Usually, people associate predatory lending with payday loans. And it’s common knowledge exactly how awful payday loans are: 12 million people — 84 percent of whom have family income under $40,000 — are subject to annual percentage rates (APRs) around 400 percent to borrow just a few hundred dollars. These rates trap borrowers in long debt cycles of constant loan renewals. The typical payday loan consumer will spend almost 200 days — more than half the year — in debt, and two-thirds will renew at least seven times, meaning they ultimately pay more in interest and fees than the original amount they borrowed.

Get TalkPoverty In Your Inbox

Recently, however, there’s been a significant shift from payday loans to slightly bigger, slightly longer term installment loans. While payday loans are mostly under $500 with two-week terms, installment loans generally range from $500 to $2,000 (though they can reach $10,000 or higher) and offer terms of 6 months to 2 years or longer, with APRs around 100 percent to 200 percent. This shift happened quickly: One of the biggest predatory lenders, Enova International, made 98 percent of its revenue in 2009 from payday loans, but in 2019 only 10 percent came from payday loans compared to 43 percent from installment loans. Although the interest rates are slightly lower than payday loans, and consumers have longer to repay them, installment loans are actually more likely to trap people in dangerous debt cycles because they target the same low-income people but require a much bigger principal to be paid back.

There has been bipartisan legislation to curtail both types of predatory lending. Congress enacted the Military Lending Act in 2006 and expanded it in 2015 to protect service members — 44 percent of whom received a payday loan in 2017, compared to 7 percent of the total population. The bill capped rates on most consumer loans at 36 percent APR for active duty members, their spouses, and their dependents. Meanwhile, 18 states and DC, red and blue alike, have strong rate caps on payday loans that are extremely popular. (Illinois’s House of Representatives actually approved their payday rate cap unanimously, and Nebraska passed theirs with 83 percent ballot approval.) In addition, the vast majority of states have rate caps on at least some installment loans. Forty-five states and D.C. set interest for $500 6-month loans at a median APR of 38.5 percent; 42 states and D.C. set interest caps on $2,000 2-year loans at a median APR of 32 percent.

Predatory lenders want to circumvent these state laws to charge obscene interest rates on Americans everywhere, and the Trump administration was more than happy to draft a new rule that makes that possible. The rent-a-bank rule works as follows: The consumer applies for a loan with the non-bank “fake lender” like Ace Cash Express or OppLoans, which processes that application and sends it to an actual bank. The bank sends money to the consumer and then sells the loan back to the fake lender in exchange for some of the profit. Finally, the consumer pays back their loan to the non-bank lender. The consumer only ever interacts with the “fake lender,” but since the bank technically originated the loan and isn’t subject to the same state interest rate restrictions as non-bank lenders, the fake lender doesn’t have to abide by the rate cap anymore either.

Predatory lenders have been trying to use this rent-a-bank scheme to evade fake lender and anti-usury laws as far back as the early 1800s, but courts and federal regulators have always found it to be illegal. Until the Trump administration reversed course and implemented the new rent-a-bank rule. Now, 42 states and DC currently have at least one predatory lender using a rent-a-bank scheme, and another five have high-cost installment lenders that lend directly to consumers.

The costs of this rule to individual people and families will be enormous. In a state like Iowa, where rates are capped at 36 percent for both $500 6-month loans and $2,000 2-year loans, a $500 6-month installment loan from Check ‘N Go that a borrower is able to fully pay after the first term would cost $90 in fees at the 36 percent APR.  But under the new rule, Check ‘N Go is able to charge 199 percent APR on the same loan, which would cost $497.50 just in fees. Similarly, a $2,000 2-year installment loan repaid after just one term would cost $1,440 in fees at a 36 percent APR but $7,960 in fees at 199 percent APR.

And this example is assuming that borrowers are able to pay off the loans when they’re due, instead of renewing them, which is much more common. After six renewals, that 2-year installment loan at a 199 percent APR will cost $47,760 in fees.

This isn’t just a hypothetical exercise. About 19 percent of the 53 million adults in the US with household incomes under $40,000 will take out a payday loan sometime during the year, and most will end up renewing so many times that they pay more in fees than the principal they originally borrowed. If that percent holds across the states, as many as 4 million adults every year will take out a payday loan in a state where anti-predatory lending laws are being undermined by the rent-a-bank rule.

To add insult to injury, while these non-bank lenders profit by preying on millions of desperate Americans, they’re also demanding special support from the government during the pandemic. When the Paycheck Protection Program (PPP) was created in March 2020 as part of the CARES Act, payday lenders and their ilk were initially excluded. The lenders threw a tantrum, suing the government for inclusion and convincing a number of lawmakers from both parties — who happen to have received 6 times more in campaign contributions from the payday industry than those not involved — to write a letter urging the Trump administration to provide them with PPP funds, which it ultimately did.

As of July 2020, at least 35 payday loan and debt collection companies and their subsidiaries had received between $9 billion and $23 billion in PPP loans. Meanwhile, they continued to charge low-income consumers 400 percent APR on short-term loans amidst a financial crisis. Some even had the audacity to market “COVID-19 Financial Relief” and “Emergency Funding Relief” loans at 800 percent APR early in the recession. One company, Opportunity Financial — which operated under the name OppLoans but recently rebranded as OppFi — lends directly in 10 states and uses a rent-a-bank scheme in 33 other states to lend at 160 percent APR. OppFi has received 46 complaints to the Consumer Financial Protection Bureau (CFPB) for their payday lending practices since 2011 and is currently being investigated for potentially violating the Military Lending Act, but last year they took a PPP loan of $6,354,000. Another predatory lender, CashCall, has received a staggering 565 complaints to the CFPB and was successfully sued in separate cases by the CFPB and DC for using a rent-a-bank scheme to charge illegally high interest rates, but still received a PPP loan of $788,600.

The good news is that there are some easy fixes to this problem. In an ideal world, we would have a national 36 percent rate cap that applies to everyone. At 36 percent APR, consumer loans would still be pretty costly but wouldn’t be at predatory usury levels. The bipartisan Veterans and Consumers Fair Credit Act introduced by Representatives Jesús “Chuy” Garcia (D-IL) and Glenn Grothman (R-WI) in November of 2019, and which is expected to be reintroduced this legislative session, would extend the Military Lending Act’s 36 percent cap to all consumers. This would be overwhelmingly popular with the American public, polling at 70 percent among all voters with no less than 60 percent support in any state and with a majority of those opposed saying that 36 percent is still too high. However, given the makeup of the Senate, this legislation is unlikely to pass, and certainly not quickly.

Waiting for a new comptroller of the currency to be appointed by President Biden and then issue a new rule reversing the rent-a-bank rule will also take some time and could face a threat from lawsuits in a very conservative federal judiciary. In the meantime, millions of low-income consumers will be robbed of billions of dollars in fees from exploitative interest rates.

The much faster and easier solution to the rent-a-bank problem is for Congress to simply use the Congressional Review Act (CRA) to overturn the rule. This option is time-limited, though; Congress has just 60 legislative days after a rule is implemented to pass CRA legislation. Thankfully, Representative Garcia (D-IL) and Senator Chris Van Hollen (D-MD) and Senator Sherrod Brown (D-OH) took the first step on Thursday March 25 and introduced the necessary CRA legislation to repeal the rent-a-bank rule.

The resolution now needs to pass both the House and Senate and get signed by President Biden soon, likely sometime in May, to prevent millions of low-income people every year from being even further exploited and trapped in debt by predatory lenders.

The bill—misleadingly titled “Protecting Consumers’ Access to Credit Act of 2017”—claims to be a response to a recent federal court decision in a case called Madden v. Midland. Ms. Madden opened a credit card; when she fell behind on payments, it was sold to Midland Funding, a debt collector. Midland tried to charge her an interest rate of 27 percent, higher than New York’s legal limit of 25 percent, and the judge ruled that while banks are not subject to state interest rate caps—consistent with rulings going back several decades that led to the rapid growth of credit cards—nonbanks, such as a debt collector, are. The decision was reached by the Second Circuit, and only applies to New York, Connecticut, and Vermont.

Get TalkPoverty In Your Inbox

In the bill, both houses of Congress have proposed a so-called “Madden fix” that would declare that any valid loan made by a bank stays valid if that loan is later sold or transferred to a nonbank. On its face, that sounds fair—until it’s clear that this is exactly the business model, sometimes called rent-a-bank, that payday lenders have historically used to get around state consumer protection laws. Under rent-a-bank, in a state that caps annual interest rates at 36 percent or less—a level considered the maximum for responsible lending for about a century—a loan shark shut out of the market can just partner with a national bank that’s subject to no limits on interest rates at all, and charge consumers more than 300 percent annual interest or more. This practice goes back two decades, and federal banking regulators have been grappling with it just as long.

Getting around state laws also means skirting the will of Americans that have elected to keep predatory lenders out of their states. Fifteen states and the District of Columbia—representing more than 90 million Americans—have set interest rate caps to keep payday lenders at bay. South Dakota joined this club in 2016 with a ballot initiative receiving more than 76 percent of the vote, despite confusing, contradictory language on the ballots. Seventy-two percent of Montanans voted for a cap in 2010. And faith leaders across the country have decried the practice—some even using their own community assistance funds to bail out borrowers trapped in debt.

Even in states where payday lending is not restricted with a rate cap, forty-two states have interest rate caps in place for some other types of loans, such as installment loans, which are generally paid back over a longer period of time. It’s no surprise that the Consumer Financial Protection Bureau’s (CFPB) 2017 payday lending rule specifically called out rate caps as providing better protections than what it could do itself to deal with debt trap lending. (The Dodd-Frank Act, which created the CFPB, specifically bans the agency from capping rates itself.)

Taking away states’ ability to pass and enforce laws that protect their residents from loansharking might not be so devastating if a tough federal standard existed in their place. But this January, CFPB Acting Director Mick Mulvaney delayed the final payday rule, which only dealt with certain aspects of predatory lending, with an eye toward weakening or scrapping it altogether. New Trump-appointed leadership at the banking regulators are not likely to scrutinize rent-a-bank partnerships the way past regulators have, and the Office of the Comptroller of the Currency, one of these regulators, reversed its restrictions on banks themselves making payday loans last year. The closest Congress has come to taking decisive action to help vulnerable borrowers in recent years was passing the bipartisan Military Lending Act in 2007, which put in place a 36 percent rate cap on servicemembers and their families—and still only survived an effort to weaken it in 2015 by one House committee vote.

To be sure, some nonbank lenders who do not make payday loans have argued that the Madden decision makes it harder for even responsible startups to lend nationwide because investors will not support them if loans may be invalidated under state law. But they have other options, including seeking a federal nonbank charter or simply ensuring that they comply with state law. Supporting a nationwide market should not mean forcing open the doors to financial exploitation by allowing lending without limits.

Should the House bill pass this week, it then goes to the Senate, where a bipartisan group of senators has teamed up to co-sponsor the same bill. In an era of massive tax cuts for the rich and devastating benefit cuts for everyone else, this is merely the latest attempt from Congress to tilt the financial playing field further in favor of corporations and the wealthy, making it even harder for working families to get by.

It’s a wonky bill, and it’s flown under the radar so far. But—particularly given the political war being waged at the Consumer Financial Protection Bureau—it shouldn’t get buried. More than 1 in 10 homes in rural or small-town America were built in a factory, and they are usually owned by older, poorer Americans. Even though the average sale price for a new manufactured home is $68,000, consumers who take out a loan to buy one typically pay high interest rates and fees that can add hundreds of dollars to their monthly housing payment.

Get TalkPoverty In Your Inbox

Proponents of the new legislation argue that this change will allow salespeople to help consumers find financing more quickly. However, it also creates a powerful incentive for retailers to drive consumers toward the loans that are most profitable for the business—even when there are less expensive options available for the consumer.

Carla Burr, who owns her home in Chantilly, Virginia, was surprised by the interest rate she was offered after she sold her condominium to purchase a manufactured home in 2004. She had good credit and could make a sizeable down payment—she had just netted more than $100,000 from the sale of her condo. But lenders were asking her to pay an interest rate greater than 10 percent for a 20-year mortgage, more than double what she paid on the mortgage for her previous home. “It’s as if they are treating manufactured homeowners as if we were substandard, or uneducated,” Burr said. Today, even though mortgage interest rates are generally lower than they were 13 years ago, manufactured housing consumers like Burr are still being charged high rates.

About 70 percent of mortgages for manufactured homes are already higher-priced mortgage loans Higher-priced mortgage loans have interest rates and fees (APR) above the standard rate (APOR) by 1.5 or more percentage points.
, compared with only 3 percent of mortgages for site-built homes. That’s due, at least in part, to the lack of competition within the manufactured housing industry. Companies affiliated with a single large corporation, Clayton Homes, were responsible for 38 percent of manufactured housing loans in 2016 and for more than 70 percent of loans made to African American buyers in 2014. That leaves companies with little need to lower their rates to attract consumers—and that would be especially true if there was a steady stream of referrals from affiliated retail shops.

Clayton Homes is also the largest producer of manufactured homes and sells these homes through 1,600 retailers. That gives the company thousands of opportunities to solicit customers for loans offered by its mortgage lending affiliates, 21st Mortgage and Vanderbilt Mortgage, which make far more loans each year than any other lenders. They also charge consumers higher interest rates than much of their competition.

In Virginia, for instance, this company’s interest rates for higher-priced loans averaged 6.1 percentage points above a typical mortgage loan, whereas interest rates charged for similar loans by the rest of the industry in the commonwealth averaged 3.9 percentage points above a typical loan. For a Virginian taking out an average-size loan from a lender affiliated with Clayton Homes, this means they could pay about $75 more each month and about $18,000 more over the life of a 20-year loan than if they had gotten a mortgage elsewhere. Since owners of manufactured homes in Virginia earn about $40,000 each year—about half the annual income of other homeowners in the commonwealth—these additional payments can be a significant financial strain.

Interest rates aren’t the only thing on the line. The House bill under consideration would also allow lenders to include higher up-front fees, prepayment penalties, balloon payments, and hefty late fees on higher-interest loans, leaving many manufactured housing buyers with expensive loans that are difficult to pay off. Manufactured housing industry lobbyists claim that regulations preventing these practices have made it more expensive to do business and, as a result, consumers can’t get loans to buy manufactured homes. However, Center for American Progress analysis shows that 2015 loan volumes were fairly similar to the volumes before the regulation went into effect; the biggest difference is that fewer consumers received loans with exorbitant rates and risky terms. Last year, there was a modest 5 percent decrease in the number of loans originated, but lending quality remained stronger.

If Congress is serious about giving consumers more borrowing choices, more high-quality lenders need to offer mortgage loans for manufactured housing. However, by giving further advantage to today’s largest providers, these bills could derail efforts to expand financing options available for consumers. Fannie Mae, Freddie Mac, and state housing finance agencies are taking steps to make it easier for lenders to offer mortgages for manufactured homes. For instance, both Fannie Mae and Freddie Mac have committed to buying more manufactured housing loans from banks, which should encourage more lending. They are also launching pilots to buy manufactured housing loans titled as chattel, which represent the majority of manufactured housing lending. Allowing the largest manufactured housing companies today to tighten their grip on consumers could put newer lenders, who do not have salespeople at retailers promoting their offerings, at a disadvantage.

Consumers of manufactured housing deserve the same rights and protections available to those buying site-built homes. And since families that live in manufactured housing are more likely to be teetering on the edge of financial stability, they are the least well-positioned to shoulder additional burdens. Congress should take further steps to expand options for these consumers, not pave the way for more abuses.

But like a hydra that just keeps regenerating, payday lenders often spring back when states try to rein them in. Take Ohio, for example. After 64 percent of Ohio voters—and a majority in 87 of the Buckeye State’s 88 counties—voted to ban payday lending in 2008, lenders just rechartered themselves as mortgage lenders under state law, despite not making any home loans. And after payday loans were banned in Arizona, lenders switched over to making pricey car title loans. This struggle to regulate lenders at the state level is one of many reasons why the federal Consumer Financial Protection Bureau (CFPB) is working on a proposed rule to curb payday loan abuses.

Unfortunately, some members of Congress from Florida are defending lenders in their race to the bottom. Last year, the entire Florida Congressional delegation, with the exception of Rep. Thomas Rooney (R-FL), sent a letter to the CFPB’s Director Cordray arguing that new rules are unnecessary because Florida’s regulations are “among the most progressive and effective in the nation.” Recently, they went one step further, when twelve Floridians in Congress—seven Republicans and five Democrats—sponsored the so-called Consumer Protection and Choice Act. This bill would block CFPB’s actions for two years.  It would also exempt states from having to adhere to the new CFPB rule if they model their own laws on the Florida regulations. Ten other members co-sponsored the bill, including two Ohioans who apparently missed the results of their state’s 2008 referendum.

If Florida were indeed a model state on regulating abusive lending practices, this legislation might make sense. New York, for example, has a 25 percent interest rate cap, and state officials have also aggressively pursued lenders that try to skirt the law by making illegal loans over the Internet. Indeed, 14 states and the District of Columbia have similar rate caps that protect consumers from dangerous loans. The Pentagon is also a model: under the Military Lending Act, loans to servicemembers and their families are capped at 36 percent annually. But Florida’s annual interest rates average 360 percent, and payday lending drains an estimated $76 million a year from the state’s economy. That’s hardly “progressive and effective,” nor is it a model we should aspire to replicate nationwide.

Indeed, the Florida regulations that some in Congress want other states to follow, such as a 24-hour cooling-off period prior to taking out another loan, by and large don’t work. 85 percent of Florida borrowers take out seven or more loans a year, and almost two-thirds take out at least a dozen loans. That suggests a product that makes financial distress worse, not better. In the words of one Florida borrower from Daytona Beach, “I would take out a payday loan for emergencies and it would take me an entire year to pay it back. I would have to juggle all my other bills, causing more problems than I had in the beginning.”

Get TalkPoverty In Your Inbox

While the CFPB’s proposed rule is yet to be announced, it will undoubtedly go farther than states like Florida in stopping these kinds of debt traps. It should require lenders to determine whether the borrower is actually able to pay back the loan—a common-sense approach that can stop financial problems from cascading down the line. And it should ban a lending practice that amounts to legalized pickpocketing: repeated automatic withdrawals from a borrower’s bank account as soon as funds are available, even if the borrower has more important bills to pay. These actions would make it harder to exploit vulnerable borrowers and also complement states’ authority to cap interest rates.

Americans want something done about the payday lenders that are taking money out of the community and causing great financial distress. In fact, every time the issue has gone to the polls—in Ohio and Arizona in 2008, and Montana in 2010—responsible credit has won. It’s time for members of Congress to listen to the will of the people and make it harder for their vulnerable constituents to get ripped off.

In 2008, Ohio passed the Short Term Loan Act, which established a number of protections against predatory payday lending and other small dollar loans, including setting a 28 percent rate cap on payday loans.

Not surprisingly, the Ohio payday industry immediately tried to overturn the law through a ballot initiative. So what did Ohioans decide? They voted overwhelmingly (64 percent) to affirm the Short Term Loan Act, including the 28 percent rate cap. (Fun fact: the Ohio payday industry spent $16 million on the ballot initiative effort, while opponents spent just $265,000).

For the past seven years, however, payday lenders have deliberately defied the will of Ohio voters by continuing to saddle consumers with triple-digit interest rates on loans—some as high as 763 percent. They do this by using two older Ohio laws—the Mortgage Lending Act and Small Loan Act—to take out different lending licenses that allow them to circumvent the protections put in place by the Short Term Loan Act.

There are now 836 payday and auto title lenders in Ohio—more than the number of McDonald’s in the state. These lenders are so good at bypassing state laws that every year they rake in $502 million in loan fees alone. That’s more than twice the amount they earned in 2005, three years before the 28 percent rate cap was set.

Unfortunately, payday lenders scheming to avoid state consumer protection laws isn’t just a problem in Ohio—it’s a problem throughout the country. Time and again, whenever states crack down on abusive, small dollar lending, payday lenders find creative ways to continue business as usual:

• In Texas, payday lenders are dodging state laws by posing as Credit Access Businesses (a tactic also employed by Ohio payday lenders). By disguising themselves as a completely different kind of financial service provider—one that isn’t subject to the limits imposed on payday lenders—they are able to essentially continue to act like payday lenders.

• In states where payday lending is prohibited—such as Arizona, Georgia, Maryland, and others—lenders utilize online lending to broker deals with consumers within those same states.

• In many other states with payday loans restrictions, lenders have established partnerships with Native American reservations to circumvent the law.

The moral of the story is clear: even if every state had protections on the books, lenders would find new ways to get around them.

But the good news is that the Consumer Financial Protection Bureau (CFPB) can help to crack down on these abuses.

Earlier this spring, the CFPB released a proposed framework for regulations that would govern the small dollar lending industry. As currently written, however, it would leave a number of glaring loopholes that are ripe for exploitation by payday lenders.

For starters, the proposal doesn’t address the problem of unscrupulous online lenders. It also fails to address the main cause of payday debt traps: the fact that lenders aren’t required to determine a borrower’s ability to repay a loan, even as they continue to peddle more and more loans to “help” a consumer dig out of a hole.

The CFPB can’t eliminate all the circumvention and abuses by payday lenders, but it can help. To do that, it needs to issue the strongest rules possible—and soon. It’s been eight months since the release of the regulatory framework and the CFPB has yet to offer an official proposal. Low-income Americans across the country need the CFPB to act fast.

That’s why we at CFED launched the Consumers Can’t Wait Campaign—to call on the CFPB to release strong rules on payday lending now. Until the CFPB acts, the profitable practice of ensnaring millions of American consumers in debt traps will continue to thrive unabated.

In what seems a reprisal of the predatory practices that led up to the subprime mortgage crisis, low-income individuals are being sold auto loans at twice the actual value of the car, with interest rates as high as 29 percent. They can end up with monthly payments of $500—more than most of the borrowers spend on food in a month, and certainly more than most can realistically afford. Many dealers appear in essence to be setting up low-income borrowers to fail.

Dealers are also making use of a new collection tool called a “starter-interrupter device” that allows them not only to track a borrower’s movements through GPS, but to shut off a car with the tap of a smartphone—which many dealers do even just one or two days after a borrower misses a payment. One Nevada woman describes the terrifying experience of having her car shut off while driving on the freeway. And repossession of their cars is far from the end of the line for many borrowers; they can be chased for months and even years afterward to pay down the remainder of the loan.

Predatory subprime auto loans are just the latest in a long line of policies and practices that make it expensive to be poor—something I saw every day representing low-income clients as a legal aid attorney.

Low-income individuals are much more likely to be hit by bank fees, such as monthly maintenance fees if their checking account falls below a required minimum balance—balances as high as $1,500 at leading banks such as Bank of America and Wells Fargo—not to mention steep overdraft fees. For the more than 10 million U.S. households who lack a bank account, check cashers charge fees as high as 5 percent. This may not sound like much, but consider a low-income worker who takes home around $1,500 per month: She’d pay $75 just to cash her paychecks. Add in the cost of money orders—which she’ll need to pay her rent and other bills—and we’re talking about $1,000 per year just for financial services.

Whether or not they have a bank account, very few low-income families have emergency savings, and more than two-thirds report that they’d be unable to come up with $2,000 in 30 days in the event of an emergency expense such as a broken water heater or unexpected medical bill. Out of options, many turn to payday loans for needed cash. Jon Oliver, host of Last Week Tonight, gave this important issue perhaps the best treatment I’ve seen in some time, detailing how families who turn to predatory payday loans can end up trapped in an inescapable cycle of debt at 400 percent annual interest.

Then there’s the rent-to-own industry.  Through weekly installments, low-income families with bad credit or no credit can end up paying as much as two and a half times the actual cost of household basics like a washer and dryer set, or a laptop for their teen to do his homework.

Grocery shopping can bring added costs too. For families who can’t afford to buy in bulk, the savings Costco offers are out of reach. And for those without a car, living in low-income neighborhoods without a convenient supermarket, it’s either cab or bus fare to haul groceries back, or swallowing the markup at the neighborhood corner store.

And then there’s the issue of time. Something I heard about frequently from my clients when I was in legal aid was how much extra time everything takes when you’re poor. Many told of taking three buses to work and back, and spending as many as five hours in transit to get to and from their jobs every day. Those who needed to turn to public assistance to make ends meet would describe waiting at the welfare office all day long simply to report a change in their income.

Also worth noting is the criminalization of poverty and the high costs that result. In a nationwide trend documented by the National Law Center on Homelessness and Poverty, a growing number of states and cities have laws on the books that may seem neutral—prohibiting activities such as sidewalk-sitting, public urination, and “aggressive panhandling”—but which really target the homeless. (The classic Anatole France quote comes to mind: “The law in its majestic equality forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread.”)

Get Talk Poverty In Your Inbox

Arresting a homeless person for public urination when there are no public bathroom facilities is not only a poor use of law enforcement resources, it also sets in motion a vicious cycle: The arrested individual will be unable to afford bail, as well as any fees levied as punishment, and nonpayment of those fees may then land him back in jail.

In an extreme example, in the state of Arkansas, missing a rent payment is a criminal offense. If a tenant is even one day late with the rent, his landlord can legally evict him—and if the tenant isn’t out in 10 days, he can wind up in jail.

In yet another penny-wise and pound-foolish trend, states and localities are increasingly relying on enforcement of traffic violations—as well as fines and fees levied on individuals involved with the criminal justice system—as sources of revenue. In Ferguson, Missouri, the city relied on rising municipal court fines to make up a whopping 20 percent of its $12.75 million budget in 2013. Ability to pay is often ignored when it comes to these types of fines and fees, leaving individuals stuck in a cycle of debt long after they’ve paid their debt to society. While debtor’s prison was long ago declared unconstitutional, failure to pay can be a path back to jail in many states.

It’s good to see the New York Times, Melissa Harris-Perry, and others paying attention to these injustices. But that’s just the first step. If we are truly interested in building an America that is defined by opportunity, we must commit to enacting public policies that support rather than impede upward mobility.

Editor’s Note: To watch both segments of the Melissa Harris-Perry show that featured Rebecca as part of a panel discussing the high cost of being poor click here and here.

For much of Christian history, the Catholic Church opposed charging any interest for loans, which was regarded as sinful “usury.” In late antiquity, St. Augustine described loans as one form of charity: he assumed that the lender would charge no interest, providing a service to the needy borrower at some cost to themselves. He realized that many of those who need loans in order to get by are poor people whose needs should be at the forefront of Christian concern. Out of this same realization, some Italian Franciscans began to open pawnshops, called montes pietatis, in the 15^th century, running them as charitable organizations to help poor people access small loans. As it became clear that these local practices were helping people in need, official Church teaching changed. In 1515, Pope Leo X proclaimed that charging “moderate” amounts of interest so that loan organizations could be maintained was legitimate under church law. (Despite this acknowledgement that lending at interest could be done morally, deep-rooted stigma against Jewish moneylenders, who had historically responded to Christians’ need for loans, affects European and US culture even today.)

If you hear a Christian call out “usury” today, like theologian Alex Mikulich does here, likely they’re not decrying all charging of interest but suggesting that a certain type of loan is predatory, unjust and harmful to the borrower. Catholic groups use this tradition effectively as they fight some of the most exploitative practices of payday lenders in states like Illinois, Kentucky, and Minnesota.

A new film, Spent: Looking for Change continues the dialogue about the payday loan industry. Two things are clear from this powerful film. First, many current practices of the payday loan industry are indeed exploitative and harmful to families who already find themselves on the edge. One family in the film estimates that by the time they pay off a loan of $450, they will have paid more than $1700 in interest. Another borrower was not allowed to pay off her loan until she could pay in full—racking up more interest although she could have been making payments, and eventually losing the car that she needed for work. Second, while payday lenders and check-cashing services charge fees that could accurately be described as usurious, they fill an otherwise unmet need. As many as 70 million people in the U.S. are excluded from the traditional banking system, because of issues like bad credit, no credit (a potential result of the cautious choice to avoid credit card use), or lack of geographic access to traditional banks.

Get TalkPoverty In Your Inbox

The film is sponsored by American Express, which is announcing new financial products designed to help those underserved by the traditional financial system, like the people featured in Spent who turn to usurious lenders. This seems consistent with a trend noted in the New York Times earlier this year: in response to rising inequality within the U.S., companies are shifting their offerings to appeal to either very wealthy, or increasingly poor consumers. It’s encouraging, I suppose, that one result of this trend could be more affordable financial services for people who historically have needed them. But let’s not forget that high inequality comes with a host of other social ills.

Let’s also not assume that because the market is beginning to respond to this need, anti-poverty activists can just sit back and relax. The makers of Spent created a petition to legalize prize-linked savings accounts.  Supporting Elizabeth Warren’s plan to allow Post Offices to offer affordable financial services seems like another promising response. Watching and sharing Spent is a great way to keep the conversation going.

And I’d encourage people of faith, and everyone concerned about poverty, not to stop there. Microcredit agencies like Grameen America and Kiva Zip help individuals and groups—maybe even you, or your congregation—make interest-free loans to small-business owners in the US and abroad. Run on donations, they boast impressive repayment rates and help people in need avoid the most predatory operators in the financial system.

Call them today’s Franciscan pawnshops.