The artwork on this note card was created by 5768 WRJ Art Calendar artist Césan d’Ornellas Levine.
“And these are the people who transgress a negative commandment: the lender, the borrower, the guarantor, and the witnesses. And the Sages say: even the scribe. They transgress within the category of… “You shall not put a stumbling block before the blind (Bava Metziah 4.11).”
At its essence, Judaism lives and breathes within community. The rabbis of the Talmud were deeply concerned with fair administration within their communities, and their legal codes reflect their desire to maintain a society where people treat each other fairly. They wrote a great deal about fair lending practices, recognizing that lending serves as an important function of the community, and it is a tool that can be used either for good or for bad. The Mishnah teaches that Jews who issue loans with excessive interest violate the commandment of “placing a stumbling block before the blind” (Bava Metziah 4:11). Our rabbis wisely argued that fair lending should serve as a vehicle to self-reliance, and not lead to an endless cycle of debt.
1,500 years later, these societal issues persist. Today, there are nearly 20,000 payday loan storefronts in the United States issuing short-term loans, often at interest rates above 300%. These loans are designed to provide a cash infusion to low-income consumers so they can pay emergency expenses until their next paycheck comes, but 69% of lenders took out their first loan to cover regular recurring expenses such as utilities, credit card bills, rent or mortgage payments or food. When customers cannot repay their loan, they often take out a second loan to pay back the first, and then a third to pay back the second. The average payday loan customer is indebted about five months of the year during this process.
And, while lending can be used to provide assistance to those most in need, today it is often used to profit off of our society’s most vulnerable. According to a study by the Department of Housing and Urban Development, predatory lending practices are three times as likely in low-income communities, and five times as likely in black communities as in white communities. Too often, lending becomes a stumbling block.
In response to these findings, the Consumer Financial Protection Bureau (CFPB) has just released a proposed rule to curb some of the worst abuses in payday lending. The rule, if adopted, would consider it an abusive and unfair lending practice to make a short term loan without considering the lender’s ability to repay. In the future, when lenders want to issue loans due back in 45 days they must collect information about the customer’s income and other expenses, and make a determination if the customer can reasonably pay back the loan before issuing it. This new rule would mean that millions of Americans will no longer be pushed into an unsustainable cycle of debt because of their inability to repay a high interest loan.
Over the next few months, the CFPB is asking interested parties to comment on their proposed rule. As a community, we will be sending as many comments as possible to the agency, thanking them for releasing such a strong rule, and urging them to require lenders to consider their customer’s ability to repay all types of loans, not only these particular short-term loans. Submitting comments is very important to the process, not only to provide feedback on the proposed rule, but also to encourage swift implementation.
Lending should be a rung on the ladder to opportunity; let’s work together to make sure it is never a “stumbling block.” Urge The CFPB to implement a strong payday lending rule, by submitting a comment in support of the rule here. Also, visit the RAC’s economic justice web page to learn more about the rule and find out how you can get involved.