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BILL CRAWFORD — Usury proscriptions forgotten in Mississippi

BILL CRAWFORD

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?
 
 
» BILL CRAWFORD is a syndicate columnist from Meridian.
 

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