Big banks can't be bothered, and predatory lenders are ripping Americans off, so churches are stepping in to fill a void in responsible lending to small borrowers, according to The Washington Post
The Post detailed one poor Richmond, Va.-area grandmother who was locked into a 24.9 percent loan from a payday lender — a nearly 300 percent annual interest rate — but who found redemption from the Virginia United Methodist Credit Union, which replaced her loan with one that required 6 percent annual interest.
She is not the only one whose credit is being born again these days from church lending plans.
"Similar initiatives run by faith-based organizations across the country are shifting the way churches approach charity," The Post said.
"Unlike commercial lenders or even other nonprofit alternatives, these church-backed programs offer near-zero interest rates — a model, proponents say, that helps struggling borrowers get back on their feet."
The Post said small loans aimed at unsophisticated borrowers include payday loans secured against a borrower's paycheck, title loans typically secured against a vehicle, or an open-end loan establishing a line of credit.
"Borrowers typically need no more than a checking account and a steady source of income to qualify. This makes the loans particularly attractive for people with poor credit who would not qualify through a bank or credit union."
The Post said a Consumer Financial Protection Bureau report concluded that more than 80 percent of payday loans are rolled over or followed by another loan within two weeks, and that 15 percent of new loans lead to a chain of at least 10 loans.
The newspaper said church-run lending programs exist in pockets across the country and are most seriously organized in places such as Wisconsin, Texas, Missouri and Louisiana.
Charles Swadley, the recently retired pastor of Lakeside United Methodist Church, said that while churches have long given money to financially struggling parishioners, the concept of offering them low-interest loans that they must pay back is new.
"When you give money, you're not necessarily teaching them how to use the money — you're responding to the crisis," Swadley told The Post. "And what we've got to do is teach, which is the harder goal."
The notion of church-based lending has gained a stronger foothold in the U.K., where the Archbishop of Canterbury, Justin Welby — himself a former British corporate executive — has fostered a new credit union supported by the Church of England, and the British Presbyterian and Methodist churches, among others, Ecumenical News
"Our faith in Christ calls us to love the poor and vulnerable with our actions," said Welby. "That is why the Church must be actively involved in supporting the development of real lending alternatives, such as credit unions."
In 2013, Welby triggered a national debate in the U.K. on the practices of payday lenders, The Financial Times
reported. "This led to a series of government reforms, including caps on exorbitant interest rates," the newspaper said.
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