Predatory Lending

(Dr. Nathan Attwood) - The practice of loaning money at exorbitant interest rates is often referred to as predatory lending. It is called predatory lending because it targets those who most desperately need emergency money in order to lock them into a situation in which they end up paying many times more than they have borrowed. Conventional lenders intend to have the principal they have loaned returned to them along with a reasonable profit. Predatory lenders are not interested in the return of their principal--they are interested in getting a poor person on the hook in order to squeeze as much out of them as possible for as long as possible.

Predatory lending has a biblical name: Usury. Usury is condemned throughout the Bible, particularly in the books of the Law such as Deuteronomy and Leviticus. They clearly teach that a society ordered around the love of God and neighbor has no place for business models that take advantage of the poor. Wisdom books such as Proverbs, Job, and Ecclesiastes teach that charging the poor high rates of interest rates is wicked and foolish, that this practice undermines God’s order for economic life, and that those who charge high interest destroy others and will themselves be destroyed. The prophets, especially Isaiah, Jeremiah, Micah, and Amos, warn that usury would be a primary reason God would lead Israel/Judah into defeat and bondage. The prophets argue that God loves people people, all people, including poor people, and that God is outraged when people crush the poor through high interest rates.

Usury is currently a significant issue in Alabama, as recent efforts have tried to curb predatory lending. Once upon a time, Alabama’s recognition of the biblical injunction against usury caused the state to cap interest rates through “usury laws.” For more than fifty years, lenders could not charge more than 36% in Alabama.

In 2003, the Alabama legislature modified interest rate caps to make an exception for title, payday, and other quick-cash borrowing schemes. The current Alabama interest rate cap is 456%.

In 2014, the Alabama legislature considered returning to the pre-2003 36% rate cap and instituting a shared online system to limit the number of payday or title loans borrowers could take out. Despite broad bi-partisan support (24 sponsors were Republican, 24 Democrat) and Christian opposition to these practices, banking lobbyist were able to cause these measures to die.

2014 Annual Conference nearly unanimously passed a resolution against predatory lending. The Board of Church and Society calls upon our churches and all of our people to petition their representatives to end the practice of predatory lending in the State of Alabama.