By / Aug 3

Apple has recently announced that it will include “apple pay later” in Apple Pay when it releases ios 16 this fall. “Apple pay later” is part of a growing trend among companies to offer buy now, pay later payment options. Analysts estimate that at least $100 billion in transactions annually are paid with buy now, pay later, and this amount is predicted to dramatically increase within a few years, with some analysts predicting that this amount could reach between $1 trillion and $4 trillion within a few years. Because buy now, pay later is such a widespread phenomenon, it is important for Christians to be aware of its effects on low-income individuals. 

What is buy now, pay later? 

Buy now, pay later allows consumers to purchase products and pay for them in installments over time. Consumers often pay for items in four installments over several months, rather than paying for items all at once. Buy now, pay later is, essentially, a short-term loan that allows people to purchase items they may not be able to afford if they had to pay for them all at the time of purchase. Buy now, pay later does not cost more than traditional payment methods if consumers make their payments on time. These “loans” can be used to purchase necessities, household items, and technology, among other items. 

However, while credit card companies check credit scores prior to issuing loans, buy now, pay later does not. Thus, these programs are particularly attractive to people who have a low credit score or who do not have a bank account, which are more common among low-income individuals. Studies show that a large percentage of users are young people, who may not have a full understanding of debt and who tend to have lower incomes. 

Why are buy now, pay later programs predatory toward the poor?

Buy now, pay later programs encourage people to spend more money than they otherwise would. A 2020 survey by Cardify.ai, a data firm that tracks consumer spending, found that nearly half of buy now, pay later shoppers increased their spending by 10% to over 40% when they used buy now, pay later instead of a credit card. Another survey of 6,500 adults found that around half of people who use buy now, pay later worry it will lead them to overspend, and 57% of people who have used the program have regretted purchasing an item because it was too expensive. This is particularly troubling in light of the fact that a disproportionate number of low-income individuals use this method of payment. 

While buy now, pay later does not cost more than traditional payment methods up front, it often charges high interest rates and steep fees for people who are late on payments. Unlike credit cards, buy now, pay later is not heavily regulated by the government. Consequently, it is not required to clearly state late fee policies and is not prohibited from issuing interest rates above a certain amount. These exorbitant fees and high interest rates can trap low-income individuals in a cycle of debt. 

Evidence also suggests that people are likely to be late on buy now, pay later payments. A study by CR Research, a market research agency, found that over half of buy now, pay later consumers have fallen behind on a payment. Additionally, a 2020 study by Cornerstone Advisors found that two thirds of consumers who were late for a payment lost track of payments and paid late, despite having the needed money. This high rate of late payments is due in part to the complexity of the service and difficulty of keeping track of required payments. It also points to the reality that many low-income individuals may be forced to take on more debt to make these payments and that these programs are targeted toward young people who disproportionately overdraft. 

Consequently, buy now, pay later is predatory toward the poor because it disproportionately attracts low-income individuals, often involves very steep late fees that are not clearly advertised, and can make keeping track of payments difficult. It can trap low-income individuals in cycles of debt. 

Can buy now, pay later programs be helpful?

If people make careful and informed decisions about when to use buy now, pay later, it could serve as a helpful budgeting tool for those with limited resources. People may be able to purchase items that they wouldn’t otherwise be able to afford. And if buy now, pay later programs reduced their interest rates for late fees and more clearly advertised their late policies, they could be beneficial to low-income individuals. Regulations to ensure that these criteria are met would reduce the risks associated with these programs.

Why should Christians care about this issue? 

Christians should care about the rise in popularity of buy now, pay later programs because Scripture is clear that we are called to seek justice and care for the poor. “And what does the Lord require of you but to do justice, and to love kindness, and to walk humbly with your God?” (Micah 6:8). High interest rates on these loans are unjust and harmful to the poor, so supporting reasonable regulations on their excesses is a way to promote justice in our society. Additionally, Christians are called to love our neighbors. Opposing predatory lending practices is one way that Christians can live out this call to love. 

Scripture strongly condemns usurious and exploitative lending practices. Recognizing the dignity of every person extends to business and financial relationships as well as interpersonal ones. As the Southern Baptist Convention affirms, “God is opposed to those who take advantage of the weak, poor, and vulnerable” and “predatory lending fails to respect the dignity of the person created in the image of God and interferes with human flourishing.” For this reason, Southern Baptists are opposed to predatory lending practices that target financially unstable persons. Any lending practice that intentionally uses and exposes vulnerable individuals is unacceptable and should be strictly regulated by government protections. By being aware of the pitfalls of buy now, pay later, Christians can support policies that are beneficial to their neighbors and more effectively advocate for the poor. 

The ERLC is committed to strongly opposing exploitative lending practices and is working to support regulations and legislation that would stop these practices that are harmful to our neighbors.

Sources:

By / Feb 11

A record 31.4 million American adults plan to bet on Super Bowl LVI, a 35% increase from 2021, according to new research by the American Gaming Association. While half that number is casual bets among friends, 18.2 million will place traditional sports wagers online, at a retail sportsbook, or with a bookie. This is an increase of 78% from the 2021 Super Bowl.

For the past several years Americans have been increasingly exposed to predatory gambling, the practice of using gambling to prey on human weakness for profit. Unfortunately, rather than protect the vulnerable, state governments are colluding with the profiteers to exploit ​​their citizens. For-profit gambling, or commercial gambling, is illegal unless granted special legal exemption by the government — which many states are increasingly willing to provide. 

Until three years ago, Nevada was the only state in which a person could legally wager on the results of a game. But in 2018, the Supreme Court ruled that a federal ban on sports betting was unconstitutional. The vote in the case of Murphy v. National Collegiate Athletic Association was 6-3, with Justices Ruth Bader Ginsburg, Stephen Breyer, and Sonia Sotomayor dissenting. That decision opened the floodgates for legalized sports betting. 

Currently, 45 million Americans can legally wager in their home state. The states where sports betting is currently legal are Arizona, Arkansas, Colorado, Connecticut, Delaware, Florida, Illinois, Indiana, Iowa, Louisiana, Nevada, New Hampshire, New Jersey, New York, Michigan, Mississippi, Montana, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Virginia, Washington, West Virginia, Wyoming, and Washington D.C. North Carolina and New Mexico have limited sports betting via tribal casinos. Mississippi also allows online sports betting, but only on-site at licensed casinos. Maryland, Nebraska, and Ohio are likely to legalize sports betting by the end of 2022 or early 2023. 

Because of these changes in state law, gamblers across the U.S. can wager on various sports competitions at a sportsbook. Over the past few years, advertising for sportsbooks such as FanDuel, Caesars, and DraftKings has become ubiquitous in states that allow sports betting. The advertising is prominently displayed on subways, buses, and buildings and heard constantly on radio and television. According to research, 106 million American adults (41%) recall advertising related to gambling in the past year — an increase of 32 million people (12%) from 2020. 

The human cost of predatory gambling

States are reaping the benefits in the form of increased tax revenues. But the human cost is largely being ignored. According to experts, federal and state governments still devote few resources to tracking and treating people with gambling problems.

“It’s this ticking time bomb,” said Keith Whyte, executive director of the National Council on Problem Gambling. “We have to take action now, but the problem is almost impossible to quantify.”

State governments continue to legalize predatory gambling despite decades of research that it is destructive to their communities. For instance, the National Gambling Impact Study estimated the lifetime divorce rates for problem and pathological gamblers were 39.5% and 53.5% respectively; the same rate for non-gamblers was 18.2%. And a study that looked at the spread of casino gambling in 300 Metropolitan Statistical Areas found that the presence of a casino reduces voluntarism, civic participation, family stability, and other forms of social capital within 15 miles of a community where it is located.

According to a study by the University at Buffalo Research Institute on Addictions, the poorer the neighborhood, the higher the risk for problem gambling. In areas with the highest “neighborhood disadvantage” — determined by census factors such as the percentage of people who were unemployed, received public assistance, and/or live in poverty — more than 11% were problem gamblers, compared to just 5% in neighborhoods ranking in the top fifth of economic advantage.

Numerous studies demonstrate disparities in health and health services including problem and pathological gambling among ethnic and racial minority groups. Overall, gambling activities appear to be frequent among ethnic and minority populations with rates ranging between 12.9 and 87%. The prevalence of gambling disorders have been reported as low as 0.3% in Hispanics and as high as 58% in South East Asian refugees. 

One survey ​​found that Black Americans spend nearly twice as much on lottery tickets as do white or Hispanic respondents. The average reported expenditure among Blacks was $200 per year, $476 among those who played the lottery the previous year. Black men have the highest average expenditures. Poor Americans also spend a larger percentage of their wealth on lottery tickets than other households, leading to a reduction in spending on other activities. During the time 21 states implemented a state lottery, household expenditures declined 2.4% for expenses not related to gambling. The implication is that households spent that money on lottery tickets rather than on other goods and services.

Without the legal, administrative, regulatory, and promotional advantages provided by state governments, predatory gambling would not be spreading so quickly into mainstream American life as they are today, and would likely still exist only on the fringes of the society.

How Christians can respond

Christians should care about the effects of predatory gambling on their neighbors. Governments are entrusted with seeking the welfare of their citizens, not exploiting their weaknesses. There are several things you can do to help stop the spread of this type of gambling: 

  • Ask state legislators to oppose any expansion of gambling and/or to roll back current laws authorizing legal gaming. Find the contact information for your state legislators and call or write them directly.
  • Persuade local governments to enact regulations that prevent legalized gambling companies from targeting vulnerable groups, such as minorities, the elderly, and the poor. Be on the lookout for gambling related initiatives, and show up to meetings to express your opposition.
  • Promote awareness within their churches and communities about the harms of predatory gambling. ERLC has produced a free, downloadable bulletin insert for use by your church on Anti-Gambling Sunday. 
By / Jul 1

Last week, the House of Representatives voted 218-208 to repeal the Office of the Comptroller of the Currency’s (OCC) 2017 ‘True Lender’ rule. Republican Rep. Glenn Grothman (WI-06) voted to pass this bipartisan Congressional Review Act (CRA) aimed at the OCC’s misguided rule. The bill now heads to President Biden’s desk for his signature or veto. 

The 2017 OCC rule allowed payday lenders to partner with out of state banks, thus evading state interest rate caps in their own state. This partnership is known as a “rent-a-bank” scheme, which allows banks to “rent” their name to lenders in an outside state in order to avoid consumer protection laws. The rule states that these partner banks operated as the ‘true lender’ and originator of the loan, so though the consumer and the payday lender are in one state, their state laws did not apply to the loan. The Congressional Review Act allows Congress to repeal rules promulgated by a federal agency, such as this 2017 OCC rule. 

The ERLC has long applauded states’ efforts to curtail unjust lending practices in their states. Currently, 19 states and the District of Columbia have 36% interest rate caps. We believe that these common sense consumer protection laws should be respected rather than undermined by federal regulation. Predatory lenders should not be granted a loophole from state laws that promote responsible and honest lending practices and that represent the will of the voters of those states. 

As the Southern Baptist Convention affirmed in 2014, “predatory lending fails to respect the dignity of the person created in the image of God and interferes with human flourishing.” To learn more about the harms of payday lending and why Southern Baptists oppose it, read the ERLC’s explainer here

Six years ago, the ERLC joined the Faith for Just Lending Coalition (FJL) to advocate for an end to the payday debt trap. FJL has been working since the 2017 OCC rule was first proposed to oppose its implementation and released a statement yesterday applauding the House for its vote to repeal the harmful rule. 

The ERLC is grateful to both chambers of Congress for taking action to roll back this harmful regulation. Predatory lending is out of step with God’s design for financial relationships, and we celebrate this progress toward ending the payday debt trap. 

The ERLC will continue to advocate for legislation that curbs payday lending, including for the re-introduction of the Veterans and Consumers Fair Credit Act (VCFCA). To learn more about the VCFCA and why the ERLC supports it, read our issue brief here. The ERLC is proud to have advocated for the repeal of the OCC’s ‘True Lender’ rule and we urge President Biden to swiftly sign it into law. 

By / May 14

Last night, the Senate voted 52-47 to repeal the Office of the Comptroller of the Currency’s (OCC) 2017 ‘True Lender’ rule. Republican Sens. Lummis (WY), Collins (ME), and Rubio (FL) voted to pass this bipartisan Congressional Review Act (CRA) aimed at the OCC’s misguided rule. The bill now heads to the House of Representatives for consideration. 

The background 

The 2017 OCC rule allowed payday lenders to partner with out of state banks, thus evading state interest rate caps in their own state. This partnership is known as a “rent-a-bank” scheme allowing banks to “rent” their name to lenders in an outside state in order to avoid consumer protection laws. The rule states that these partner banks operated as the ‘true lender’ and originator of the loan, so though the consumer and the payday lender are in one state, their state laws did not apply to the loan. 

The ERLC has long applauded states’ efforts to curtail unjust lending practices in their states. Currently, 19 states and the District of Columbia have 36% interest rate caps. We believe that these common sense consumer protection laws should be honored, and not undermined by deceptive regulatory definitions. Predatory lenders should not be granted a loophole from state laws that promote responsible and honest lending practices. 

The average annual interest rate on payday loans in states without an interest rate cap is 391%. This unfair and exorbitant interest rate traps families in cycles of poverty and debt, leading many to rollover their payday loans eight or nine times. 

Calling for an end to payday lending

Scripture speaks clearly against usurious lending practices. A just nation protects consumers from exploitive business relationships and regulates lenders to ensure just treatment. As the Southern Baptist Convention affirmed in 2014, “predatory lending fails to respect the dignity of the person created in the image of God and interferes with human flourishing.”

These values prompted the ERLC to join the Faith for Just Lending Coalition (FJL) and advocate for an end to the payday debt trap. FJL has been working since the 2017 OCC rule was first proposed to oppose its implementation and released a statement yesterday applauding the Senate for its vote to repeal the harmful rule. 

Chairman of the Senate Banking Committee, Sen. Sherrod Brown (OH), conducted a hearing on the CRA and cited FJL and ERLC’s advocacy on this issue: “a broad, bipartisan coalition is asking Congress to overturn the OCC’s harmful True Lender Rule. That support includes […] the Southern Baptist Convention […] and other members of the Faith in Just Lending Coalition.”

Every sector of public life has a role to play in ending payday lending. This includes individuals who should steward their money well, churches who should help financially struggling families and individuals, and governing authorities who should regulate consumer loan interest rates. 

The ERLC is grateful to the Senate for passing such an important bill to curb the proliferation of payday lenders across the country. Predatory lending is out of sync with God’s design for financial relationships, and we celebrate one small step in ending the payday debt trap. 

The ERLC will continue to advocate for the repeal of the 2017 OCC ‘True Lender’ rule as the CRA moves to the House of Representatives, and President Biden’s desk for signature.

By / Aug 11

This week the ERLC released a free, downloadable bulletin insert for use by your church on Anti-Gambling Sunday (September 18). In preparation for the event, here are five facts you should know about problem gambling:

1. Problem gambling is an umbrella term for all gambling behavior patterns that compromise, disrupt or damage personal, family or vocational pursuits. According to the National Council on Problem Gambling, the essential features are increasing preoccupation with gambling, a need to bet more money more frequently, restlessness or irritability when attempting to stop, “chasing” losses, and loss of control manifested by continuation of the gambling behavior in spite of mounting, serious, negative consequences.

2. When problem gambling causes significant problems or distress, it can be a sign of gambling disorder, also called gambling addiction or compulsive gambling. The American Psychiatric Association (APA) notes that some people develop a craving for gambling that is similar to the cravings for drugs or alcohol. Those with gambling disorder often hide their behavior, and may lie to family members and others to cover up their behavior and may turn to others for help with financial problems.

3. The Diagnostic and Statistical Manual of Mental Disorders, Fifth Edition (DSM-5), the standard classification of mental disorders used by mental health professionals in the United States, classifies problem gambling as a disorder if a person exhibits at least four of the following behaviors during the past year:

1. Need to gamble with increasing amount of money to achieve the desired excitement

2. Restless or irritable when trying to cut down or stop gambling

3. Repeated unsuccessful efforts to control, cut back on or stop gambling

4. Frequent thoughts about gambling (such as reliving past gambling experiences, planning the next gambling venture, thinking of ways to get money to gamble)

5. Often gambling when feeling distressed

6. After losing money gambling, often returning to get even (referred to as “chasing” one’s losses)

7. Lying to conceal gambling activity

8. Jeopardizing or losing a significant relationship, job or educational/career opportunity because of gambling

9. Relying on others to help with money problems caused by gambling

4. Gambling disorder tends to run in families, but environmental factors may also contribute, notes the APA. Symptoms of the disorder can begin as early as adolescence or as late as older adulthood. Men are more likely to begin at a younger age and women are more likely to begin later in life.

5. Approximately 4-6 percent of high school students are addicted to gambling, and another 10-14 percent are at risk of developing an addiction, which means that they already show signs of losing control over their gambling behavior.

By / May 28

Earlier this month the ERLC joined other faith organizations in forming the Faith for Just Lending Coalition. The purpose of the coalition is to raise awareness about families in financial crisis and how high-cost lending negatively impacts them. One industry that frequently takes advantage of the poor and others in financial distress is payday lending. Here are five facts you should know about payday lending:

1. Payday lending (also known as payday loans) is the term used to describe the practice of lending small amounts of money to people, usually $350 or less, for two week periods, i.e., until their next payday. In return the borrower pays interest on the loan when it is due at the end of the loan period.

2. Because they are short-term loans, the borrowers aren’t always aware of the actual rates they are paying. For instance, when the lender offers a $350 loan for 15%, that two-week loan is actually provided at a 390% annual interest rate.

3. If a typical payday loan of $325 is rolled over eight times, the borrower will owe $468 in interest; to fully repay the loan and principal, the borrower will need to pay $793. The rollover of existing borrowers’ loans every two weeks accounts for three-fourths of all payday loan volume, with the typical payday borrower remains in payday loan debt for 212 days of the year.

4. The average payday borrower has nine transactions per year. 90 percent of the payday lending business is generated by borrowers with five or more loans per year, and over 60 percent of business is generated by borrowers with 12 or more loans per year. Loans to non-repeat borrowers account for just two percent of the payday loan volume.

5. Since its inception in the 1990s, the payday lending industry has established more than 22,000 locations that originate an estimated $27 billion in annual loan volume. Nationally, there are more than two payday lending storefronts for every Starbucks location.

Image source: Taber Andrew Bain

By / Mar 20

What is “predatory gambling?”

Predatory gambling is the practice of using gambling to prey on human weakness for profit. For-profit gambling, or commercial gambling, is illegal unless granted special legal exemption by the government.[1] Casino gambling, the most common form of predatory gambling, differs from other problematic forms, such as social gambling, because it leads to higher rates of addiction, promotes organized crime, leads to higher rates of gambling losses, and promotes vices which are sanctioned and protected by the state.

What are casinos?

A casino is a facility which houses and accommodates certain types of gambling activities. The industry that deals in casinos is called the gaming industry. Most games played in casinos have mathematically determined odds that ensure the casino always has an overall advantage over the players. In the United States, there are 462 casinos, which take the form of commercial casinos and tribal casinos.

Where are casinos located?

Throughout most of the twentieth-century, legal casino gambling in the U.S. existed in only two locations: Nevada and Atlantic City, New Jersey. Beginning in the 1990s, casinos spread across the nation at an accelerating pace. Today, 23 states have commercial casinos, a category which includes land-based, riverboat, dockside, and racetrack casinos. Many other states have casinos on Native American tribal lands. In the Northeast and Mid-Atlantic States, nearly every adult now lives within a short drive of a casino.

Why is casino gambling more predatory than other forms of gambling?

Casino gambling has become increasingly more predatory because of the popularity of slot machines. Unlike the old Vegas-style resorts, the new regional casinos depend decisively on attracting gamblers who live in the region, who return frequently, and who play modern slot machines. In 1978, outside of Nevada, there were virtually no legal slot machines in the United States. By 2010, there were about 947,000. In 2013, the percentage of casinos' total gambling revenue deriving from slot machines is estimated at 62 to 80 percent, with racinos (racetrack casinos) getting 90 percent of their take from slots.

Modern slot machines are programmed for fast, continuous, and repeat betting. Players insert plastic, not coins; they tap buttons or touch a screen rather than pull levers; they place bets in denominations ranging from a penny to a hundred dollars on multiple lines that spin across a screen with each rapid tap of the button. The laws of pure chance or probability no longer dictate wins and losses on slot machines. Modern slots are hooked up to a central server that collects player information, preferences, and speed of play and has the capacity to program each machine to each player's style. The trend in slot design is to provide a slow and smooth “ride,” with small wins that are less than the amount bet, but nonetheless encourage repeat bets and prolonged “time on machine.”

Overall, problem gamblers account for 40 to 60 percent of slot machine revenues, according to studies conducted over the past decade or so. A large-scale study in 2004 also found that people who live within 10 miles of a casino have twice the rate of pathological and problem gambling as those who do not.

What groups are most affected by predatory casino gambling?

Casino gambling was once a largely upper-class activity. Today, low-income workers, retirees, minorities, and the disabled include disproportionately large shares of regional casino patrons.

According to a study from the University at Buffalo Research Institute on Addictions, the poorer the neighborhood, the higher the risk for problem gambling. In areas with the highest “neighborhood disadvantage” – determined by census factors such as the percentage of people who were unemployed, received public assistance, and/or live in poverty – more than 11 percent were problem gamblers, compared to just 5 percent in neighborhoods ranking in the top fifth of economic advantage.[2]

Casinos are also targeting older Americans. One third of the U.S. population visited a casino in 2012 and more than half were fifty years or older. Casinos often prey on older customers by catering to their special needs, providing wheelchairs, scooters, adult diapers, and other amenities for customers with mobility and health problems.  This manufactured “kindness” is especially appealing to people who are lonely and isolated from the larger community.

 According to researcher Amy Ziettlow, gambling addiction experts and researchers have found that the very situations seniors encounter as they age, such as loneliness, the death of a spouse, loss of mobility, and loss of employment, make escaping into the “machine zone” of the slots an attractive form of relief. Like any type of addictive behavior, it can be “a way for many people to anesthetize their pain.” Scholars claim that “the new face of problem gambling in America is a senior woman who has lost a spouse or become alienated from her children, but has embraced slot machines and quite rapidly develops an addiction.”[3]

How does casino gambling affect communities?

Gambling has a detrimental impact not only individuals but also on families and communities. A study of members of Gamblers Anonymous found that upwards of 26 percent have gambling-related divorces or separations. And a study that looked at the spread of casino gambling in 300 Metropolitan Statistical Areas found that the presence of a casino reduces voluntarism, civic participation, family stability, and other forms of social capital within 15 miles of a community where it is located.

One of the most unfortunate consequences from casinos is that along with them tends to come a rise in crime. Of all the crimes associated with communities around casinos, one of the most prevalent is the sex trafficking of minors.[4]

What can be done to stop the spread of predatory casino gambling?

Casino gambling is a form of predatory business that is allowed to operate by state governments. States typically legalize casino gambling by changing state constitutions. They create regional monopolies for the casinos, provide minimal oversight and regulation, and rescue casinos from bankruptcy. In short, without the legal, administrative, regulatory, and promotional advantages provided by state governments, casinos would not be spreading into mainstream American life as they are today and would likely still exist only on the fringes of the society.

To stop the spread of predatory gambling, Christians can:

  • Lobby their state legislators to oppose any expansion of casino gambling and/or to roll back current laws authorizing legal gaming.
  • Persuade local governments to enact regulations that prevent casinos from targeting vulnerable groups, such as minorities, the elderly, and the poor.
  • Promote awareness within their churches and communities about the harms of predatory gambling.
 

[1] “What is ‘Predatory Gambling’”, Stop Predatory Gambling Foundation. Retrieved from http://stoppredatorygambling.org/facts-research/what-is-predatory-gambling/

[2] “People in poor neighborhoods are twice as likely to have gambling problems,” ScienceBlog. Retrieved from http://scienceblog.com/69226/people-in-poor-neighborhoods-are-twice-as-likely-to-have-gambling-problems/#OWlBCffl1ZGI0CKP.99

[3] “Seniors in Casino Land: Tough Luck for Older Americans,” Amy Ziettlow. http://americanvalues.org/catalog/pdfs/seniors-in-casino-land.pdf

[4] “Regions With Casinos See Increase Sex Trafficking Among Minor,” Stop Predatory Gambling Foundation. Retrieved from http://stoppredatorygambling.org/facts-research/spg-research-center/