By: Katherine Snyder
Blog Category: Religion & Race
Predatory lending practices target members of minority races disproportionately, leaving them disproportionately vulnerable. Ads for cash-now pay check advances that have hefty interest rates and short repayment time periods are conspicuously absent from areas where affluent white people live while opportunities for reasonable interest rates and mortgages with banks as opposed to subprime lenders are harder for people of color to attain. Different communities have started to fight back against these unfair practices, many centered around faith-based initiatives.
People of Latino/a heritage are familiar with the tradition of lending circles, called tandas or cundinas in Mexico. African Americans and people from almost every culture have different names for these groups all over the globe. Churches and faith-based service initiatives can be the foundation for the Latino and Black communities as well as for recent immigrant communities alike. These lending circles allow people from the community to come together, contribute a set portion of their paycheck to a common fund managed by one member of the group. In turn each member of the group takes turn receiving the proceeds. Depending on where your name falls on the list it acts as a loan or a savings account. People are held accountable by the valuable good will they have established within the community before the transaction and in following through with the payments.
The success of these small community programs is widespread and can provide a person with the shot in the arm they need to make ends meet and keep moving forward while helping them avoid taking on debt and entering an agreement that could trap them in a perpetual cycle of borrowing. Unfortunately, many laws in this area are unclear on their application to this type of lending leaving these people with their credit in limbo. Some non-profits have sought to organize these lending circles in order to give the loans and repayment cycle legal credence so that people are building their credit and actually getting credit for their responsible payment plans. This legitimacy often triggers a licensure requirement and creates more barriers for these people because the non-profits have to require more from the participants and do not have the resources to achieve a lending license.
The Baptist churches as well as Catholic Charities have taken the initiative to combat this issue in several ways. First, the Baptist churches have come together to create a united front in order to lobby for a change in the laws that are allowing predatory lending. The Baptist churches are also seeking to work within their own communities to support their congregations and create opportunities for positive lending opportunities as well as education for borrowers. Catholic Charities has started some domestic microloan projects designed to help people break out of the cycle of borrowing from high-interest payday lenders. Finally, California Sen. Lou Correa has a really innovative approach to regulating these lending circles: if it ain’t broke don’t fix it. He sees the wisdom in allowing people to start building their credit with baby steps without requiring them to jump through giant hoops simultaneously.
The opinions expressed herein are strictly those of the author and do not necessarily reflect the opinions of the Widener Journal of Law, Economics & Race.
Aaron Weaver, At Summit, Baptist Leaders Announce Action Covenants on Hunger, Literacy, Predatory Lending, General CBF (April 24, 2014), available at http://cbfblog.com/2013/11/25/at-summit-baptist-leaders-announce-action-covenants-on-hunger-literacy-predatory-lending/.
Anita F. Hill, Women and the Subprime Crunch, Gender Discrimination (April 24, 2014), available at http://220.127.116.11/economica/stories/viewStory?storyId=3696.
Beth Newberry, Multiplying Loaves, Sojourners (April 24, 2014), available at http://sojo.net/magazine/2013/01/multiplying-loaves.
Brian Dakss, Loans To Avoid at All Costs, CBSNews.com (April 24, 2014), available at http://www.cbsnews.com/news/loans-to-avoid-at-all-costs/.
Manny Fernandez, Study Finds Disparities in Mortgages by Race, N.Y./Region (April 25, 2014), available at http://www.nytimes.com/2007/10/15/nyregion/15subprime.html?_r=4&ex=1350187200&en=a9978e04a9864642&ei=5088&partner=rssnyt&emc=rss&.
Tim Logan, Church, Housing Groups Sue Gov. Brown Over Mortgage Settlement Money, Business (April 24, 2014), available at http://www.latimes.com/business/money/la-fi-mo-mortgage-settlement-money-20140314,0,5927040.story#axzz2wBUjSRCL.
Sarah Ennis, CCHD: Catholic Charities of Salina Expands Microloan Project, (April 26, 2014), available at http://www.ncrlc.com/news.aspx?ID=278.
Shereen Marisol Meraji, Lending Circles Help Latinas Pay Bills and Invest, Morning Edition (April 2, 2014), available at http://www.npr.org/blogs/codeswitch/2014/04/01/292580644/lending-circles-help-latinas-pay-bills-and-invest.