WASHINGTON, D.C. — It has been well documented over the past year that a fairly large percentage of Americans cannot afford a $400 emergency expense. This makes them the perfect target of payday lenders.

Under the terms used by payday lenders — some call them “predatory lenders” — in many areas of the country, someone who’s strapped for cash takes out a small loan. The lender charges, say, 10 percent interest. Not that bad, you may think. But that 10 percent rate is not per year, but per week. When the loan comes due in a couple weeks’ time, the borrower cannot pay it all back, and so must take out another loan.

The typical borrower gets 10 loans every year, and pays back in interest far, far more than the cost of the original loan.

Some state Catholic conferences have taken steps to blunt the impact of payday lending in their states.

The Catholic Conference of Illinois had some unexpected help from the coronavirus pandemic, which shortened the legislative session, according to Marilou Gervacio, its director of social services and social justice. There were 23 states, plus Puerto Rico, which had payday lending bills introduced in 2020, according to the National Conference of State Legislatures; Illinois led with seven separate measures submitted for consideration.

The issue has been on its radar even before Gervacio started working for the state Catholic conference in 2003; the executive director, Bob Gilligan, had Gervacio’s job when she started working there and it was in his portfolio.

“I see a lot of payday lending stores in Chicago, where I live,” Gervacio told Catholic News Service in a Dec. 16 phone interview. “A lot of them are in areas where there are lower-income residents. In terms of payday lending, we’ve done a good job in terms of reforming it and limiting it, but it’s still a pretty big industry out there.”

As of late, a close relative of the payday loan — the car title loan — has been “more of our focus,” she added. “When we address predatory lending, there’s been no cap on interest rates” for car title loans, Gervacio said, and reforms are needed to “make them fair to the consumer.”

In Michigan, the state House passed a bill easing prior restrictions on payday lenders, according to Tom Hickson, vice president for public policy and advocacy for the Michigan Catholic Conference.

“They brought it over to the Senate, and we killed it in committee,” Hickson said, “Boy, we had a really strong effort on the Senate side. A lot of Catholic members over there, I figure they didn’t listen to the song and dance” of the payday lending lobby.

Those who seek help from payday lenders wind up in “a terrible cycle of debt,” Hickson said. “The Consumer Financial Protection Bureau — federal data — showed that 70 percent of people take out a new loan within a day of paying back” the original loan, while 90 of borrowers seek a new loan within 30 days.

Given that the annual percentage rates for these loans can easily top 400 percent, “it turns out they make 75 percent of their money on people who borrow 10 times a year or more,” he said.

Hickson shot down some of the arguments touted by payday lending advocates. “‘We’re serving a need. We’re helping the unbanked, We help people.’ The truth is you have to have a checking account to get a loan,” he said.

More than fighting off the lure of payday lenders, the Michigan Catholic Conference published a one-page fact sheet with several alternative sources for small loans. Some familiar names on the fact sheet included Bank of America, Habitat for Humanity and the Society of St. Vincent de Paul. Every lender offered annual percentage rates of under 25 percent, with some under 10 percent.

“The Bank of America, that was a surprise to me,” Hickson said, adding that the state Catholic conference worked with the Vincentians in the Diocese of Lansing to establish its microloan program — a 3 percent interest rate for loans of up to $750. “It’s meant to teach financial literacy,” he said.

A half-dozen credit unions in the state were listed by name on the fact sheet for their skill in offering small loans. “During the pandemic, Michigan credit unions made nearly 9,500 emergency cash loans, covering more than $22.5 million,” the fact sheet said.

In Nebraska, the state’s Catholic conference worked independently of a coalition that achieved a stunning 83 percent-17 percent victory at the polls in November to cap the annual percentage rate for loans of any kind at 36 percent. It became the 19th state, plus the District of Columbia, to either outright ban payday lending or to cap interest rates so low that it is not a profitable business.

Nebraska was no stranger to triple-digit interest rates, according to Tom Venzor, executive director of the Nebraska Catholic Conference. Before the cap was enacted by voters, “lenders were basically able to charge up to 461 percent APR (annual percentage rate) on a $425 loan,” he said “From our figures, the average borrower was being charged just north of 400 percent on basically $250 loans, and getting trapped into 10 loans a year.”

The state Catholic conference focused its efforts on Catholic newspapers and radio as well as social media. An Omaha archdiocesan priest, Venzor said, was on the board of Nebraskans for Responsible Lending, which spearheaded the statewide campaign.

“People get it,” Venzor told CNS. “They know what it’s like to take out a mortgage. They would never pay 400 percent, 200 percent, 100 percent interest.”

These and other efforts this year at the state level to rein in payday lenders have faced an surprising foe in the federal government.

A 2017 CFPB regulation meant to restrict payday lending and similar borrowing schemes by calling it “unfair and abusive” to make payday loans without “reasonably determining that consumers have the ability to repay” was revoked in July after never having been implemented.

One week before the election, a division of the Treasury Department called the Office of the Comptroller of the Currency, or OCC, issued a rule that makes it easier for payday lenders to operate even in states that have effectively outlawed them, tacitly permitting lenders to partner with out-of-state banks and thereby evade local interest-rate caps.

The OCC rule could be subject to a court challenge, or to congressional efforts to revoke it. President-elect Joe Biden also could act to overturn the rule after he takes office.