March 12, 2008
Payday Lenders
In the last five or ten years, I've noticed check cashing and payday loan centers popping up everywhere. Their astronomical fees and interest rates amount to usury, and it's quite outrageous that they exist -- and seem to be flourishing. (Their annual interest rates are often in the hundreds of percents. In a finance class I took, we calculated one rate at more than 700% annually.)
A recent WSJ article reports that "lenders are increasingly targeting recipients of Social Security and other government benefits, including disability and veteran's benefits." According to the article, data show that "many payday lenders are clustered around government-subsidized housing for seniors and the disabled." Check out the graphics in the article to see the clustering.
Oddly, payday loan centers also seem to be more prevalent in conservative Christian states. A geographer at Cal State Northridge (the one mentioned in the WSJ article) and a law professor at the University of Utah recently published a paper showing a correlation between payday lenders and the Bible Belt and Mormon Mountain West:
"Our research showed that the correlation between payday lenders and the political power of conservative Christians was stronger than the correlation between payday lenders and the proportion of a population living below the poverty line," Peterson explained.
Why so little concern about regulating payday lenders on the part of these politicians, given the admonition against usury in the Bible? Here is the authors' explanation:
"When the Christian Right allied itself with conservative Wall Street business interests in the 1980s and early ‘90s, consumer protection law was placed to the side as an inconvenient sticking point. The laws allowing an astonishing number of triple-digit-interest-rate lenders throughout most of the Christian South and Mormon West are a legacy of that political alliance."
They're probably right. But I wonder if part of the explanation is deeper than an "inconvenient sticking point" in an alliance stretching back only twenty-five or thirty years. While the hot button issues (abortion, gay rights, etc.) for evangelicals and fundamentalists are part of the so-called Fourth Great Awakening, the doctrinal outlook of many groups -- like Baptists, Methodists, and especially Adventists and Mormons -- is largely rooted in the Second Great Awakening. In an article for the latest edition of Reason, Ronald Bailey writes the following about the Second Great Awakening:
These revivalists completely rejected Calvinist predestination in favor of free moral agency, arguing that anyone could be saved by God's grace if he struggled fiercely against sin. Evil arose from an individual's conscious choice, not, as Calvin had claimed, from his innate depravity. Since everyone was free to choose good or evil, the revivalists located the source of social problems in individuals. "Lurking in this view," Fogel writes, "was the belief that poverty was the wages of sin."
From this viewpoint, then, the source of the problem is not money changers but rather the weak, sinning individuals who patronize them. I suspect that's part of the explanation for the disinterest of at least some conservative Christian lawmakers in addressing the problem of payday lenders.
As to whether they're right or wrong to have such a lack of concern for desperate, ignorant (or 'just plain stupid') folks who turn to payday loan centers... it's something that could framed in modern political ideology and argued at great length. I'm simply pointing out that it's a reflection of a fairly long history of American religious and political thought concerning individualism and the source of social ills.
(For related fun, see Check into Cash into Tequila, where someone counted the steps between check cashing locations and liquor stores.)
12 Mar 0:09 | Link | Category: Opinion & Thoughts, Politics