At Least HB 333 Is Not 666
Now I have hovered around the Reformed camp of believers for some time. For those that know, that wing of Christianity has never really bought the “separation of church and state” idea in its entirety. However recent events have made me reconsider at least one phase of that idea. I think I am going to declare a moratorium on “pastors and politics.” Note I did not say “religion and politics,” “Christians and politics,” or even “church(es) and politics”
It is not that I think religion, and Christianity in particular, has nothing to say about political organization or social relations. In fact, I think quite the opposite. I think precisely that since Christianity proclaims Christ as Lord that Christianity must have everything to do with politics. I think Christians should inform public policy and shape it.
However, to say that Christians must be involved in politics does not automatically mean that pastors should do so. Being qualified to speek on matters of the Bible does not always translate into giving that same level of authority on the specifics of social or political issues. For some reason, pastors—even the best of the best—get a little fuzzy in their reasoning when proclaiming social policy and/or change from the pulpit.
The Bible speaks of the need for social justice; it often does not speak of the means of achieving that justice. Tinkering with systems that exist—even bad ones—can have consequences that do more harm than good.
Currently some Ohio pastors are making a political pronouncement that may be in this category. Last week, even at my own church I received a post card to fill out and send to my local State representative urging action on this issue. The topic under consideration is the Responsible Lending Bill (HB 333). The cards, which put words into area congregations’ mouths or at least on their pens proclaimed:
I am asking your support [local Representative] for the Responsible Lending Bill…It is my understanding that Ohio permits payday lenders to charge interest rates of up to 391% AOR on short term loans. I think this should be stopped. I support a cap on interest rates and a prohibition on using post dated checks as collateral.
The pastors have noted how these excessive interest rates have kept the poor in bondage, sometimes being burdened by up to five of these loans being outstanding at one time. The proposed Laws would make the ceiling interest rate 36% from the current maximum rate of 391% noted above. Therefore, the law is necessary to provide protection for the poor from these usurious lenders. Not only that, these business put most of their offices in the poorest section of town in order to better target their victims.
How can a free market make a rate of 391% you ask? Your mind fills with images of Dickensian evil black coated Scrooges raking in the money over the backs of the poor, blighted borrower. If that is what you think, you can be excused. When I first heard it, my mind went in the same direction. My guess is that Ohio pastors are operating with the same assumptions.
However, Dickens England is not 21st century America. Apparently such “exorbitant” rates are necessary for these businesses to turn even a modest profit. Most actually turn losses during the first years of opening. According to the government’s own Fiscal Note and Local Impact Statement on the issue:
An August 2006 study in the Fordham Journal of Corporate and Financial Law reviewed these documents (which includes data from nearly 8,000 payday lending stores) and came to a similar conclusion as Flannery and Samolyk: that payday loan firms are not “overly profitable.” While average store operating margins were comparable to those reported by Flannery and Samolyk (24.64%), the average profit margin (the percentage of gross revenue that remains after subtracting out all associated costs for the period) was 7.63% when including companies that, while pawn is their primary business, also make payday loans. This study also noted that the average profit margin was less than Starbucks (a little over 9%), a company with a similar business model as firms in the payday lending industry.
So the Payday Lenders are not “racking in the dough” as one would think. The study showed that it takes an individual office almost four years to turn from making losses to making the above marginal profits. The reason: operating costs.
Also among the findings was a contention that the industry’s average profit margin is attributable to high operating costs, which are driven by longer business hours (leading to higher wage costs) and a large number of stores (leading to high occupancy or rent costs) that are needed to drive loan volume and thus profitability. The high cost of loan losses also contribute heavily to a store’s operating costs, further reducing profitability (around 25% of store operating costs in both studies)
In order to work past “bankers’ hours” the Payday Lenders must incur costs that the banks do not. Not mentioned above is the probably increased cost of security. I would imagine that places that keep large amounts of cash in the poorest areas of the city would require security measures higher than does the average suburban mall bank. However, the Payday Lenders must incur these costs in order to serve customers that the banks do not. In the process, some 25% of their loans go bad, as would be expected from their chosen locations and customer base. Someone has to “pay” for those losses. If it is the businesses, then they will close. So they must up the interest rate. As a result, they end up making less in four years than a Starbucks does on opening.
So the economics do not support the direction the area pastors are going. Now understand, despite my sarcasm at the beginning of this post, I really think pastors should make political judgments. It is their rights as citizens and certainly their right as a believer. They even have a right to be wrong, as they very well may be in this issue. However, once men of the cloth make a pronouncement from the pulpit that action implies a level of integrity that they should strive to uphold.
In the very least, one would expect a level of balance and a degree of investigation that would be performed when that same occupation investigates a particularly difficult passage of scripture. After all, we have to be careful. If we push too hard, these guys may close the Payday Loan stores and open a Starbucks instead.
Now that would be the real crime.
Next: HB 333: Consider the Alternatives