The dramatic increase of payday lender storefronts in Texas has left some Christians wondering how to respond. What does Scripture say about high interest rates? Can the church offer solutions?
“Payday loans perpetuate American poverty,” said Bill Tillman, T. B. Maston Professor of Christian Ethics at Logsdon School of Theology in Abilene. “If we take Christianity seriously, we are not in this world to make all we can, but we’re in this world to serve others. The authenticity of our relationship to God is dependent on how we treat other people.”
Payday loans are small-dollar loans with high service fees and interest rates that offer instant cash with no credit check. These loans, usually $300 to $500, are secured with a personal checking account and a service fee. Often, borrowers pay $20 or more for every $100 borrowed. If the loan is not paid in full within two to three weeks, then the borrower can pay another service fee and roll over the loan.
A recent survey conducted by Texas Appleseed, an advocacy group for low- income families, found most payday loan borrowers roll over loans at least once, and several people roll them over multiple times.
With this model, payday lenders profit from a cycle of debt. Most payday loan borrowers in the survey earned an income of $30,000 or less and used the loan for recurring expenses of basic needs like rent, utilities and food. While the Texas Finance Code sets some restrictions on small-dollar loans, many payday lenders operate as consumer service organizations avoiding licensing and regulation by the Office of Consumer Credit Commissioner.
Christians can look to the Bible for instruction regarding unethical business practices and financial systems, biblical scholars note. Several references to charging interest appear in the Old Testament. Exodus 22:25 of the Covenant Code and Leviticus 25:36 of the Holiness Code—the two central instructions for forming community—both urge Israel not to extract interest from the poor. Later, this instruction is confirmed in Psalm 15:5 in reference to worship practices and Proverbs 22:7 in the wisdom literature.
Prohibition of interest to the poor is consistent with the great prophetic emphasis on social justice, especially seen in Amos 2:6-16.
It is difficult to compare ancient society to our capitalist, egalitarian society, said James Nogalski, professor of Old Testament at Baylor University. Still, he sees how certain thematic ideas regarding righteous and just living can be applied to Christians’ lives. A righteous person, as described in Psalm 15:5, does not charge too much interest or make a profit at the expense of someone who is in need.
In ancient society, it was not uncommon for lenders to collect 40 percent, 50 percent or more interest, and some even took children as slaves, but such practices ultimately were considered too much.
Furthermore, people who oppress the poor through exorbitant interest rates and other practices are called unjust.
“There is clearly a point where all the literature agrees,” Nogalski said. “When lenders take back more than is justified and oppress the poor, the prophets in particular offer powerful words of judgment.”
The modern debate today is over the point where interest rates become too high in our society, Nogalski explained. When we take more than is justified, especially from those least able to pay, we are in danger of living like the unrighteous or unjust against whom the prophets and the psalmists rail, he said.
The Old Testament is concerned with forming a community in covenant with the living God, said Bill Bellinger, chair of the religion department at Baylor University. The biblical witness summarizes God’s instruction in terms of loving God with all we are and have and loving our neighbor.
“Extracting interest, especially high interest, from the poor is decidedly not a neighborly practice,” Bellinger said. The Bible calls the community of faith to a life that lifts up the poor, and thus, the community of faith is called to bear witness to practices that bring justice and hope to the poor.
“The usury of payday and car title loans are in direct conflict with these goals,” he said.
The New Testament also talks about financial systems and treatment of the poor. Jesus summed up the Old Testament witness with his command to love God and love our neighbor explained Dennis Tucker, associate dean of Truett Theological Seminary.
“Loving a neighbor means keeping someone from being victimized,” he said.
Many times we think of loving our neighbor as an overt act, but it also includes seeking justice, he explained. Jesus spoke against systems that dehumanized people like in the case of the adulterous woman in John 8.
“As Christians, we need to critique systems that oppress the poor,” Tucker said. “But we also need to be a part of the answer.”
The early church in Acts 2 actively sought answers to problems by meeting people’s needs itself rather than relying on political structures. Likewise, there is a movement in churches today to reach out to the needs of their immediate communities. Churches are discovering new ways to help raise questions and find solutions at home.
Tillman encourages Christians to offer their business skills to help those people caught in the cycle of debt from payday loans. Christians and churches can offer financial education or help to develop alternative small-dollar loan products. Tillman explains that Jesus’ good news was socially relevant; it actually saved lives.
“To be socially relevant in our day, churches must remember the nature of Jesus’ gospel,” he said.
The church should respond proactively to the harmful practices of payday loans, said Joe Trull, editor of Christian Ethics Today.
“Churches can teach basic economic principals, helping people to make the most out of their money,” said Trull, formerly an ethics professor at New Orleans Baptist Theological Seminary.
“Many people who use payday loans use them because their parents used them,” he observed. Churches can teach about financial practices that will keep people from using payday loans.
“We do this kind of thing for young married couples. Why don’t we do it for the poor?”
Amy Wiles is a student at Austin Presbyterian Theological Seminary and plans to graduate with her Master of Divinity degree in May 2011. Before entering seminary, she taught music in public schools five years, after completing her undergraduate degree at Baylor University. She is serving a public policy research internship jointly sponsored by the Christian Life Commission and the Baptist Standard, made possible by a grant from the Christ is Our Salvation Foundation of Waco.