I was reminded by Connexions' Kim of some news that the Church of England made this winter, looking to divest themselves of stock of a big British payday lender. Seemingly modest fees for short-term loans can create ultra high interest rates when compounded if the borrower has to roll the loan over again and again. A 2% fee for two weeks ($4 on $200) creates a 67.3% yearly effective rate; (1.02)26 -1 is the math, since that can get repeated 52/2=26 times in a year. Make the fees a bit higher, and we can be looking at an effective interest rate over 100%.
That's abusive for folks who need some financial mercy the most. At least, that's the gut response of the bleeding-heart side of the body of Christ.
However, if that $4 fee helps head off an eviction or a $25 late fee on some bill, that would be money well spent for the down on his luck bloke. Shutting down the payday lenders takes away those options for folks who don't have the credit rating to do business with bankers; at least that is the libertarian counter-argument to the cry of usury coming from foes of the legal loan sharks.
What rightly got Kim's ire was an editorial from The Independent telling Archbishop Welby to stay out of politics. Welby isn't as theologically liberal as his predecessor Rowan Williams, but he is taking an economically liberal line here. Given that the Independent is a libertarian-leaning rag, it won't like Welby's right-of-center take on social issues or his left-of-center take on economic issues; here, Jesus is acting like a Jewish liberal (in the American meaning of the word).
Welby and other good-hearted church folks are right to criticize payday lenders for the high rates and take a step in the right direction by plugging credit unions. I've been doing my banking at a credit union for almost two decades, so I'm a fan. However, credit unions are still looking to break-even on their business rather than making a profit. The rates at a credit union will be a bit lower than at a bank and a lot lower than at a payday lender, but folks that are too high of a risk will get turned down for a loan if their credit is lousy.
When I got my teaching job at Sullivan University back in 2007, I needed my dad to cosign my loan, since my debt load was rather high after being largely unemployed for three years. Even with a nice professor job waiting for me, the credit union needed backup to loan me money. Had I not had such backup, either Eileen or I would have been taking a bus to and from work (we had one car at the time) until my credit improved.
Who provides that backup for someone without cosigners if their outflow is greater than their inflow and not paying the bill isn't a viable option?
That's where the church might find a ministry, lending to its members at little or no interest, knowing they're going to have some bad debt expense in the mix. Or, they could co-sign a loan at a credit union for members who need the hand.
A lot of churches spend very little on helping the needy. One former church of mine spent more on Sunday School materials than they did on the needy. One could tweak the budget a little and take some of the lower-impact items in the budget and use it to beef up a benevolence fund that could take on the form of backstopped loans rather than outright gifts.