By now you have seen them on the corner, you have endured the commercials: businesses that promise to give you the cash you need right now, and all you have to do is leave a postdated check for payday. More and more people are beginning to see that these outlets are nothing more than loan sharks in the guise of a corner store.
There is an old-fashioned word, “usury,” that ” like its cousin, “sin” ” nearly is forgotten today. Usury, the crime of charging excessive interest on a loan, actively was punished by the government from our earliest colonial beginnings to but a short time ago. From the loosening of credit-card laws in the Seventies through the reckless changes in small-loan usury rates in the past two decades, an increasing segment of our population has been shackled with the chains of debt. Let us speak, and therefore think, clearly. Payday loan shops are nothing more than organized exploitation of the poor and vulnerable.
Effective annualized rates of many payday loans reach well in excess of 400 percent in some states ” rates that make the Mafia seem like a Credit Union. Oklahoma law weakly has mandated the ability to have installment payments under certain conditions, but this merely restructures the indentured servitude, it does not alleviate it. The worst part of our present law is the unconscionable rates that are allowed to be charged. Consider these numbers from a Federal Trade Commission Consumer Alert: A two-week loan of $100 to be paid back for $115 carries an annual percentage rate of 391 percent for those who extend it another two weeks! Compare that to APR limits brought over from England that we maintained for two centuries: approximately 6 percent.
This deserves to be a bipartisan issue. Honest progressives should be aghast at the social justice issues at stake. Moderates ought to be scandalized by the affront to social cohesion oppressive debt creates. Conservatives in general need to respect the tradition inherited from the colonial eras, and religious conservatives would do well to consider the many scriptures that speak out against usury. My personal favorite is Proverbs 22:8 ” “One who increases his possessions by usury and extortion gathers it for him who will pity the poor.”
I know many honest Oklahoma legislators have allowed the law to come to such an impasse due to deference to the market and a preference for limited government, and I applaud their principles. However, we must always keep in mind what we should have learned from that great President Theodore Roosevelt: Government does not exist to be an overwhelming player on the field, dictating terms. Neither does it exist simply as a spectator as the market rules no matter the consequences. Rather, government is meant to play the role of impartial referee, setting the rules for fair play and enforcing the same so that hard work and diligence can find their reward and extortion can be chased into the shadows.
So, what can be done? First, we must clarify and standardize our usury laws, but this is not all. In 2004, the state of Georgia passed a law clamping down on payday lenders that used high, out-of-state usury rates to circumvent Georgia law and limited small-loan rates to an annualized rate of 60 percent. It is now the time to follow their lead ” and build on it.
Reese is an attorney who lives with his wife and son in Oklahoma City.