Jeremy Bentham

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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

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 at http://www.ffiec.gov/cra/, 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 Rather than create temporary exceptions to antiquated usury rules, some state legislatures repealed payday loan rate limits altogether.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 “Defense 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 treatise 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.

Of Usury, from Brant's Stultifera Navis

The proverbial “Christian Right” has traditionally been among the most vocal opponents of the product, which they consider to be usurious in the most pejorative modern definition (for the original definition, look here… usury may not be what you think it is). However, Peterson and Graves find that no fax payday loan companies tend to concentrate in high densities in conservative Christian states, particularly in relation to the number of traditional banks. In fact, whether or not there was a conservative Christian presence was shown to have a much greater impact upon the density of payday loan businesses than race or poverty levels (two of the primary weapons well-funded hatchet groups like the Center for Responsible Lending try to use against the industry).

What they say about usury

In one form or another, payday loans have been around for some time. Historical records speak of them in ancient Mesopotamia. Contracts and receipts were recorded on clay tablets. Lenders used the lunar cycle as a tool in establishing short-term loan due dates. The more abusive lenders who refused to deal in a civil manner with delinquent borrowers were essentially what prompted societies to consider loan pricing. The Babylonian and Roman Empires each had highly structured rate limits on various types of lending.

In the Bible, there are numerous Scriptures cited by the Christian Right as being against lending. A few of them are as follows (King James translation):

Exodus 22:25 - “If thou lend money to any of my people that is poor by thee, thou shalt not be to him as an usurer, neither shall thou lay upon him usury.”

Ezekiel 22:16-16 – “In thee have they taken gifts to shed blood; thou hast taken usury and increase, and thou has greedily gained of they neighbors by extortion, and hast forgotten me, saith the lord GOD. Behold therefore I have smitten mine hand at thy dishonest gain which thou hast made, and at they blood which hath been in the midst of thee. Can thine heart endure, or can thine hands be strong in the days that I shall deal with thee? I the LORD have spoken it, and will do it. And I will scatter thee among the heathen, and disperse thee in the countries, and will consume thy filthiness out of thee. And thou shalt take thin inheritance in theyself in the sight of the heathen, and thou shalt know that I am the LORD.”

Ezekiel 18:8-17 – “He that hath not given forth on usury, neither hath taken increase, that hath withdrawn his hand from  iniquity, hath executed true judgment between man and man, hath walked in my statutes, and hath kept my judgments, to  heal truly; he is just, he shall surely live, saith the Lord GOD.”

CLICK HERE to continue reading and see how the Christian Right deals with the payday loan in practice.