Sunday, November 4, 2018

Bill Crawford: Usury Proscriptions Forgotten

Living in a very Christian state, most Mississippians should remember the biblical proscriptions on usury.

Here's one: "Thou hast taken usury and increase, and thou hast greedily gained of thy neighbors by extortion, and has forgotten me, saith the Lord God." (Ezekiel 22:12)

Many Mississippi leaders have forgotten.

Once Mississippi's maximum annual finance charge was 8%. Anything over was usury.

Indeed, such usury rules were the law of the land through most of the 20th Century. Starting in the 1980s, states including Mississippi began to relax these rules. Lately, Mississippi has caved in to special interests.

The 8% maximum charge remains in law today, but the legislature has added exception after exception. Today, every special interest has its own rule allowing higher rates.

Market forces tend to keep rates for credit-worthy borrowers reasonable. For the least credit-worthy, however, market forces tend to evaporate. Reasonable finance charge caps are their only hope for fair rates.

Mississippi Today reported 18 states, including Arkansas, Georgia and North Carolina, prohibit extremely high lending fees, with movement underway in Alabama to do the same.

Contrarily, economic freedom apologists funded by the wealthy Koch brothers’ network, e.g. MSU's Institute for Market Studies, strongly push a worldly view that there should be no caps at all.

State caps on bank finance charges are 10% or 5% over the federal discount rate for traditional loans, 10% or 5% over the 20-year U.S. bond rate for mortgage loans and loans financed by stock, and 1.75% per month (21% annually) for credit cards.

Caps on closed-end credit sales charges are 24% and on loans over $2,500 are 15% or 5% over the federal discount rate. There is no cap for mutually agreed upon finance charges for loans of more than $2,000.

Caps on rates for used car refinancing range from 18% to 28.75% and for mobile home financing from 15% to 25% based on amounts financed.

The top rate for pawn shop charges is 25%.

The top rates for small loan companies used to range from 14% to 36% based on the size of the loan. In 2016 the legislature added an "alternative" finance charge cap of 59% for loans over $4,000.

Getting kind of high? Well, consider the following levels for the least credit-worthy.

Payday loan companies can charge up to $21.95 per hundred dollars for 30-day loans up to $500, an annualized rate of 263.4%.

Title loan companies can charge 25% per month for a contract up to $2,500, an annualized rate of 300%.

And, since 2016, there are "credit availability" installment loans with finance charges up to 25% a month plus a 1% origination fee for six-to-twelve month installment loans up to $2,500. That's an annualized rate of up to 297%.

Mississippi's Catholic Bishops called such rates "predatory." Clarion-Ledger columnist Jimmie E. Gates called for "more stringent regulations on the amount of interest and fees they can charge." Greenwood Commonwealth Editor Tim Kalich called the practice "sinful."

"For the love of money is a root of all kinds of evils. It is through this craving that some have wandered away from the faith." (Timothy 6:9-10)

Faithful Mississippians should think about these things as next year's elections approach. Should our policy be to pray for the poor, or to prey on them?

Crawford is a syndicate columnist from Meridian.


Anonymous said...

In any capitalist economy the only sin is being poor. The poor are fair game. It is only important to protect the interest of the rich, which we are all pledged to do. All true?

Anonymous said...

Based on my travel, we have no poor in this country. We have those who have typically, not entirely, elected to remain USA "poor". Free housing, food, medical from conception, dental, vision, cell phone, gas, education from age 3,etc. You cannot call them poor when they choose to use their government supplied resource to buy things a lot of hard working folks cannot afford - regardless on the interest rates. USA "poor" is not a valid argument.

Anonymous said...


Anonymous said...

Save money! Stop buying Ambien and just read Salter and Crawford. No need to purchase a sleep aid.

Anonymous said...

This article fails to mention borrower default rates, as well as the ease of accessing bankruptcy laws and giving creditors the finger.

Don't like the rates? Don't borrow the money.

Simple fix.

Anonymous said...

It’s great that the grave evil of usury is being discussed. But it’s important to understand that usury is not “high” or “excessive” interest. That is a modern fiction - akin to saying that adultery is excessively sleeping around on one’s wife. Usury is not high interest; usury is ANY interest charged on what was once known as a mutuum loan - a loan that is backed or securitized by a personal IOU of the borrower. There are all sorts of reasons why interest on a mutuum is immoral. But it may be helpful to think of it in terms of what “collateralizes” a mutuum loan - what interest is actually being charged on - is the person of the borrower. A person is being treated as property. This is evil and why usury has always been characterized as a form of slavery.

Anonymous said...

The above statement just confirms that Mississippi "claims" to be Christian, but is FAR from it......mostly poor whites, poor blacks, and the remaining gentry from the landowners. Nothing Christian about it.

Anonymous said...

These moneychangers will reap what they sow at some point. And all the wealth they have gained will serve no purpose in ghwarting their upcoming pain and suffering.

Unknown said...

Interesting... the rise of Usury and the rise of Republicans perfectly parallel????
Loan Sharks and Land Sharks seem prevalent in Mississippi now days.

Anonymous said...

11:42 "We have no poor in this country" Do we have rich in this country? Poor is relative to rich, not an absolute status. Poor may be starving to death in one country but simply lacking the means of upward mobility in another. Just because some people lack good judgment in their use of modest financial resources does not mean they are not worthy of fair treatment. The rich often waste their money and make stupid financial decisions too,but because they can afford to influence the legal and financial institutions that affect them they avoid dire consequences. Usury follows the poor not simply because they are stupid, but because they are defenseless.

Anonymous said...

Mississippi is the least Christian state in the nation.

Anonymous said...

Loan sharking became popular in Mississippi in parallel with the burgeoning of pawn shops which (wait for it) ran in perfect concert with the advent of casino gambling. Ain't got shit to do with Republicans. In fact we had democrats in charge of the senate and house, the governor's office and the Light Guvernor.

Anonymous said...

Thank you Bill for writing this. There’s a front row seat in Hell for the loan sharks. One of the GOP’s largest contributors lives in a hilltop Rankin County mansion built on the backs of the poor. See you in Hell.

Anonymous said...

For the dunce at 7:47...When you're in that business, you best set your rates high to compensate for all the defaults, having to hire investigators to track people down, trying to get blood out of turnips and generally putting up with assholes who want your money with no intention of paying it back.

These 'customers' are people who can't borrow a dime at a bank, have no savings, can't budget past the middle of the month, don't know where their paycheck went, spend too much time in casinos and liquor stores, will steal gas out of your gas tank, bum cigarettes and then axe you for a light and would steal money from their momma if she was in the bathroom.

Don't hate on the guy who goes out on a limb and gets the shaft 25% of the time.

Anonymous said...

5:42 - Now that you've had a night's rest, are you sure you don't want to rethink that post?

bill said...

This is one of Bill's most ridiculous efforts. A loan is a contract between the lender and the borrower, and whatever they agree to should be left alone. Want to get rid of high interest lenders? Make traditional banks compete with them. Let Regions start lending money at 8% to high risk borrowers and the payday loan companies will be out of business. See if you can get the boys in Birmingham to agree to that one...

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