My wife and I have supported Spay Neuter Kansas City, a low-cost, urban core veterinary clinic providing subsidized services for pet owners with financial need. A number of its clients have also been customers of payday loan companies.
News reports tell of payday lenders charging unconscionable fees to borrowers, trapping those vulnerable persons in a cycle of crushing debt. The average charge on payday loans in the Kansas City area is 445 percent annual percentage rate, according to Eva Schulte, executive director of Communities Creating Opportunity, a group that has fought predatory lending since the 1970s.
Ms. Schulte cites a study showing that payday lending results in the annual transfer of $26 million in wealth from desperate borrowers to payday lenders, just in the Kansas City area alone. A recent article in The Kansas City Star detailed how one older man ultimately paid $50,000 in charges on $2,500 in payday loans taken out to cover his wife’s medical bills, eventually losing their home.
Payday loan burdens have led young families as well as senior citizens to seek help from emergency assistance programs in the urban core. B.J. Atkinson is the director of one such program. She can recite numerous instances of responsible folks who came up short on a utility bill or medical expense, and turned to a payday loan to cover the gap.
Soon “they were sucked into the vortex of never-ending debt,” she says, and were forced to turn to the church for emergency assistance. Abuses by payday lenders have been so egregious that several area operators are currently facing federal charges for alleged deceptions.
The Consumer Financial Protection Bureau is trying to rein in abusive lending practices, but unfortunately some elected officials support the payday loan industry. Champions of the online payday loan industry include Rep. Kevin Yoder, a Kansas Republican, and Rep. Blaine Luetkemeyer, a Missouri Republican. In 2013, Yoder and Luetkemeyer jointly wrote a letter to the U.S. attorney general and the chair of the Federal Deposit Insurance Corp., pleading with those two officials to permit online payday lenders to automatically debit the bank accounts of payday loan customers.
Payday lending not only traps borrowers, it also burdens the charities that serve low-income families. One wonders:
▪ How much did demand on food pantries increase because payday loan customers didn’t have enough money for groceries?
▪ How much additional strain was placed on soup kitchens and safety-net health clinics?
▪ How much additional fundraising did charities have to do to help families hurt by payday lending?
Sharon Lee, founder and physician at Southwest Boulevard Family Health CARE, says, “Those of us who work to help the poor are undermined by these payday lenders who take advantage of the disadvantaged.”
As a divorce and family law attorney, I see firsthand the damage to marriages and harm to children caused by financial stress in the household.
We are now learning how the payday lenders and those who financed them made their millions. What we don’t know is how those people sleep at night.
Richard D. Ralls is a divorce and family law attorney in Overland Park. He lives in Mission Woods.