Christ the King CCO targets payday loan industry
By Kevin Kelly
Catholic Key Associate Editor
KANSAS CITY - Storefront businesses offering "payday loans" have been springing up like dandelions in the three years since the Missouri General Assembly deregulated the industry.
But red flags went up at Christ the King Parish in southwest Kansas City when parishioners, noticing a 50 percent increase in demand at its food pantry over the last four years, learned from interviewing emergency assistance clients that 80 percent of them owed money to a payday loan company.
"There are seven payday loan companies and two banks within five blocks of this parish. Who do you think is the major lender in this community?" said parishioner Betsy Weinzirl at a March 20 parish Church Community Organization (CCO) meeting with state lawmakers that drew nearly 200 people.
Christ the King CCO won public promises at the meeting from four members of the Missouri House of Representatives to support legislation to cap the interest rates and fees payday loan companies charge. The CCO had earlier won a promise from Jackson County Prosecutor Bob Beaird to stop prosecuting post-dated checks used to secure payday loans under the state's criminal bad check law.
That promise was affirmed at the March 20 meeting by Beaird's top deputy, David Baker.
"Bob Beaird is out of this business," Baker said. "Absent any evidence of a willful intent to defraud, the Jackson County Prosecutor's Office will not prosecute these cases. And we will put the burden on the payday loan industry to prove to us any intent to defraud."
That was a major victory, CCO members said. They claim that payday lenders had been using the tax-supported prosecutor's office as a "collection agency," while more conventional lenders, such as banks, mortgage lenders and credit card companies, must sue in civil court to recover on defaulted loans.
Payday lenders contend that they are performing a service by lending small amounts of cash quickly to people who could not qualify for conventional loans.
But Christ the King CCO members, after spending months researching the industry, had another term which they displayed to the crowd with an overhead projector - "Legalized Loan Sharking."
In a report delivered at the meeting, Weinzirl and Bob Rastorfer outlined how a typical payday loan is issued.
A borrower is normally required only to show a paycheck stub as proof of income and to hold an active checking account. The borrower then writes a post-dated check, up to 14 days in advance, for the loan amount, plus interest and fees that typically are $15 for every $100 borrowed. The borrower then receives cash on the spot.
At the end of two weeks, the borrower has two choices. He can repay the loan by allowing the lender to cash his post-dated check, or he can renew the loan by paying additional fees.
Many payday loans are renewed, Rastorfer said, and profits to the lender from renewing loans repeatedly are astronomical.
Weinzirl told of a single mother, earning $348 a week, who came to the parish for food for her two children.
A few months earlier, "she had an abscessed tooth, and called around until she found a dentist who would do a root canal for $300, which is half-price," Weinzirl said. "But the dentist wanted the money up front."
Weinzril said the woman wrote a $345 post-dated check to a payday lender and received $300 to pay the dentist.
"Fourteen days later, she went back and rolled it over (renewed the loan) for a $50 fee," Weinzirl said. "For three and a half months, she kept giving them $50 every two weeks. Finally, she went in and asked them how much she still owed them. They told her she owed the original $300, and that she had only been paying interest and fees (to renew the loan)."
Jack Roney, who turned to a payday lender when he was injured in an automobile accident and unable to work for a year, said he was shuttled back and forth between lenders to float new loans to repay old ones.
Roney said he was soon paying $400 a month in loan fees to various payday lenders without paying back a cent on the money he was borrowing. Threatened with criminal bad-check prosecution, Roney and his wife filed for bankruptcy.
"The payday loan places helped us when we really needed it. I admit that," he said. "But the loss of basic dignity was the price I paid. I will never again go to a payday loan company."
Rastorfer said Christ the King CCO learned from a payday loan industry website how lucrative the business can be.
According to the website, a typical payday lender will issue more than 500 loans per month, averaging $300 per loan. Fees and interest amount to nearly 400 percent on an annual basis, according to the website, or about 20 times higher than the law allows consumer credit card companies to charge.
On an average monthly loan volume of nearly $150,000, each payday lender can generate more than $25,000 per month in fees and interest, the website said.
"The exhorbitant interest and fees charged by payday loans not only drain people of their money, but their dignity as well," Rastorfer said.
Rastorfer said that payday lenders justify those fees by saying that they lend money to high-risk clients when no other lender will.
But Rastorfer said that the company markets to the working poor and takes advantage of them when they are desperate.
He showed a slide picturing a nearby payday lending store with a neon sign in the front window that announced: "No Credit Check."
"'No credit check' is advertised to attract even the shakiest borrower," Rastorfer said. "To cover their exposure, the industry has convinced the Missouri legislature to allow them to charge whatever interest they want."
To illustrate the need for increased regulation, Weinzirl said that there are more than 200 payday loan companies now operating in the Kansas City metropolitan area. She showed a slide of a strip shopping center in southeast Kansas City where six different payday loan businesses were operating, some of them side by side.
"It is estimated that the payday loan industry in Missouri will grow by 60 percent within the next two years," she said.
State Rep. Bill Boucher, D-Kansas City, told the crowd that he sponsored legislation this year to cap total loan fees at $50, regardless of the amount of the loan, and to cap interest on payday loans at 30 percent, a level about one-third higher than the legal cap on credit card interest.
But Boucher's bill died a quick death in committee under an onslaught of industry lobbying. One of his bill's primary opponents, he said, was the Missouri Chamber of Commerce.
"That's how big the pressure is against doing anything with this industry," he said.
Boucher said that a substitute bill to place a cap on fees but not on interest rates is likely to pass this session.
"It's half of a loaf," he admitted. "But it has taken us two years just to get this half of a loaf."
Christ the King CCO also won pledges of support from State Reps. Marsha Campbell, Cathy Jolly and Jenee Lowe, all Kansas City Democrats, for broader legislation to re-regulate the industry.
Father John Weiss, pastor of Christ the King Parish, said the task won't be easy.
"We are on our way," he said. "But this meeting is just the beginning. We have a long way to go."