Payday Loan | Christian Right and Usury in Theory and Practice (Part 2)

By CashAdvanceMojo

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This is the conclusion of “Payday Loan | Christian Right and Usury in Theory and Practice.” If you missed the beginning, CLICK HERE.

Yet as Peterson and Graves see it, there is some divergence. Some Old Testament passages appear to state that Hebrews were permitted to make interest-bearing payday loans to non-Jews, but not to fellow Jews. Later, the understanding of Christ’s ministry led Christians to believe that all interest-bearing loans were to be banned. This held until the Renaissance and Protestant Reformation, which is apparently when good business sense began to develop. Religious leaders questioned whether banning all interest was a good idea. John Calvin, Martin Luther and others suggested that only excessive interest was a problem. Pope Paul II even approved pawnshops in 1461.

What they do about payday loans

Jeremy Bentham

By the 1980s and early 1990s, a trend had developed in the American banking establishment where loaning to low and moderate income consumers was severely restricted. As a consequence, Congress adopted the Community Reinvestment Act, which required them to increase their efforts in these underserved and unserved communities. The success of the Act has been somewhat unsuccessful. As there was a definite demand for microcredit like payday loans, businesses began to open their doors to popular acclaim.

According to Peterson and Graves, Christian leadership began at this time to ally itself with a variety of business interests, perhaps remembering what their Renaissance and Reformation fathers had discovered about the need for operating capital. The result is splashed across the pages of the authors’ study - payday loan stores in the “Bible Belt” are found at a much greater density than anywhere else in the country.

Not surprisingly, as this happened, American legal response to faxless payday loans became more favorable. Why? First, the Supreme Court gave banks the authority to export high interest rate limits from across the country as it favored said banks. Second, inflation caused interest rates to rise. Rather than create temporary exceptions to antiquated usury rules, some state legislatures repealed payday loan rate limits altogether. Most of these states were located in the same “Bible Belt.”

A “Defence of Usury”

Customer satisfaction levels, loan prevalence and the flexibility of payday loans have made them a popular product for consumers, despite the lip service religious groups and supposed non-denominational activist organizations pay against them. Aside from the facts of Peterson and Graves’ study, there exists a classic treatiste by English philosopher and financial reformer Jeremy Bentham. Bentham argues in favor of usury as a part of free trade and financial freedom, where the market dictates the price. The authors point out that Bentham’s ideas about usury have been hotly debated ever since the document appeared in 1787. Policymakers, judges, businessmen and academics are more suspicious of tight regulation of interest on products like the payday loan than they have ever been, in large part thanks to the forward thinking of Bentham. While the debate may never disappear completely, perhaps the actions of the Christian Right when it comes to supporting payday loan companies in their communities is the clearest indication of where they stand. Like anyone else in need of a small amount of cash in an emergency, they use payday loans, too.