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The Sin of Usury is Alive and Well

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Usury, at least in modern times, has typically been regarded as excessive interest rates, in the order of dozens or even hundreds of percent.  Those of us, of a “certain age”, can recall the stereotypical “loan shark” and his henchmen who fall under the category of usurious money lenders.  Such was not always the case.  Within some commentaries, any interest charged to any of the Hebrew brethren was considered usury,  Interest could be charged if the money/food / whatever had been lent to a foreigner.

You Need to Prove That One, Charlie Brown!
Deuteronomy 23:20-21
You shall not demand interest from your kindred on a loan of money or of food or of anything else which is loaned. From a foreigner you may demand interest, but you may not demand interest from your kindred, so that the LORD, your God, may bless you in all your undertakings on the land you are to enter and possess.

Exodus 22: 24-26
If you lend money to my people, the poor among you, you must not be like a moneylender; you must not demand interest from them. If you take your neighbor’s cloak as a pledge, you shall return it to him before sunset; for this is his only covering; it is the cloak for his body. What will he sleep in? If he cries out to me, I will listen; for I am compassionate.

Leviticus 25:35-37
When one of your kindred is reduced to poverty and becomes indebted to you, you shall support that person like a resident alien; let your kindred live with you. Do not exact interest in advance or accrued interest, but out of fear of God let your kindred live with you. Do not give your money at interest or your food at a profit..

There are over a dozen references to usury, interest, money lending, and so forth spread throughout the Old Testament and even the New Testament as each Matthew and Luke recount the story of the master who put some servants in charge of various amounts of money and one was castigated for not giving the money to a bank so that it would be returned at least with interest.

A More Modern Definition – Loan Shark
A person who lends money in exchange for its repayment at an interest rate that exceeds thepercentage approved by law and who uses intimidating methods or threats of force in order to obtain repayment.

In most jurisdictions, Usury laws regulate the charging of interest rates. Loan sharking violates theselaws, and in many states, it is punishable as a criminal offense. The usual penalty imposed is a fine,imprisonment or both.

 
But, the reader may be thinking, no one has heard about loan sharks anywhere except the movies in years and years, the cops, and the Feds must have taken care of it, so all is good now, right?

Not really.  Most of us drive by businesses nearly every day which while perhaps not classically defined as “loan sharks”, are at least predatory in their interest rates and practices.  These businesses are the payday loan companies or any other number of titles they may operate under.  The premise is simple and sounds almost good and beneficial to the people taking out the loans.

The loans are typically small, say under $1,000 and are short-term, usually 14 days.  The “interest rate” on the loan paperwork may say 10%, but the websites of these firms may actually list the effective APR (Annual Percentage Rate) in the order of 360% or higher.

A person takes out a $500 loan for 2 weeks, at 10% interest, this is $550 plus origination fees of, for the purpose of this article, $50 making the total $600 payable in 2 weeks.  At the end of the 2 weeks, the individual may be unable to pay and the loan gets re-written as $660 ( $600 plus 10% interest ) plus the $50 origination fee, making the loan amount due in 2 weeks, $710.  So, at the end of one month, this $500 loan now costs $210 in interest and fees.  This is how the effective APR gets so ridiculously high in such a short time.

But, the average individual pays it back in 2 weeks right?

Not really, a couple of studies have found that the average “payday” loan with a duration of 14 days, takes the average person greater than 240 days to repay.  Nearly 9 months to pay back a 14-day loan simply because the fees and rewrites keep piling up and piling up.

So, What Are We to Do About It?
Clearly, this practice needs to stop, but very few of us are in any position to make any meaningful change to this distressing situation.  We can, however, become educated on the disastrous nature of these predatory loans by reviewing the information available through the USCCB, for example, http://www.usccb.org/issues-and-action/human-life-and-dignity/poverty/domestic/predatory-payday-lending-background.cfm.  There is a link on this site to another amazing resource: https://togoforth.org/2015/08/07/payday-lending-hurts-families/.  Another resource which is quite helpful is https://www.debt.org/credit/predatory-lending/.

After getting some information on the scope of the problem, then, it is time for some action.  A few thoughts appear below:

  • Become involved with the Society of St Vincent de Paul as many of the conferences ( local units ) or councils ( district or diocesan ) may have programs to help people out of poverty and help them break the bondage of predatory loans.  These programs may need in financial training, mentoring, etc, plus, the SVdP can always use talented, caring people who want to make a difference,
  • Letters to state legislators to inform them of the plight of the working poor in this regard,
  • Deal with or support the various financial institutions which have active programs on financial literacy, credit score improvement or other programs to help break the cycle of loans, and
  • Prayer.  Pray that a solution may be found for this usurious and sinful situation.  Pray for the conversion of heart of the operators of these predatory loan companies.  Pray for the victims of the predatory loan companies that they may find a more stable, suitable employment situation which will help them out of the hands of these people.

Source: Catholic Stand, David Byron

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