By Debora Haede
Each year 12 million Americans take out a payday loan. As we have covered on Shared Justice, “Payday loans are short-term, small-dollar loans with exceptionally high interest rates attached. Typically, a payday loan ranges between $100 and $500 and needs to be paid back within two weeks. These loans have an average annual percentage rate (APR) of 390 percent, and some states allow interest rates over 1,000 percent.”
In Michigan, Reverend Dallas Lenear, director of Project GREEN, has been an advocate for just lending practices that honor the God-given dignity of all people. In this interview, Reverend Lenear shares about the destructive impact of payday loans in the lives of individuals and families in his community. Reverend Lenear discusses the crucial role of community education efforts, responsible alternatives, and state level advocacy in combating predatory lending. This interview has been edited for clarity and length.
DH: How did you get involved in working on the issue of payday lending?
DL: Twenty years ago I moved to Grand Rapids, Michigan, to pursue my Master of Divinity at Grand Rapids Theological Seminary. I had previously managed the local branch of a bank in my hometown of Flint, Michigan, where I witnessed how people in my own community managed their money and checking accounts in their daily lives. When I came to Grand Rapids, there was a friend at my church who exposed me to Dave Ramsey’s Financial Peace University. He really laid out a biblical foundation for money management. So, listening to his radio show and following his ministry, I began to hear more about the payday lending industry. I had never experienced it myself, but I learned about the excessive interest rates people were being charged and got to hear local stories about people unwillingly getting trapped in the walls of financial prisons. It has always been a personal passion of mine to try to help people escape their harmful habits and to teach good financial practices that will lead to immediate financial peace as well as long-term financial wealth. I have been on the journey of abolishing payday lending for more than eight years now.
How have you seen payday lending impact families in Michigan?
Last time I checked, there were 36 payday lending stores in Kent County. Story after story, I heard of people who had been taken advantage of by payday lending. There was this one young lady who came to a workshop I was conducting and shared her story. She had originally gone to a payday lender because she had gotten behind in her daycare payments. She had no family to take care of her child because she had recently moved from Tennessee. She had to pay for daycare to keep her job as a nurse. She couldn’t pay back the original loan, so she got another payday loan. When she received that second loan, her previous loan provider got a hold of the title of her vehicle, so she had to find another payday lender to get another loan.
Revered Dallas Lenear.
What started off as one $400 loan ended up in her paying back a total of $1200 fees in about a year and a half. That’s often the design engraved in payday loans — they are designed to keep people trapped.
Most payday loans are due in two weeks, and for most borrowers, if they don’t have that $500 today, it is very unlikely that in two weeks they will have $575. Their financial need is what forces them to take out a loan from payday lending stores in the first place. Payday lenders are aware of this. So, their business model is structured such that consumers would be forced to rewrite that loan over and over again incurring new fees on top of fees.
In Michigan the interest rate can be up to 400%. The fee is approximately $15 per $100 borrowed. At first, that might sound like a 15% interest rate, but that would only have been true if the person had a full year to repay the loan. Instead, they are only given 2 weeks. So you have to do some math to calculate the actual percentage rate which is equivalent to the annual percentage rate (APR). Since there are 52 weeks in a year, customers would have to pay the 15 percent interest rate 26 times. That amounts to 390 percent. It is unimaginable that payday lenders are allowed to charge such a high rate legally.
Unfortunately, payday lenders specifically target vulnerable low-income communities of color. Those who are already financially fragile end up being the ones to pay the most expensive rates to borrow money. That is unjust. That is the rich taking advantage of the poor which the Bible specifically speaks against in Proverbs 22.
Project GREEN is a community initiative which offers financial security advocacy and education in Grand Rapids, Michigan. How did it get started?
Now, almost eight years ago, I was preaching at a church here in Grand Rapids. One Sunday, a man came to hear my pastor preach, but I gave the sermon on that day instead. I don’t exactly remember what I talked about, but I must have mentioned financial freedom somewhere during the sermon. This gentleman reached out to me the next day and asked whether I had ever heard about payday lending. I told him that I had briefly heard about it, but that I was interested in learning more and so he invited me to participate in a book club that was studying the specific issue of payday lending.
A workshop hosted by Project GREEN. Photo courtesy of Reverend Dallas Lenear.
Over time, the book club became an advocacy group of the Micah Center which was a social justice organization wanting to create strategy and take real action for a more just community. We worked on several projects over the years ranging from educational initiatives to legislative protections to raise awareness in the community about the impact of payday lending. The first thing we did was brainstorm recommendations to promote fairer practices and protect the rights of the consumers. The recommendations initiated detailed reports. The reports eventually turned into programs. Project GREEN started under the Micah Center, became its own program in 2016, and in 2019 became a 501c3 organization.
What is the “390 reasons” project, and why is it needed now?
The APR [annual percentage rate] for payday loans here in Michigan is about 390 percent. So, we are going to the community to collect 390 individual stories about their experiences, hoping to have 390 more reasons for people to avoid payday loans. The project is still in process and we are still working on collecting stories. It is a bit of a challenge because, as you might imagine, in the stories which we have been able to collect people are sharing a lot of pain. It’s not a popular thing that people want to relive or share those experiences publicly. We are thinking about ways we can convince people that there is value in them sharing their story.
You’re involved in direct service, but you’ve also been active in meeting with public officials on this issue. Why is this “both/and” approach important?
I believe that it is very clearly stated in the Scripture as you see people of God move from one destination to another. When Moses saw two Israelites fighting, he broke up the fight. He didn’t want to see his own people treating themselves in a way that was unhealthy. But then, he also was called to go to the pharaoh and ask to let his people go. He did both. In Matthew chapter six, Jesus tells us not to worry about what we will eat or what we will wear. Jesus cared about and talked to people, but when he went to the temple and saw the money changers taking advantage of worshippers, he turned the tables over. He spoke to the people about the decisions they were making, but also spoke to the systems about the conditions people were in.
As followers, we are called to do the same. Making disciples and forming relationships is important, but we are also called to speak out against unjust systems. The Bible contains about 800 scriptures that speak to the issue of money. This sets out the Bible’s priority to foster good financial disciples. But Jesus also taught us to pray that God’s kingdom come on earth as it is in heaven by impacting the systems that create the context of conditions for God’s kingdom.
We need to work on both the supply and demand of this issue. So, how do we reduce the demand for payday loans? But also, how do we develop a just supply of capital to ensure fair and equitable loans that help people accomplish goals rather than take advantage of the people?
What are a few examples of responsible alternatives to payday loans?
Through advocacy groups we were able to partner with a local organization called Inner City Christian Federation. This nonprofit organization would provide loans to those who were caught in payday loan debts; the borrowers could pay back in installments. However, that was a one-year pilot and it is no longer around. Another partner organization called the Source has relationships with over 20 corporations. They provide social services for employees of these companies. One service is a short-term loan through a local credit union. Employees can borrow up to $1000 and pay back in the form of payroll deduction. We would like to incorporate this model in other companies around the state.
We are also drafting a model we are really excited about. This church-based model equips churches to redirect their benevolence dollars (also known as financial assistance dollars). Instead of just giving it to a person in need, they give it as a repayable gift. This encourages people to develop a healthy pattern of financial stability and be able to make their own emergency fund.
How can Christian college students and young adults take action on the issue of payday lending in Michigan and beyond?
The first thing I would recommend is to raise their own awareness. There are some great resources available. One of them is a 30-minute documentary called “Spent” which retells the story of a number of people who have been hurt by payday lending. It is a good documentary for young people to sit and watch together with friends and share with others on social media.
Another thing would be to make sure that they themselves are building up savings. That way, when there is an emergency, they will be able to meet their needs themselves rather than having to go to payday lenders, friends, or family. Developing a pattern of personal savings is helpful.
Thirdly, it is important to raise awareness within the church. Young people should ask their own church leaders whether they are aware of payday loans. A lot of times pastors neither know how payday loans work nor the extent to which their own congregation is trapped in payday loans.
Lastly, young students need to be engaging with their legislative leaders, especially at the state level. Encourage your state leaders to support consumer protections that may be represented in the House of Representatives or the State Senate. There is a bill that is being drafted in Michigan right now that would implement a cap on the state’s annual interest rate for payday loans, but it is having a really hard time getting the support of the House Finance Committee. Young people should encourage their legislators to work on bills which protect consumers.
Debora Haede attends Calvin University (MI), majoring in International Relations and minoring in Economics. She was an intern with the Center for Public Justice during the summer of 2019.
Reverend Dallas Lenear is the director of Project GREEN, a Grand Rapids-based community initiative which offers financial security advocacy and education, and one of the lead consultants at the Genesis Consulting Group.
WANT TO GET INVOLVED?
1. Learn more about the issue of predatory payday lending by reading the latest Public Justice Review series, “Predatory Lending: A Public Justice Problem“.
2. Sign up for the Shared Justice monthly email to stay updated on this series and more.
3. Write for us! Email sjsubmissions@cpjustice.org for more information.
4. Form a Political Discipleship group and advocate for criminal justice reform in your community. Political Discipleship is an 11-week praxis-based curriculum that helps Christians form lifelong habits and practices of citizenship. Email katie.thompson@cpjustice.org for more information.