These shops on Highway 153 in Chattanooga are payday lenders and pawn brokers.
By David Tulis
By regulatory fiat, a New York official, Ben Lawsky, has destroyed a Chattanooga Internet financial services business employing 400 people. The lending websites were run by Cary Brown, a Christian entrepreneur who got his start on a used car lot in Rossville and who developed a savvy “sovereign individual” business model foreseen in a 1997 book of that name. ‡
The companies offered online loans that brought high interest rates and fees because they were to unsecured strangers. These customers face a short-term cash crisis who need a few hundred bucks to tide them over until their next paycheck. Hence the handle “payday loan.” The brick-and-mortar vendors of such costly debt are a fixture on American boulevards and near federal bases.
Though called “predatory,” the payday loan industry serves a genuine marketplace need. The need is great because employers do not pay their staffs and work crews promptly. In Chattanooga, the payday loan industry prospers because companies in the city hold the pay they owe, sometimes for a month. A scientist at my church who works for a government contractor is paid monthly. The local newspaper where I worked 24 years pays employees twice a month, though it used to provide a weekly paycheck.
Is holding a man or woman’s pay for a week, or two weeks, right? How does a Christian entrepreneur justify it? It has very likely pragmatic grounds. We’ve always done it this way. We’re billed more by the processor if we don’t go to two weeks. We get to hold money payable to the government (12 percent payroll tax) longer in house if we don’t pay our staff. I haven’t reported on the whys, but the rationales must be widely shared.
Christianity has always been about reforming society and culture. William Carey was such a powerhouse in the reformation of India in the early 1800s because he believed the scriptures touch every aspect of life and culture. Thanks to his efforts, India worked toward stopping many manifest evils, from widow burnings, the caste system and child marriages.
Basis for payroll reform in Chattanooga, beyond
American payroll culture awaits a Christian reform, I suspect, given how prevalent the lending trades have become. The scriptures order a policy of quick payment of wages. The passages strike at greed, a vice prohibited in the 10th commandment, which starts off this way: “Thou shalt not covet. **** ” Passages that require rapid payment for employment:
➤ “Do not withhold good from those to whom it is due, When it is in the power of your hand to do so. Do not say to your neighbor, “Go, and come back, And tomorrow I will give it,” When you have it with you.” Proverbs 3:27, 28
➤ “Wealth gained by dishonesty will be diminished, But he who gathers by labor will increase.” Proverbs 13:11
The scriptures favor equity, justice among people, especially between one who is superior with his inferior. Wages are to be paid daily.
➤ “You shall not oppress a hired servant who is poor and needy, whether one of your brethren or one of the aliens who is in your land within your gates. Each day you shall give him his wages, and not let the sun go down on it, for he is poor and has set his heart on it; lest he cry out against you to the Lord, and it be sin to you.” Deut. 24:14, 15
➤ “’You shall not cheat your neighbor, nor rob him. The wages of him who is hired shall not remain with you all night until morning.” Leviticus 19:13
The man among those “who exploit wage earners and widows and orphans” is likened to the sorcerer, adulterer, perjurer and one who turns away an alien (Malachi 3:5)
Employers’ sins need local economy remedy
The payday loan industry is not the primary evil in this crisis of debt that engulfs the clientele. If anything, Cary Brown and such sites as MyCashNow.com provides relief for people who does not get F$200 or F$500 from friends or family in a short-term crisis. The problem is the capitalist, the entrepreneur, the Christian who thinks he does his neighbor no wrong by holding wages two weeks or a month.
My first encounter with the biblical arguments above was from John Kozlowski, the programmer in Cleveland, Tenn., in whose work I have a financial interest (secure email). One project is payroll software that lets a man pay his employee hourly. Why is that not possible in this age of software and direct deposit?
Mr. Kozlowski looks at the perils of the big monthly paycheck vs. the much smaller one that would cover a day’s work. A big check “allows us to blow it more readily,” he says. “Many have argued that it is much less of a burden on them when their employer pays them even monthly so they can pay all their bills at once.” Another possible objection to daily payroll, he says, is that such a system would be a “burden” on the company. “However technology available today can easily be designed to ease this process. Of course there is also the issue of the tax system that has been put in place that makes it more attractive to delay pay. Remove the payroll tax, as a century ago, and you remove a large reason to delay pay.”
How about another idea from Mr. Kozlowski — the friendly cash drawer at the employer’s front office? It’s a terrific local economy concept, and would go far to connect employer and employee as human beings. “One of the designs I was working on with the software to manage pay was the idea of an employee being able to simply take cash from the company, perhaps directly from a cash register, and log that as pay. They simply can take their due as needed. This reduces the cash management burden on the employer, makes is very convenient for the employee, and I suggest brings a stronger emotional tie between the two.”
Local economy is about personal economics, relational economics. It seems the Word of God wholly supports the concept.
Cloudswell on Amnicola Highway in Chattanooga was a primary supporting company for Carey Brown’s Web payday loan operation.
Sources: Ellis Smith, “A letter stymies payday empire,” Chattanooga Times Free Press, Aug. 27, 2013
‡ James Dale Davidson and Lord William Rees-Mogg, The Sovereign Individual (New York: Simon & Schuster, 1997), 416 pp; see “Transcending Locality” pp 178-206
See Ruth and Vishal Mangalwadi, Carey, Christ and Cultural Transformation[;] The Life and Influence of William Carey (Carlisle, Cumbria, UK: OM Publishing), 1993, 142 pp.
In response to comments on Facebook at the Chattanooga News & Review page: Scripture generally perceives debt as an evil and slavery. God’s people are limited in how far they can go into debt and were protected by the 7-year limit and the 50-year Jubilee. Debt is viewed as an evil unavoidable in some cases. Among God’s people, loans to the poor are to be interest free.
The requirement of a lender to return the poor man’s collateral (his cloak, his sole piece of liquid property) is so stringent as to make such a requirement impractical; therefore the poor loan is required to be extended without security.
Israelites were forbidden to lend to the poor of their own people at interest. But they were allowed to lend to other people at usury (Deut. 23:19, 20).
Today debt is common, and people go into debt to buy milk and bread on the way home from work. The pervasiveness of debt quite apart from material distress reveals a cultural decline away from assets, liquidity, property and capital and toward servitude, poverty, dependence and lack of hope.
America needs a reformation, a revival!
The Brown enterprises are lawful, providing short-term loans to people regardless of their connection to Christianity and the church. They are purely in commerce, and are not part of a Christian ministry of mercy. Yes, customers fall exhausted on the treadmill that payday lenders set up, and are under a judgment of servitude and slavery to the lender, a position the scriptures warn against. Mr. Brown’s business is not evil, but attended with evil circumstances for some customers, to be sure.
All the more reason for employers to pay wages promptly, as I argue in my essay. That way Mr. Brown’s former line of work would have been less successful.
Carey Brown was involved in preditory lending in violation of the usury laws of Tennessee and many other States including New York. He was charging in the range of 500% interest and taking this directly out of the customers account and making it difficult for them to ever pay the loan off.
To blame the situation on employers is ludicrous. There is no excuse for the illegal and immoral activities of Carey Brown, who, like many crooks, do it under the guise of Christianity. Historically Christianity has condemned usury.
The reason employers pay bi-weekly or monthly is because the law requires it and they must also collect payroll tax and pay it to the government on this schedule.
There are employers who cheat their employees of their wages just as Carey Brown cheated people with his preditory lending. One does not justify the other.
In my lifetime we have gone from a situation where folks had no debt other than maybe a charge account at a local store paid monthly and/or a 15 year mortgage at the local Savings and Loan, where they also maintained a savings acount, to a situation where they live off credit extended by remote lenders, with no connection to the local community, who only look at their FICO score and who, themselves charge exorbinate rates that once were considered Usurious.
Those who cannot meet the requirements because they have a low FICO score or no credit are left to the preditory lenders such as Carey Brown.
We must teach the next generation to save for the future and spend within their means and recreate instiutions and companies that encourage this and deal with folks in a moral and ethical manner.
The culture will collapse otherwise. It already is.