Group pushes misinformation about payday loan initiative

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ST. LOUIS - As this year's elections cycle kicks into overdrive, the Missouri ballot initiative to cap payday loan interest rates at 36 percent is getting a lot of attention from an unscrupulous, pro-industry organization.

"Missourians for Equal Credit Opportunity" opposes the ballot initiative so much that it is willfully spreading misinformation and lies in an attempt to intimidate supporters.

The organization, with an $850,000 budget, is targeting faith and clergy leaders. It hopes to stop or slow down religious support for the initiative, which is being backed by a broad-based union, community and faith coalition, Missourians for Responsible Lending. In fact, a Texas-based law firm associated with the misleadingly named Missourians for Equal Credit Opportunity sent hundreds of clergy leaders in St. Louis and Kansas City a letter falsely implying that churches and religious organizations actively educating their congregations about the initiative could possibly lose their tax-exempt status or face other penalties.

Legally, tax-exempt organizations like churches cannot endorse candidates. However, they can support ballot initiatives and educate congregations on issues like the payday loan ballot initiative.

Martin Rafanan, an Evangelical Lutheran minister, says, "This is an insidious campaign to gum-up the works and slow down the process. They want to sow the seeds of doubt in an attempt to disrupt and stop a common sense solution to a problem plaguing many of Missouri's most vulnerable families."

Rafanan is the executive director of Gateway 180 Homelessness Reversed, the largest emergency shelter in Missouri for women and children, serving 110 residents daily.

"Twenty-five percent of the people serviced by Gateway 180," Rafanan added, "are there because of payday loan debt spiraling out of control."

The Texas law firm letter falsely claims that the initiative would "eliminate small, short-term loans in Missouri and drive borrowers to more expensive and credit damaging alternatives."

But the Rev. Teresa Danieley, from Saint John's Episcopal Church, says, "We want to regulate payday loan companies, not eliminate them."

Danieley, who also serves as the faith co-chair for St. Louis Jobs with Justice, compared current payday loan interest rates to usury, a biblical sin.

Missourians for Equal Credit Opportunity claim to be concerned about "more expensive" loan products. But right now interest rates for short-term payday loans average 444 percent. Currently, Missouri payday loan interest rates are capped at a whopping 1,950 percent.

According to the Missouri Division of Finance, in 2010 there were an estimated 1,040 payday loan stores in the Show-Me State, and an estimated 22,300 payday loan stores nationwide making $30 billion in loans annually.

Ballot initiative supporters need to collect around 200,000 valid, registered voters' signatures between now and May to qualify the initiative, which would then be placed on the November ballot. Polls currently show overwhelming support for the initiative.

If passed in November, Missouri would join 17 other states that cap payday loan interest rates at 36 percent, the federal limit for active duty service men and women. The initiative is seen as likely to help boost voter turnout among low-wage, working class families, benefiting President Obama in his re-election bid.

According to Montague Simmons, the St. Louis Jobs with Justice ballot initiative coordinator, "The fight for November starts right now with this campaign to cap payday loan interest rates."

Photo: rinkjustice // CC 2.0

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  • Churches and congregations should not be involved in matters relating to people’s personal finances. What they are here for is to offer the worshipper solace and comfort in a time of need. They are here to offer advice and guidance to individuals when they are experiencing a crisis. And yes – giving advice usually means educating the supplicant of what their actions will procure. Why should they be threatened when all they are trying to do is help their community stand on its own feet?

    Posted by Spot Thedog, 09/06/2013 3:51am (10 months ago)

  • If this passes, there will be no options for individuals who have little or no credit to get a loan anywhere!! The individuals who are trying to pass this initiative need to thoroughly investigate both sides, the pros and cons if this initiative were to pass. If passed, this initiative would devistate Missouri's economy!!! Have you researched the 17 states that have passed this? How are the individuals who relied on small-short term loans doing financially? How many of them have had to pass bad checks because they weren't able to access a small-short term loan? How many of those individuals are suffering because they can not get a small short term loan from a bank or credit union because their credit isn't good enough? Have the members of the congregations that are part of MCU been fully educated on the pros and cons of this initiative? Do they fully understand what will happen to their congregations' options if this passes? Do the members of MCU fully understand how this will affect Missouri and its resident financially? According to your article 25% of the individuals who are being helped by Gateway 180 are there because of Pay Day Lending, who got them there? You can't totally blame the lending companies, those individuals should know their limits financially and pay more attention to what they are signing. If they are unsure, either don't sign or find someone who can fully educate them on what they are signing, just like the petition for this initiative. MCU is only giving their side of the story and only telling individuals what they want them to hear. Those voting Missourians have a right to know both sides of the story and be fully educated on the results of this initiative. Don't look at the short term results, look at the long term results. If they have medical emergencies or need to buy food, or get their car fixed, they will simply be out of luck! Pushing this and passing this is like telling those individuals "Oh well"! If you want to protect your members of your congregations and your communities, then think long and hard about what you are trying to pass. Investigate the results of this cap passing in other states and let your congregations know how much of a burden this will put on the economy. There is a term in ethics called utilitarianism...it means to do what is best for the greater good. This initiative may help a few thousand people who borrow from PayDay lenders, but it will do more harm than good to the hundreds of thousands of other Missouri residents who depend and rely on these short term loans. I do not work for a loan company of any kind. I have investigated both sides and looked at the results in other states and have found that this rate cap is not what is best for Missouri and its residents.

    Posted by Beth Hagenhoff, 03/05/2012 9:40pm (2 years ago)

  • Interesting article on the state of electoral politics. Sad. But when ever we try to involve the law in people's daily life choices it gets heated like that, often with extreme lobbying on both sides.

    And then I read Mr. Blair's comment, and it seems like everyone has their own math to calculate interest on these loans. But you have to ask yourself, who would take out a loan at 444%, 5934% or even 210,258,493% interest? Those numbers don't make sense at any rate, especially when a payday loan of $100 paid back on time is cheaper than a bounced check.

    Like any controversial issue, the debate can get distorted by both sides of the argument. In this case, we should let people decide for themselves if they want to use these loans or not, without trying to tell these lenders how to do their business.

    Posted by Not a numbers guy, 02/10/2012 12:59pm (2 years ago)

  • The 444% and 1950% stated in this article are NOMINAL (simple-interest) annual percentage rates determine in accordance with Appendix J(b)(1) of the Truth in Lending Act of 1968 .... and are not the mathematically-true COMPOUND annual percentage rates ... which are much higher. Assuming the loans are for the usual 14 days, then the nominal 14-day periodic interest rate on the 444% loan is 17.03%, calculated as, using Excel notations: 444%*14/365. The mathematically-true compound APR on that Nominal 444% APR is 5934%, calculated as (((1+(17.03/100))^(365/14))-1)*100.
    The 1950% loan for 14 days has a Nominal 14-day PERIODIC INTEREST RATE of 74.79%, calculated as 1950%*14/365. The mathematically-true compound APR on the 14-day periodic rate of 74.79% is 210,258,493%, calculated as (((1+(74.79/100))^(365/14))-1)*100. Get someone financially educated on your side.

    Posted by A F "Bob" Blair Jr, 02/09/2012 1:41am (2 years ago)

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