Mississippi legislators didn't buy the so-called Biblical argument against payday loans. (Photo Credit: CC BY-SA/Ken Lund/Flickr)
Opponents of no credit check payday loans frequently support their arguments by referencing religious documents, such as the Bible, that claim payday lenders practice usury – charging an “exorbitant or unlawful rate of interest.” Charlie Mitchell of the Mississippi Clarion-Ledger makes this mistake in his recent criticism of Mississippi House Bill 455, which will enable payday lenders to continue to do business in the state. Upon closer inspection, it becomes clear that interest-bearing no credit check payday loans are neither usurious nor “sinful” in the Biblical sense.
No credit check payday loans and interest rates
The crux of Mitchell’s argument is that payday lenders charge too much interest on an annual basis, and short term loans are sinful devices that impoverish the working man. This ignores the fact that payday loans are not intended to be paid off over the course of 12 months; most have terms ranging from two weeks to 90 days. If the lender charges the borrower $15 to $25 per $100 loaned, the borrower is paying a 15 to 25 percent fee, not a 500 percent APR as Mitchell claims.
The Bible does not condemn payday loans
Because Mitchell’s facts regarding online payday loan terms are lacking, he is left with the Biblical avenue of attack. While it is true that there are numerous Bible scriptures that forbid usury (Exodus 22:25, Ezekiel 22:16-31, Ezekiel 18:8-17), the prime Biblical parable that critics as noteworthy as MSNBC’s Rachel Maddow have used to attack payday loans is found at Nehemiah 5:9-10. This frequently misinterpreted scripture refers to an excessive and unreasonable temple tax levied against the Jews by the Romans that caused the Jews to become financially destitute. Critics of online payday loans, like Maddow, mistakenly replace “tax” with “interest-bearing loans,” and claim that the interest is what brought dark days to the Israelites.
Not only were Hebrews not being oppressed by interest-bearing loans, their God permitted them to lend and charge interest. Consider Deuteronomy 23:30:
“Unto a foreigner thou mayest lend upon interest; but unto thy brother thou shalt not lend upon interest.”
So long as the borrower was a Gentile, everything was fine with God.
Are no credit check payday loans usurious?
Usury is often defined an “exorbitant” or “unlawful” rate of interest. No credit check payday loans are regulated by federal and state laws that clearly establish terms and fees that can be charged, so the product is not unlawful.
As to whether online payday loan fees are exorbitant, the answer is relative. If potential borrowers think an interest rate is unreasonable, they have the option to abstain. If an online payday loan originator cannot lend at a rate that is reasonable for business, loans will not be issued. A mutually agreeable interest rate will always be found in the U.S. free market economy. No credit check payday loans are neither exorbitant nor unlawful, thus not usurious.
Sources
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