Cusack, Anne –– – VAN NUYS CA. – FEBRUARY 25, 2010: Ace Cash Express is in a small shopping center in Van Nuys on February 25, 2010. Lenders have found a lucrative source of business by offering cash advances to people who are unemployed and have unemployment insurance. (Anne Cusack / Los Angeles Times)

Universities and retirement plans are reaping profit from ACE Cash Express’ lending practices in poor communities. (Courtesy Photo)

U.S. lawmakers and a body of national clergy gathered recently to demand universities and retirement plans divest their interest in ACE Cash Express – the nation’s largest payday lender.

The Interfaith Payday Lending roundtable convened by U.S. Rep. Maxine Waters, ranking member of the Financial Services Committee, said they would petition the country’s most notable endowments, including the Harvard Management Company, and the University of California’s Board of Regents as well as state retirement plans in New York, Illinois, Colorado, Virginia, and Montana to divest their interests in the predatory lenders. Divestment would require current interest in the ACE Cash Express to be sold off and no further investments be made.

Like “vice stock,” investments in things such as prisons, tobacco, and gun manufacturers that are considered by some to be morally or socially harmful, investments in ACE Cash Express, which was acquired by JLL Partners Fund in 2006, have proven particularly lucrative – with each store-front reportedly clearing more than a million dollars a year.  The profit is generated directly from the default fees assessed on overdue short-term loans, most of which are obtained by the impoverished.

“Absent substantial reforms in their business practices, public employee retirement assets and university endowments should not support an industry that leaves thousands of Americans trapped in cycles of debt – especially companies that have violated federal law,” Waters said at the event on July 16. “I convened this group because it is important that the debate over payday lending includes the moral objections that it raises for people of faith.”

Roundtable panelists, including the Rev. Dr. Willie Gable Jr. from National Baptist Convention USA and Faith and Credit Roundtable and Rachel Anderson, director of the Faith and Credit Roundtable, Center for Responsible Lending discussed the impact of payday and small-dollar lending practices on the communities they serve.  The panel also discussed federal, state, and local activities to combat payday lending, such as extending the borrower’s time to pay the loans back, as well as faith-based alternatives to small-dollar lending practices.

Waters said ACE Cash Express was guilty of “illegal debt collection tactics – including harassment and false threats of lawsuits or criminal prosecution – to pressure overdue borrowers into taking out additional loans they could not afford.”

The Rev. Graylan Hagler, senior minister at Plymouth Congregational United Church of Christ in Northeast D.C. was instrumental in pushing payday lenders out of the District in 2008.  Hagler applauded Waters’ actions and told the AFRO that it was unconscionable to have the financial security of one group of Americans fortified by the dispossession of another.

“The stocks are publicly traded and people gravitate towards them because they make money, but they make these obscene amounts of money off of people already struggling,” said Hagler, who called the rates of return better with a loan shark.  “There’s no humanity in this.”

Unfortunately, vice stock – also known as the “sin bin” of investment  – tend to outpace those that do not rely on a moral compass.  In fact, evidence suggests that sin bin stocks not only sell but pay because there is a steady demand for their goods and services regardless of economic conditions, they operate globally, and tend to give a high margin of profit.

“I commend Waters’ effort because years ago the Department of Defense said payday lending was immoral because of the financial strain it placed on soldiers. How are we to say the practices are okay for the average citizen if they are not okay for the soldier?  If it is harmful, morally, to the nation, divestment should be sought,” Hagler said.

ACE did not return AFRO inquires before press time.