As the nation observes its annual recognition of the life of Dr. Martin Luther King Jr., it is timely to reflect upon how far we have honored his hope that the nation would live up to its creed. In his famous 1963 March on Washington speech, Dr. King said, “America has given the Negro people a bad check which has come back marked ‘insufficient funds.’”
“Insufficient funds” are more than a metaphor or literary reference in 2015. The lack of enough household dollars to cover daily living needs is actually worse today than it was in the 1960s – particularly for black Americans.
At his recent swearing-in ceremonies as the new chair of the Congressional Black Caucus, Rep. G.K. Butterfield noted that the unemployment rate of African Americans has been consistently twice as high as that of whites for the past 50 years.
Long-term, disproportionate high unemployment and under-employment leave many black Americans struggling to hold on financially until a paycheck or government benefit is received. Others work multiple part-time jobs, trying to piece together a family living. In the interim, predatory fringe lenders exploit these financial challenges by charging triple digit-interest on small-dollar loans such as payday loans.
In a very real way, payday loans are a leading civil rights issue in the 21st Century. Many civil rights organizations are fighting for changes to end the debt trap created by these abusive products. In a recent letter to President Obama, the Leadership Conference on Civil and Human Rights (LCCR) identified payday lending as one of its top legislative priorities, representing a “path forward for our country in advancing social and economic justice.”
According to Wade Henderson, LCCR president and CEO, “Low-income people and people of color have long been targeted by slick advertising and aggressive marketing campaigns to trap consumers into outrageously high interest loans. We’re simply advocating for reasonable regulatory oversight that ensures that low-income people won’t be swindled out of the little money they do have at their disposal.”
Late last year LCCR, a coalition representing more than 200 diverse national organizations, voted unanimously for a resolution urging states, Congress and federal agencies to increase regulatory oversight and enforcement of payday lenders. While the resolution acknowledged how 15 states, including the District of Columbia, several Native nations and the military have begun to regulate many predatory payday lending products with interest rate caps, more must still be done to halt the discriminatory financial practices that still target communities of color.
The LCCR resolution called for specific actions to end payday lending’s financial enslavement:
Enact a 36 percent rate cap for all borrowers, similar to what it previously enacted for active-duty military and their families;
Limit the length and time that payday lenders can keep borrowers in debt that would also be consistent with the FDIC’s 2005 payday loan guidelines that advised but did not impose limits on consumer indebtedness to a maximum of 90 days over a 12-month period;
For the Justice Department, the Federal Trade Commission and the Consumer Financial Protection Bureau to exercise their enforcement powers against payday lenders who illegally process payments from debtors’ checking accounts.
Michael Calhoun, president of the Center for Responsible Lending (CRL) and a board member of the Leadership Conference’s Education Fund, said, “Payday loans entrap families into an ever-deepening cycle of debt, where loans are repeatedly flipped by lenders at interest rates of 300-400 percent. Then lenders seize borrowers’ bank accounts and garnish their wages. Regulators should require that lenders follow basic rules of fairness, such as making sure that loans are affordable and that lenders cannot continually flip these high-cost loans.”
LCCR is not the only major civil rights organization to call for an end to lending that reaps $3.5 billion in fees charged to many low-income Americans who feel they have few or no other financial options.
The NAACP, long a vocal payday lending opponent, has passed its own resolution, and has often testified on Capitol Hill to payday’s harmful effects on communities of color.
For example, at a public hearing convened by a subcommittee of the House Financial Services Committee, Hilary Shelton, director of the NAACP’s Washington Bureau said, “The NAACP knows that predatory lending, which is rampant in our communities, hurts individuals, destroys neighborhoods, and poses a real risk to our nation’s future. . . .Predatory lending is clearly a major civil rights issue. As several studies have shown, predatory lenders prey on African Americans and other racial and ethnic minorities in vastly disproportionate numbers.”
Both civil rights organizations, along with consumer advocates will make a strong push this year for a regulatory rule from the Consumer Financial Protection Bureau.
Profiteers selling debt-trap loans already know that 90 percent of their customers will eventually take out five or more loans each year. If our country truly were to honor Dr. King’s legacy, 2015 is the best time to stop these financial predators and break their shackles of payday debt.
