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Payday lending a moral issue?

Posted by Stephen on August 24, 2007

Faith group presses effort to cap interest rate at 36 percent

By PAMELA STALLSMITH

Ann Rasmussen of Virginia Interfaith Center for Public Policy said churches would be engaged on the issue.

In what they call a moral and not political campaign, members of Virginia’s faith community are launching a renewed effort to cap the interest rate of payday loans.

The Virginia Interfaith Center for Public Policy, at a Capitol news conference, announced yesterday its “Faithful Pledge” endeavor to combat what it calls the “usury and predatory nature” of the high-interest, short-term loans.

Under state law, payday lenders are exempt from Virginia’s annual interest cap for small loans at 36 percent. Loan rates can spiral into the three-digits, opponents contend, exploiting borrowers and preying upon the financially downtrodden.

Citing the Gospel and invoking moral imperative, representatives and ministers of Christian churches urged state lawmakers to end “the debt traps” and limit the rates.

“We know that Jesus would never condone the charging of 390 percent interest,” said the Rev. Charles Swadley of Lakeside United Methodist Church.

“It is unfair and unwarranted to gouge someone in an emergency like a hurricane . . . or floods or fires,” he said, “And it’s just as immoral to gouge people when they are desperate and facing financial crisis. In the faith community, our call is to serve others.”

The “Faithful Pledge” campaign “is about engaging churches and other congregations of faith about the issue of payday lending,” said Ann Rasmussen, the center’s policy director. It will reach people through petitions, educational events and a Web site.

While yesterday’s event featured Christians, the center will hold news conferences with members of the Jewish and Muslim faiths.

The battle over the controversial loans will certainly emerge again as a hot topic during the upcoming General Assembly, which in 2002 passed the law lifting the cap. Last year, the industry successfully blocked efforts to put a 36 percent interest cap on the loans.

Industry officials contend the cap would drive them out of business.

“It is an effective repeal of the industry,” said Jamie Fulmer, director of investor relations for Advance America in Spartanburg, S.C., the largest publicly traded payday lender. “Our intention is to sit down and once again work with folks to try to find that reasonable reform.”

Gov. Timothy M. Kaine backs the 36 percent interest-rate ceiling.

“He would be supportive of any good-faith effort to convince the legislature that lifting the cap was a horrible policy decision,” said Kaine spokesman Kevin Hall.

Virginia is one of 38 states that allow the high-interest loans. North Carolina and Maryland do not, and the Council of the District of Columbia has given initial approval to a 24 percent interest limit.

If that happens, and payday lenders move across the Potomac River into Virginia, Rasmussen said, “it’s all the more reason why this General Assembly session we’ve got to cap the loans at 36 percent.”

Pamela Stallsmith is a staff writer with the Richmond Times Dispatch. Contact Pamela Stallsmith at (804) 649-6746 or pstallsmith@ timesdispatch. com.

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