Messages from the Bishop

Creditors and Debtors

Written by Bishop Henry on Friday, 27 February 2015

In the Old Testament, it is a blessing to be a creditor rather than a debtor. Nevertheless, a number of laws restraining creditors suggest that the reality of debt was grim. The cloak [Ex. 22:25], other garments [Am. 2:8], the ox and the ass [Job 24:3], and children [Job 24:9] were given as pledges. The millstone, without which the family food of the day could not be prepared, was prohibited as a pledge [Dt. 24:6], nor could the lender take a garment of a widow. If the cloak were pledged, it had to be returned at sunset that the borrower might sleep in it [Ex. 22:24ff]. The lender may not enter the house of borrower in order to collect his pledge [Deut. 24:10]. There are exhortations to the creditor not to exact the pledge when the debtor is unable to pay [Ezk. 18:16].

Wisdom literature contains a number of reflections on loans and debts which view them unfavourably. The borrower is the slave of the creditor [Ps. 37:21]. The good lender is kind and just [Ps. 112:50]. The fool lends today and demands payment tomorrow [Sir. 20:15]. A series of reflections in Sir. 29:1-10 commends the payment of debts, patience with the poor debtor, and generosity in the lender to the point where he is willing to risk the loss of his loan.

As a society that has its roots in the Judaeo-Christian tradition, we seem to have lost our way.

 Although not absolutely necessary, most people need a credit card to survive and operate in our personal, family and corporate lives. I recently received a credit card statement – my annual fee is $89, purchases $19.99% and cash advances $22.99%.

On the back side of my monthly statement, in very small print is the following text: "If interest is charged on any portion of your New Balance, it is determined by multiplying the total interest-bearing portion of your New Balance at the end of each day by the interest rate for the period in question.... If any daily balance is less than zero, we treat it as zero (thanks be to God for that! And in case you missed it ). Interest is calculated daily and added to your account...."

Now I can usually deal with all of this but it is still an outrageously high rate of interest.

Far worse, of course, is the phenomenon of "Payday Lending," which is even more morally repugnant and an assault on the poor.

The best description of this phenomenon comes by way of personal testimony or witness. In October of this year, Timothy shared his story in a Letter to the Editor in the Calgary Herald. He wrote:

"I am happy to say that I have been set free from the vicious cycle of payday loans. The inconvenient truth is that the products are engineered for those who do not have the means to repay.

They conveniently meet you at a rough patch in your journey, and for the first week or two, their services seem like a lifesaver. How could I have been able to send money for my mother's hospital bill if they were not there for me?

But over time, you begin to realize that they have discreetly given you a shovel, and with a smile, asked you to dig your own financial grave. With courtesy (and their staff are very courteous) they hand you a rope and give a helping hand as you tangle yourself in a financial mess. Over a period of 10 months, however, I paid $2,500 in interest on a $600 loan.

I believe everyone needs to learn to save for a rainy day. I wouldn't have been in that mess if I had just learned early enough to put a little aside every week. Still, I can't help but wonder why a product as harmful as a payday loan is legal in our province."

Unfortunately, such stories are all too common.

In Alberta, a Payday Loan is a short term loan of up to two months to a maximum amount of $1500 that is legally available to consumers. Payday lenders can charge up to $23 per $100 borrowed. Payday lenders charge interest rates that top 400% when annualized and are largely located in lower income neighbourhoods.

Payday loan customers are predominately those who are employed full time but live at or below a living wage. The majority of those taking out payday loans are also doing so to cover ordinary expenses; only 28% say they need the loan to cover an emergency or unexpected expenses. There are 15 return customers or rollover loans for every new payday loan customer, which further perpetuates the cycle of debt.

We need to recognize the effects that poverty has on our community and take action to reduce poverty. It is time for Calgary City Council to take action on this issue. Although some of the required work must be done by higher levels of government, the City of Calgary can implement changes to land use and licensing that will prevent additional businesses of this nature from opening. This step cannot be done in isolation, it is up to banks and non-profits to offer replacement credit, but at non-usurious rates of interest.

I would urge you to contact by email, letter or telephone Mayor Nenshi and any or all members of City Council and ask for immediate action to limit payday lending. They can amend law-use bylaws to stop the proliferation of payday lenders, raise business licensing fees to fund financial empowerment programming and act as a convenor to improve banking access for the working poor.

If you would like more information on payday lending, please refer to the website www.momentum.org or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it

 

 

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