Jaws of Debt

It wasn’t your typical church meeting. More than 600 people filed into Metropolitan Missionary Baptist Church on Linwood near Prospect to confront several state legislators about modern-day loan sharks who operated openly from storefronts and prospered from loopholes in Missouri law.

The allegations about some so-called payday-loan operations were startling: interest rates as high as 800 percent; working families paying thousands on $300 loans without making a dent in the principal; increased dependence on charities and social services.

“It blew me away,” says Representative Marsha Campbell, a Democrat from Kansas City. “Blew. Me. Away. And these companies aren’t doing anything wrong. They’ve done this legally in Missouri.”

Campbell immediately began working with Representative Meg Harding, a Democrat from north of the river, on legislation that would rein in the interest rates and compounding fees of payday loans.

Representative Cathy Jolly, a Democrat from the Southland and a former Jackson County assistant prosecutor, is writing legislation prohibiting payday lenders from using district attorneys as collection agencies. Because borrowers must write postdated checks as collateral for some payday loans, they can be prosecuted when the lender later cashes the checks.

“A lot of prosecuting offices, including Jackson County, do not currently do this,” Jolly says. “But we want to make sure no prosecutors at any time use their offices for this.” The bills by Jolly and Campbell will complement previously unsuccessful legislation proposed by Kansas City Democrats Melba Curls and Sharon Sanders Brooks to provide lender-education opportunities for Missouri residents.

Rarely has it been so politically popular to promote an issue on behalf of the poor. Apparently, the abuses are too appalling to ignore. This movement is fueled by the Church/Community Organization, a consortium of dozens of metro-area religious congregations. The organization has been working on the issue since one of its member congregations — Christ the King Catholic Church in Waldo — discovered that the loan sharking had caused an increase in the number of visitors to the church’s food pantry, which serves the poor (“Forgive Us Our Debts,” July 19).

After the October meeting, Church/Community Organization leaders directed their attention to the Missouri Senate — and to one senator in particular: Ronnie DePasco, a Kansas City Democrat. They feared DePasco might not embrace their movement because the Democratic lame duck from the Northeast (an area besieged with predatory lenders) had received campaign contributions from payday lenders. Two companies that own and operate payday-loan outlets in Missouri contributed a total of $1,150 to DePasco’s last campaign. (DePasco tells the Pitch he was unaware that the contributions were made by payday-loan companies.)

But C/CO leaders also knew that DePasco planned to run for Jackson County executive next November. Without support from the Catholic community, he wouldn’t have a prayer. So in November, priests from three C/CO parishes — Our Lady of Peace, Visitation and Christ the King — met with DePasco to lay out their concerns. DePasco scoffs at reports that it was a “come to Jesus” meeting, saying that predatory lending has long been a concern of his. Last year, for example, he proposed an amendment to a title-loan bill that would have capped interest on all loans in the state at 18 percent or 10 percent above prime, whichever is lower.

Regardless, DePasco seems to have been swayed by the priests. In December, he and Lee’s Summit Republican Senator Bill Kenney prefiled a comprehensive reform bill that closely resembles a law in Kansas. West of the state line, a sliding-fee scale holds short-term interest rates at about half of the top rate in Missouri. After thirty days, though, the interest rate is limited to 3 percent a month; in Missouri, lenders may deny payment against principal for several months while continuing to refinance the loans and charge high interest rates.

But C/CO leaders know that with the industry’s powerful lobbyists milling about under the capitol dome, it’s hard to get banking-reform laws passed. “Unfortunately these kinds of bills don’t get very far,” says Representative Yvonne Wilson, a Democrat from Kansas City, who says that she’ll support her colleagues’ efforts. “If they even come out of committee, you’re lucky.”

The church activists sought more allies. In researching legislation in other states, they learned that the AARP had been working on the issue for years and had created model legislation. The AARP shared its information and hosted regular meetings, where members of the coalition fine-tuned their line of attack.

Then the host of a radio program on which several C/CO members and Jerry Young, a full-time C/CO community organizer, were guests casually asked whether they’d contacted labor groups. “We looked at each other like, ‘Duh!’ because here we are talking about protecting working families, and who would be more interested in that than the unions?” Young recalls.

With a recession deepening, labor representatives were eager to climb aboard. “Many of our members may find themselves unemployed in the coming months,” says Gary Kemp, executive secretary of the Greater Kansas City Building and Construction Trades Council, an umbrella organization for 24 construction unions in the metro area. “Some of them might fall prey to these payday lenders.”

After more than a decade of experience at the city level, this is the C/CO’s first venture into state politics. “We’ve had a lot of success at the grassroots level,” Young says. “But now we’re finding it’s an interesting lesson in how we do people politics. It’s going to be a challenge not to get in over our heads.”

But for the politicians and seasoned lobbyists who have joined the cause, it’s a refreshing change. “The best part of being a legislator is when you have all these grassroots organizations — neighbors, churches — coming together to try to solve problems,” says Jolly. “It’s great.”