Much has been made in the past few years about retail businesses losing ground to Internet competition. But drive through any low-income, working-class neighborhood in Fresno and you will see a strange sort of storefront business that is thriving: The buying and selling of the financial future of the working poor.
Look for the stores that market payday loans, pawning, car title loans, installment loans, rent to own and the list goes on. Investors and entrepreneurs have discovered that “supporting” low-income residents with quick cash is the wild west of the banking industry and they are making a huge amount of money on it.
There are at least 66 payday loan storefronts in Fresno. According to the Insight Center for Community Economic Development, Fresno’s local economy lost over $3.6 million to payday loan establishments in 2011. That’s not to mention the stories of loss — lost homes, shattered dreams, college educations forgone and interrupted.
As a pastor and member of our community I have had enough. That’s why I have become part of a movement of churches, nonprofits and individuals that are spreading a faith-based financial literacy curriculum called Faith and Finances. Our goal is to empower and equip those in our community to end the cycle of debt and to find a sense of financial freedom with the resources they have.
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I have watched what the cycle of payday loans can do to a family. According to the Consumer Financial Protection Bureau (CFPB) over 75% of payday loan fees are generated from borrowers with more than 10 loans a year. Ten loans a year is a debt trap, plain and simple. One of the customers I have worked with is Josie De La Fuente.
Josie is mother of a special needs son. She works as an aid with Fresno Unified. Her pastor recommended her for our class because she was caught in a spiral of payday loans. Jumping from one payday store to another, robbing Peter to pay Paul.
Before Faith and Finance, Josie did not have the ability to pay her loans. They knowingly took advantage on her lack of financial knowledge and financial management and continued to offer her loans. Josie herself called payday loans a “trap.” For her, her situation was depressing.
Financial literacy and education are important, but they are not enough. As long as predatory lenders can continue these practices, they will take advantage of hardworking moms like Josie. That's why we need meaningful local and national reform.
Just last year, Fresno City Council passed a zoning ordinance that restricted the future growth of payday stores, something which Faith in Community and other community leaders championed. The CFPB, which was created after the 2008 financial crisis, is working on federal regulations that would govern predatory payday and online short-term loans. We are hoping the CFPB does a few basic things like ensure a borrower’s ability to repay, protect consumers’ bank accounts and help stop the debt trap.
We need both boots on the ground for financial literacy education like Faith and Finance and substantive policy that protects the most vulnerable in our society.
I can also tell you that there is hope. There is hope as more people speak out against these unjust business practices and as more people get involved in supporting the most vulnerable in our society.
I had the honor of being there when Josie brought in her receipt for her final payday loan payment. I was there as she waved it over her head and loudly proclaimed she was done! May more people in Fresno be able to be free!
I would love to encourage our local elected and community leaders join the movement of those who are standing for the vulnerable in our society by encouraging our members of Congress and the CFPB to take a strong stand against predatory lenders.
“The Spirit of the Lord is upon me, because he has anointed me to proclaim good news to the poor. He has sent me to proclaim liberty to the captives and recovering of sight to the blind, to set at liberty those who are oppressed, to proclaim the year of the Lord's favor.” — Jesus (Luke 4:18-19)