Local churches which consider the trap of pay day lending a moral and social justice issue are joining together to help people escape the expensive cycle of debt.
“Pay day lending is a sinful business practice. It is taking advantage of people who are vulnerable and uses tactics that are not clear and honest,” said Nathaniel Price, executive director of Transform Scott County, a non-profit cooperative supported by local churches. The churches include Faith Baptist, Georgetown Baptist, Grace Christian, Northside Christian, Regeneration and Victory Life.
There are four pay day lending establishments in Scott County, said Sharon Felton, who is leading the new effort. Some can charge interest of 400 percent and set up a cycle that is nearly impossible to escape. She said the lenders typically target people in crisis and are often located close to car repair shops or medical clinics. Many customers are often already living in poverty or paycheck to paycheck. But, she said, no one is immune.
“Every church has a family or two that has gotten stuck in the cycle,” she said.
The Helping Hands ministry is part of the Church Benevolent Cooperative and is based on a program at First Baptist Church in Frankfort where Felton’s husband, Keith, is pastor. The program is supported by a local credit union and, after a person is screened, they are loaned money to pay off the payday lender. The new loan is low interest, but Felton said that’s only a small part of the program.
Key to change is education. People receiving loans will also attend financial education classes and have a mentor.
Felton has lobbied for legislation to limit pay day lending without luck. She said a common argument is that such lending serves a necessary purpose because people forced into pay day lending are likely not to pay the money back, so banks won’t take the risk.
But, she said, out of 60 people served by First Baptist church in Frankfort only four have not been able to pay back their loan.
While Felton has long had a passion to end pay day lending, she thinks more people are coming to understanding how devastating this practice can be. With the creation of Helping Hands, there are now four such pay day lending programs across Kentucky.
“People get their credit just destroyed, some lose their homes and families,” she said. The thing that upset her the most, she said, is that the system is structured to prey on people. “The thing is that it is literally in one of the handbooks and training manuals, they know exactly what they are doing,” she said. A loan of $400 can end up as a debt of thousands of dollars.
Price said the practice is particularly egregious because of the people who need pay day loans.
“People don’t go to pay day lending when things are going well. They are in crisis,” he said.
Price said he knew of one gentleman who had revolving, and growing, pay day loans to pay for needed medicine.
He said he was in an establishment recently and there was Christian music playing. “As an ordained pastor that was flabbergasting to me,” he said.
“I would welcome the day that legislators will see this as a business model that doesn’t support our human values,” he said.
Until then people in Scott County now have some Helping Hands.
Mary meehan is a freelance corespondent for the News-Graphic and can be reached at email@example.com.