
Look, almost everyone understands how the credit game is played. If your credit report isn't spotless, you're going to pay a higher interest rate. But we're not talking about the difference between an 8 percent and a 30 percent credit card APR. We're talking about medieval bondage.
At the New Baptist Covenant meeting, Stephen Reeves, legal counsel for the Texas Baptist Christian Life Commission, highlighted a particularly egregious example from his state: A retired military veteran, using his pickup truck as collateral, signed up for a $4,000 loan to help his adult daughter. He was hit with a $1,200 per month penalty for failing to pay the loan in full.
"He could pay $1,200 per month forever and never pay off that loan," Reeves told the Oklahoma Baptists. "That's immoral... The concept of usury is a biblical issue. When you charge people a high interest rate, you're effectively stealing from them."
As a statement released by those attending Oklahoma City's New Baptist Covenant put it, "We are convinced that the interest rates now being permitted to payday lenders are unconscionable.
"Today, what our forefathers called 'biting interest' is commonplace and the 'defenseless poor' are being forced to pay the highest interest rates -- rates up to 40 percent per year. Rates that trap them in debt and put a strain on the benevolent and charitable activities of our churches when they come to us for assistance to provide for the basic necessities they can no longer afford because payday lenders have robbed them of their limited incomes."
It's this sort of unbridled greed that is helping to fuel the Occupy movement in America. And it's one reason that a top GOP strategist, Frank Luntz, would tell the Republican Governors Association recently that he's "frightened to death" of the 99 Percenters. "They're having an impact on what the American people think of capitalism," he said.
The GOP majority in the state Legislature would be well advised to take note: You can do the right thing -- outlawing the usurious loan rates -- and win political points. Or you can defend the greedsters and pay a heavy political price.
The choice is yours.
--Arnold Hamilton is editor of The Oklahoma Observer; www.okobserver.net
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