No one would knowingly take out a loan with a 591% interest rate… Unless they had no other choice, unless that’s the only way they could get their car repaired so they could get to work in order to feed their family.
Payday loans are usually small, short-term loans that help individuals with financial obligations or emergencies until their next payday (hence the name). However, the interest rate on these loans is astronomically high, upwards of 400% (in Ohio the interest rate is 591%). If an individual is unable to pay back the loan in full by their next payday, the interest starts accruing, and fast, so the borrower might have to take out another loan, called a rollover, to continue covering it.
To qualify for a payday loan, an individual must have a job and a checking account. These payday lenders are therefore targeting working families and the working poor. They often don’t expect (or want) borrowers to be able to pay off their loan and escape the cycle of debt that has the potential to throw their entire lives off course.
These loans add up fast, and there is a large advocacy effort trying to get payday loan reform passed. Payday loans are of huge concern and are a moral issue. President Obama previously spoke about the problem with these types of loans in Birmingham, Alabama in 2015 and called for reform.
He explained that we’re a country “that was built on the idea that everybody gets a fair shot and that we put laws in place to make sure that folks aren’t taken advantage of. When this country does not live up to its promise of fairness and opportunity for all people, we’re all hurt.”
At the beginning of November, the Dominican Sisters of Peace participated in a rally at the Ohio Statehouse to support payday loan reform in Ohio. Sr. Gemma Doll spoke at the rally and encouraged the legislators to act morally. She quoted scripture saying, “For I, the LORD, love justice, I hate robbery and wrongdoing” (Isaiah 61:8). These payday loans are immoral and akin to robbery and injustice.
Across the country, our citizens deserve a fair shot at success and with the ability to provide for themselves and their families. These payday lenders are manipulating loopholes and exploiting hardworking Americans who are simply trying to make ends meet and make it until payday. These vicious predatory loans must be reformed. For more information, click here. For information on payday loan regulations in your state, click here.