Couple holding their heads in distress over finances.
Shift Ministry Models

Exodus Lending Breaks the Predatory Loan Cycle

Predatory Lenders Cause Financial Trauma
by Kaitlyn Szabo | May 9, 2022

“I feel like [predatory lenders] enjoy working with people like me that don’t have very good credit and are in desperate need of money and will go to any extent that they can to get it. Yeah, they like people like me. They prey on people like me.” – Daniel, a former borrower from a  predatory lender.

For thousands of people like Daniel, navigating financial instability is a daily struggle that is often emotionally overwhelming. In an attempt to cover the rising costs of everyday expenses, many turn to payday, auto title, or online loans that promise high approval odds on a “short-term, quick-fix” loan.

The catch? These loans charge triple-digit annual interest and are repaid either through a lump-sum payment on their next payday or through expensive installments paid over months. Borrowers who cannot repay either take out a new loan to cover the first or pay the loan off and fall behind on other expenses. The first option is commonly chosen and often leads to a costly renewal cycle known as the payday loan debt trap.

 “It’s brutal. It’s like a gerbil wheel. You just keep going around and around and around. Can I afford this month’s payment? If you can’t, then they’re going to add more fees and interest on your loan. It’s an endless battle.” – Daniel

The Debt Trap

Only 14% of borrowers can repay their loans.  And this debt trap is by design. Three-fourths of payday lenders’ revenue comes from fees from borrowers with more than ten loans a year. This extractive business model has devastating consequences on borrowers’ financial health. The debt burden of the loan itself increases financial stress, and chronic financial stress has profoundly negative effects on individual and community health.

Predatory lending is a lot of horrible things—unethical, inhumane, exploitative—but perhaps the worst one is that it is currently legal in many states throughout the U.S. This is unacceptable. In nearly every faith tradition, this exploitative behavior that makes desperate people destitute is condemned as evil. No one should become or remain trapped in a tumultuous predatory debt cycle. 

How can we, as followers of Jesus, take action and help?

This economic injustice is why Holy Trinity Lutheran Church in South Minneapolis began organizing for payday lending reform in 2011, which eventually led to the creation of Exodus Lending in 2014. Our first step was to notice when a payday store opened in our neighborhood. Our second step was to stand with our fellow community members who were facing an economic crisis. We are a non-profit dedicated to helping Minnesotans break free from predatory debt and move toward financial stability. Our program pays off up to $1,500 of debt for participants, who then repay over at least a year, with no interest. We have helped 522 Minnesotans, refinanced more than $424,000 of predatory debt, and saved participants more than $1.2 million.

“I’ve only been in the program for, I think, six months and… It changes everything. Your program helps me stay focused on what I need to do to not be in that position again. I can’t say enough about you guys. You guys are awesome.” – Daniel

Additionally, we support an effective interest rate cap of 36% for short-term loans. A 36% or lower interest rate cap is already the standard set in 18 states and the District of Columbia. The federal Military Lending Act utilizes this same rate to protect active-duty military members and their dependents.

Our responsibility as caring neighbors and Jesus followers is to stand up against predatory lenders in our community. Will you join us? Notice what is happening in your neighborhood,  share information about our organization as a resource and inspiration, contact your legislators to pass a 36% interest rate cap, or donate to Exodus Lending, if you are able.

About the Author

Kaitlyn Szabo

Kaitlyn Szabo is the Admin and Development Manager at Exodus Lending, a Minnesota non-profit dedicated to helping Minnesotans break free from predatory debt and move toward financial stability.

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