(On February 22, Chad Chaddick - pastor of Northeast Baptist Church, San Antonio - testified before the Texas Senate Committee on Business & Commerce in support of Senate Bill 253, which would close the payday lending loophole. The following was part of the prepared remarks he presented to the committee.)
As a pastor, I've reflected on my own particular encounter with the payday loans, and with payday loans in general so that our church could understand our moral and theological motivation for opposing the continuation of these unregulated practices. There is, quite naturally I think, the sheer shock and outrage a person feels that any group could legally arrange or issue a line of credit with terms that amounted to upwards of 740% interest. My outrage only increased when I discovered that the only way someone could offer such a line of credit was to do so under the guise of a Credit Service Organization (CSO) which, by definition, exists to help people. It seems ludicrous to me that 740% interest could ever be considered “helpful.” As my own experience has proven, it is education and accountability that are truly helpful to families with damaged credit and few financial resources – NOT an available line of credit burdened with usurious interest.
But I have discovered something else as I reflected on these types of loans. I have discovered that, the more I tell this story, the more 740% interest becomes just another number. It eventually loses all shock value and any moral connotation; to be honest, any argument that rests solely on its shock value is a very shallow argument. Several resources have helped me dig a deeper foundation for my own position on the issue. One is the Christian Scripture. Both Old Testament and New are clear that justice for the poor is an extremely meaningful issue to God. “Evil” is the name given in Scripture to “oppressing the poor” and “crushing the needy” (Amos 4:1). A line of credit carrying usurious interest targeting the financially fragile certainly qualifies as oppressing the poor and crushing the needy.
But a second resource in understanding this position is to follow the logical outcomes of viewing such practices as helpful and good. By such reasoning, we find ourselves in a surreal world of absurd values.
Consider this: if taking such a loan is helpful or good, then we must immediately admit that these CSOs are operating under an unfair market advantage, since our banks, credit unions, and other loan providers are unable to offer such good and helpful products. Were we to admit that such products are good for our citizens and for ourselves, then we must remove the constitutional limit of 10% interest and open the regulatory doors for our banks to offer such helpful products. After all, which of us, by this reasoning, would not want easier access to such a good thing? Just imagine the good that could be done if every bank and credit union could offer us 700% car and home loans! Indeed, the State of Texas is currently in a financially difficult situation. No doubt the state would benefit from taking loans from its citizens in the form of bonds guaranteed at 700%. As a civic duty, I would like to be the first to buy some.
But if this seems ridiculous, and it is, and if such bonds would obviously be bad for the state of Texas, and they are, then we must be ready to admit they are bad for individual citizens, too. Our citizens should be afforded some protection from such harmful practices.
Of course, one objection to regulating such practices is that the market within which they operate will condense and some people may lose jobs to keep the corporations profitable. Job loss is certainly not a good thing. But if the good of creating and maintaining jobs outweighs our consideration for the fairness of the practices those jobs support, then I fear that we find ourselves again in the position of the absurd. If we cannot regulate these practices because the creation and preservation of jobs is more important than protecting the most vulnerable of our citizens, then we must question some of our other existing regulations.
Consider, for instance, our strenuous regulation against the manufacture, transport, and sale of illicit drugs. Such regulation is clearly oppressive, and, no doubt, “hurts” those involved in such activities. If our consideration for job creation and preservation is our foremost concern, then we must face the fact that we are robbing drug dealers of their fairly-earned, market-driven livelihoods. Imagine how many jobs we could create with less strenuous regulation!
Consider also how the regulation of prostitution is hurting the bottom-lines of pimps throughout our state. The exploitation of women and the sex trade of underage girls aside, the state’s regulation of prostitution is hurting jobs. If job creation, growth, and preservation outweigh the moral nature of the practices those jobs support, then ultimately, we are robbed of any moral foothold to oppose such practices. There is no end to the types of practices we might unleash upon the citizens of our state if we followed such reasoning. It is absurd.
But clearly we are against these and other hurtful practices, and our citizens have been afforded some protection from them. If the shock of a 740% APR loan is not enough to bring payday and auto-title loans under existing regulation, then perhaps an appeal to moral conviction, consistent reasoning, justice may help. It is for these reasons that I support SB 253 to close the loophole that allows such usurious practices to continue in Texas.
