Usury, Payday Loan and Rent-To-Own Laws Needed to Protect Poor

"If thou lend money to any of my people that is poor by thee, thou shalt not be to him as a usurer, neither shalt thou lay upon him usury."

–Exodus 22:25

Well, they are again whining about the Tennessee tax structure screwing the poor. Well, boo hoo. The Tennessee Legislature screws the poor every day and it doesn't have anything to do with the tax structure.

Back in olden days, before we had the consumer movement, attorneys general and the legislatures looked after average folks, especially the poor. When department stores came up with a "revolving charge" plan that charged you interest on your interest, they got sued by states and they had to quit.

Stores would sell people televisions, appliances, and assorted junk on credit. People would go to the store each Friday and make a payment. You paid for the junk several times over, but if you missed a payment they sent a goon over to repossess the television or the refrigerator. When people came in to make payments the stores sold them new stuff, added it to the total. People no longer even knew what they owned and what they still owed.

But laws were passed. Stores could no longer come and repossess appliances in which the consumer had equity just because of a missed payment. So we have invented "rent-to-own" stores in which you "rent" televisions and appliances and pay for them many times over. And when you miss a payment on your "rental," they come and repossess it.

Since Colonial days, states regulated interest rates to prevent usury. At various times in America it was illegal to charge an interest rate above 6 percent, 8 percent or, finally, 10 percent. Then we had inflation in the 1970s and banks would no longer make loans at 10 percent or less and they came up with "fees" to get around the law. The state Supreme Court said this was illegal in Tennessee under the state constitution. So interest-rate limits were removed in Tennessee.

When Congress removed interest-rate caps nationwide in 1980 and President Jimmy Carter signed it into law, did they imagine that we would have a time of relatively low inflation and low-interest money available—and the average American consumer would still have to pay over 30 percent interest on a credit card balance?

Payday loans were an iffy industry and the Tennessee Legislature decided they needed to be "regulated." Once the bill was passed it didn't "regulate" payday loans. It made them legal and turned them into thriving enterprises that hook the poor on a treadmill and extort up to 400 percent interest on their loans. If you need money badly and you borrow your next paycheck, what is the likelihood you will be able to pay off the loan and interest when your next paycheck comes? So you "flip" the loan and do it again, forever. Paying ridiculous charges each time.

In Georgia, payday loans are a felony and you can be charged with racketeering. In Tennessee, they name college buildings after you.

The worst scam on the poor is the Powerball lottery in which the poorest of the poor are sold hope at $1 a shot. The proceeds are used to pay the college tuition for the children of the middle class. Not only will we continue the Powerball program, we are in the process of adding "Megamillions," another multi-state huge-payoff, low-probability game.

How about the state Legislature, this coming session, ignore special interests for a change and do something for the poor and lower middle class? How about you outlaw payday loans, regulate rent-to-own charges, and pass a new usury law that prevents credit card companies from holding poor and middle-class families in debt bondage forever?

Legislators who use their religious beliefs to rail against gay marriage or abortion might have more moral authority if they led the fight to force Tennessee businesses to show a little Christian charity.

For if you do it for the least of these, my brothers, you do it for, well, you know.