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Editor: Myanna Dellinger
University of South Dakota School of Law

Thursday, February 21, 2008

Evangelicals and Payday Loans

A Traditional American usury law has always been heavily influenced by a Biblical tradition that has disfavored lending money at interest.  The prohibition of lending money at interest has been condemned at least since Plato, and was completely banned to Christians in the middle ages.  In 1311 the Council of Vienne pronounced it heresy even to argue in favor of allowing interest-bearing loans to businesses.

So it’s something of a puzzle as to why U.S. states with substantial Evangelical Christian populations -- places where conventional wisdom says that state policies are most likely to reflect Biblical values -- have some of the highest concentrations of payday lenders in the country.  But that’s the finding of Christopher L. Peterson (Florida) (left) and Steven M. Graves (Cal State Northridge), in a new paper, Usury Law and the Christian Right: Faith Based Political Power and the Geography of the American Payday Loan Regulation, which is forthcoming in the Catholic University Law Review.  Here’s the abstract:

The culture war has become a national moniker describing a variety of policy debates between social conservatives and secular liberal Americans. Hotly contested battle grounds in this metaphorical war have included abortion policy, affirmative action, the right to bear arms, and gay marriage. Frequently these debates have divided secular Americans from people of faith. This article explores this cultural divide in the context of consumer financial services. In the past fifteen to twenty years America has witnessed a stunning transformation in financial services offered to lower and lower-middle classes. A new breed of fringe creditors charging prices far in excess of the old mafia loan sharking syndicates have spread throughout much of the country. The archetype of fringe creditors commonly referred to as payday lenders, charges average simple nominal annual interest rates of around 450 percent. This Article presents empirical research based on the largest, most comprehensive database of payday loan locations yet created. Payday lender locations are compared to an index measuring the political power of conservative Christian Americans in all fifty states. We conclude that there is a strong correlation between the density of payday lending industry and the political power of conservative Christians, suggesting that conservative Christians have become a prime demographic target of payday lenders. These findings are further discussed in light of Biblical injunctions against usury.

[Frank Snyder]

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