|
WCC Public Policy Positions: Prohibit Predatory Lending Practices
Here we elaborate on each of the WCC's 2023 Public Policy Positions. The complete document can be found below. You can learn more about Catholic Social Teaching on the USCCB website.
Prohibit Predatory Lending Practices. Predatory lending frequently capitalizes on the financial distress of people seeking to fill basic human needs. Wisconsin must cap interest rates and do more to encourage alternatives to predatory lending.
The Catholic Church has long stood against unjust business practices, especially those that prey on the poor and vulnerable. The Church teaches that while “the quest for equitable profit is acceptable in economic and financial activity, recourse to usury [lending money or goods at excessively high rates of interest] is to be morally condemned” Compendium of the Social Doctrine of the Church 341). The Catechism of the Catholic Church specifically states that “deliberate retention of goods lent or of objects lost; business fraud; paying unjust wages; forcing up prices by taking advantage of the ignorance or hardship of another” violates the Seventh Commandment forbidding theft (2409).
Today, unjust business practices and usury take the form of payday loans, installment loans, rent-to-own agreements, and automobile title loans. In particular, payday loans come with exceptionally high interest rates, minimal time to pay back the loans, and high fees on top of that.
According to the Wisconsin Department of Financial Institutions, the average APR for a payday loan in Wisconsin topped 850% in 2022 (Wisconsin Public Radio). Due to these high interest rates and fees, individuals often must take out additional loans to pay for the interest rates and this traps them in a vicious cycle of debt.
As Pope Francis wrote in Evangelii Gaudium, “The dignity of each human person and the pursuit of the common good are concerns which ought to shape all economic policies.” Heeding Pope Francis’ words and embracing the preferential option for the poor and vulnerable, we must search for solutions to unjust business practices.
One possible solution to predatory lending is to cap interest rates on loans. Another is to encourage banks, credit unions, and charitable organizations to offer small loans at lower interest rates. Overall, we must find ways to assist those struggling to meet their basic needs, so they have the opportunity to achieve long-term financial stability.
| 
