Payday Lending Webinar PowerPoint

Payday Lending Webinar PowerPoint

What Catholics Are Doing to Combat Financial Exploitation, presented by:

Tom Mulloy, Office of Domestic Social Development
Jennifer Allmon, Texas Catholic Conference
Rashmi Rangan, Stepping Stones Community FC

1. Catholic Social Teaching & Moral Concerns

• The Catechism of the Catholic Church condemns usury and exploitation of the vulnerable (CCC 2269, 2409).
• Pope Francis calls usury a “dramatic social ill” that violates human dignity
• High-cost lending is framed as a moral issue involving justice, fairness, and defense of the poor.

2. Nature of Payday & Auto Title Loans

• Payday Loans
  • Small cash advances, typically due in two weeks.
  • Come with high fees and require a postdated check or debit access.
• Auto Title Loans
  • Use a borrower's car title as collateral.
  • Common term: one month; defaulting can result in car repossession.

3. Why Payday Lending is Harmful

• Exploitative
  • Borrowers use loans for basic expenses; median income: $22,400.
  • Majority are employed; many have children
• Predatory
  • 94% of loans taken within one month of a prior loan.
  • Average indebtedness: 212 days/year
  • Borrowers often pay more in fees than the principal.
• Usurious Rates & Fees
  • APRs often 500%-1,000%.
  • Auto-title loan fees: over $1,000 per month on a $4,000 loan.
  • In Waco, 62% of loans are refinances.
  • Texans pay $22 per $100 borrowed on 14-day $500 loans.

4. Weak Regulation in Texas (at the time)

• No limits on loan fees, loan size, rollovers, or income-based ability to repay.
• Structure using Credit Access Businesses (CABs) allows high fees without direct lender contact.

5. Municipal Responses

Cities using the Texas Municipal League Model Ordinance include: Dallas, Austin, San Antonio, El Paso, Houston, and others (total 18 municipalities by 2014)

Model Ordinance Requirements

• Loan sizes tied to ability to repay
• Limit: 4 installments; 3 rollovers
• Each renewal must reduce principal by 25%
• Lenders must register with the city

6. Consumer Protection & Enforcement Agencies:

• Consumer Financial Protection Bureau (CFPB) - complaints, rulemaking.
• Texas Attorney General - consumer protection division.
• Office of Consumer Credit Commissioner (OCCC) - licensing and oversight.
• Consumers are urged to file complaints regarding abuse or unlawful practices.

7. Advocacy Guidance

•  Document borrower problems and stories.
• Highlight issues for legislators; support policy reform.
• Encourage more municipalities to adopt payday/auto title regulations.

8. Payday Alternative Loan (PAL) Program (Credit Union Model)

Goal: Provide ethical alternatives to predatory loans.

Key Terms: 

• Loan amount: $200-$1,000
• Term: 1-6 months
• Application fee: $0
• Interest rate: 28%
• No rollovers; fully amortized (no balloon payments)
• Eligibility: member for 1 month; steady employment; income verification

Limits: 

• Members: max 2 loans/year; must repay fully before new loan
• Credit union caps PAL portfolio at $10,000.

9. Church and Public Policy Perspective

The Church argues payday lending:

• Preys on financial hardship.
• Exploits lack of understanding.
• Increases economic insecurity.

Calls for:

• Compassion and solidarity.
• Stronger federal consumer protections.

10. Additional Resources Included:

• USCCB Backgrounder on Payday Lending
• Pew Small Dollar Loan Project
• Center for Responsible Lending
• CFPB Research Report (2014)

 

payday-lending-webinar-10-2014.pdf