Ind. Senate endorses usury, threatens housing security for vulnerable Hoosiers
Usury is an old-world term for making illegal or immoral loans that enrich the lender by taking advantage of the misfortune of the poor. In the Bible it is considered a terrible sin, but usury is the only word to describe Senate Bill 352 that passed the Indiana Senate last Tuesday. As a leader in a Christian housing ministry that serves those targeted in this legislation, I am gravely concerned that this will harm many people and result in them losing their homes over high-cost debt.
SB352 allows 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 jobs, stayed home to watch kids, drained savings, and got behind on their rent or mortgage.
Now subprime and payday lenders want to come to the rescue, but not without padding their bottom line.
The loans these subprime lenders offer carry exorbitantly high interest rates. Under this bill, if a homeowner needs to replace a water heater for $1,600, they could get a loan, same day, regardless of your credit history and with little documentation. Fast cash and easy to get — great, right? However, buried in the fine print it lists that it must be paid off in 6 months with a monthly payment is $512.59.
In the end, the borrower is paying an additional $1,475.52 in interest and financing fees. The total cost to the borrower is $3,075.52 owed in 6 months. For most, if they didn’t have $1,600 for the original loan, they certainly won’t have nearly double that in 6 months. This industry is happy to “help” them again, but this time by rolling over that amount, charging more interest and fees and creating a debt trap that they cannot overcome.
Habitat for Humanity mortgage payments average around $600 a month with a 0% interest rate. In the previous example, the total debt owed equates to about 5 months of mortgage payments. Our homeowners, in this scenario, could not pay that debt and their mortgage. This kind of cyclical debt threatens housing security for low-income owners and renters.
Proponents of this bill believe that these families need this expanded access to credit. But if that access causes increased harm and can lead to them losing their homes, how can anyone believe that it is the best way to help?
If legislators want to help struggling families, they have options like raising minimum wage, providing rent or mortgage relief, child care relief, more efficient access to government benefits, or other supportive services that could lift people out of poverty. Yet, rather than allowing struggling Hoosiers the opportunity to earn more income, they chose to allow them to earn more debt.
Worst of all, SB352 protects predatory lenders from prosecution under the Indiana
criminal loansharking statute. If they need protection from criminal prosecution, what does that tell you? This bill, simply put, is allowing usury by permitting these lenders to be exempted from our existing loansharking laws.
Habitat for Humanity exists to provide strength, stability, and independence through affordable homeownership. We cannot stay silent about this threat and we are working with other faith-based nonprofits and churches to try to stop this dangerous legislation from moving forward. SB352 threatens housing security and will exacerbate the affordable housing crisis.
The way to help struggling elderly, veteran, single-parent, and minority families financially is not to give them a loan with an exorbitant amount of interest. Please call your Representative and ask them to vote NO on SB 352.
“If legislators want to help struggling families, they have options like raising minimum wage, providing rent or mortgage relief, child care relief, more efficient access to government benefits, or other supportive services that could lift people out of poverty. Yet, rather than allowing struggling Hoosiers the opportunity to earn more income, they chose to allow them to earn more debt.”
— Gina Leckron