Usury is an old world term for making illegal or immoral loans that enrich the lender by profiting from the misfortune of the poor. In the Bible it is considered a terrible sin.
But attrition is the only word to describe Senate Bill 352 which was just passed by the Indiana Senate. As the leader of a Christian housing ministry that serves those targeted by this legislation, I am gravely concerned that this will hurt many people and cause them to lose their homes due to high debt.
SB 352 allows for an expansion of high-cost loans that prey on vulnerable, low-income borrowers at a time when many Hoosiers are struggling to find economic stability after the devastating effects of the pandemic. Many lost their jobs, stayed home to care for children, depleted their savings and fell behind on rent or mortgages. Now subprime and payday lenders want to come to the rescue, but not without pumping up their bottom line. The loans offered by these subprime lenders carry exorbitant interest rates.
Under this bill, if a homeowner needs to replace a water heater for $1,600, they could get a same-day loan, regardless of their credit history and with little documentation. Quick and easy money to get – great, right? However, buried in the fine print, it says he should be paid off in six months with a monthly payment of $512.59. In the end, the borrower pays an additional $1,475.52 in interest and finance charges.
The total cost to the borrower is $3,075.52, due in 6 months. For most, if they didn’t have $1,600 for the initial loan, they certainly won’t have nearly double that in 6 months. This industry is happy to “help” them again, but this time by deferring that amount, charging more interest and fees, and creating a debt trap that they cannot overcome. Habitat for Humanity mortgage payments average about $600 per month with 0% interest. In the previous example, the total debt owed equals approximately five months of mortgage payments. Our landlords, in this scenario, could not pay this debt and their mortgage.
This type of cyclical debt threatens the housing security of low-income homeowners and renters. Proponents of this bill believe that these families need this expanded access to credit. But if this access causes increased damage and may lead to them losing their homes, how can anyone believe that this is the best way to help? If lawmakers want to help struggling families, they have options like raising the minimum wage, rent or mortgage relief, child care relief, more efficient access to government benefits. or other support services that could lift people out of poverty.
Yet rather than allow the struggling Hoosiers to earn more income, they chose to allow them to take on more debt. Worst of all, SB352 protects predatory lenders from prosecution under Indiana’s Criminal Loan Act. If they need protection from criminal prosecution, what does that tell you? This bill, quite simply, allows for usury by allowing these lenders to be exempt from our existing loan sharking laws.
Habitat for Humanity exists to provide strength, stability and independence through affordable home ownership. We cannot remain silent in the face of this threat and we are working with other faith-based nonprofits and churches to try to stop this dangerous legislation from moving forward. SB 352 threatens housing security and will exacerbate the affordable housing crisis. The way to financially help the elderly, veterans, single parents and struggling minorities is not to give them a loan with an exorbitant amount of interest. Please call your House representative and ask them to vote no on SB 352.
Gina Leckron is the state director of Habitat for Humanity of Indiana.
This article originally appeared on South Bend Tribune: Indiana bill exempts lenders from existing loan sharking laws