Why Christians should care about predatory payday lending

May 22, 2023

When you hear the phrase “payday loans,” what words and ideas come to mind? Helpful? Useful? Timely? Or words with a more negative connotation like harmful, predatory, and immoral? These are some of the responses given by a group of Christians that took part in a recent survey titled American Views on Payday Loans. The survey of one thousand Christians from 27 states was conducted by Lifeway Research and is part of a larger project sponsored by a coalition of faith-based institutions called Faith for Just Lending.

The responses to this and other questions included in the survey were split and have changed to a surprising degree in the last several years. For instance, since 2016 the percentage of respondents who view payday loans as “helpful, useful, and timely” has doubled, and 34% of Christians living in one of these states “have obtained that type of loan themselves” (also doubling since 2016).

The reason for these changes is mixed. Yet, whatever the reason, Christians would be wise to explore what payday loans are and why they can be so morally and materially problematic.

What is a payday loan?

Barrett Duke writes that payday lending “is the term used to describe the practice of lending small amounts of money to people, usually $350 or less, for two-week periods (i.e., until their next payday). In return, the borrower pays interest on the loan when it is due at the end of the loan period.” 

A payday loan, therefore, is a relatively small amount of money (though surely it doesn’t seem small to those being forced to borrow) that is lent to people to see them through to their next payday. As Duke acknowledges, a short-term loan like this “can provide an important service,” but the terms of the loan often lead to more difficulty on the part of the borrower. In fact, the loans are often predatory in nature. And according to the Center for Responsible Lending, there are more than 20,000 payday loan shops providing these loans in the United States today.

Why are they sometimes called predatory?

Payday lending is a business that preys on the most financially vulnerable among us and those who are most in need of help. 

The Center for Responsible Lending calls payday lending a practice akin to “modern-day usury,” a word defined by Merriam-Webster as “an unconscionable or exorbitant rate or amount of interest.” While the authors of this guide recognize that “lending can empower those in need,” they also warn that “lending can be used to exploit those in need.” In too many cases, payday lending is used for the latter. 

Part of what makes payday lending predatory is the outrageous interest rates that are pinned on the loans—rates that are often veiled by the use of unclear financial speak. Duke uses the example of a $350 loan borrowed at 15%. These terms may sound reasonable to a borrower, “except that this [15%] is the two-week rate, not an annual rate. On an annual basis, that 15% two-week loan is actually provided at a 390% annual interest rate,” which is just shy of the “typical payday lender charge [of] 400%.” 

In addition to the high interest rates and unclear language, payday loans are typically eligible for renewal when a borrower is unable to repay the loan in full. In this scenario, a lender will renew the loan, provided that the borrower pays the interest that’s due. Using Duke’s example from above, on a $350 loan borrowed at 15%, a borrower would pay “the $52.50 [in] interest and extend the loan for two more weeks at another 15% interest,” rolling the unpaid total into the new loan. 

And this is a cycle that can continue almost indefinitely. It’s a business model that profits from borrowers’ inability to pay back their loans and traps them in an ongoing cycle, metastasizing their dues and eventually saddling them with a sizable amount of long-term debt. 

Why should Christians care about predatory payday lending?

Christians should care about predatory lending because its practices exploit and take advantage of our neighbors, whom we’ve been commanded to love. In the Old and New Testaments, Scripture is clear that God’s people should not tolerate injustice, should serve and care for those who are marginalized, and where possible, put a stop to the injustices perpetrated against them. 

Finding themselves in a “tough financial hole,” many of our neighbors “have attempted to use payday loans to dig themselves out.” Unfortunately, what they often find with payday loans is not that they’re digging themselves out but digging themselves deeper. For example, “the typical payday borrower pays back $793 for an initial $325 loan” and, on average, “takes out 9 loans a year.” Frequently, these loans lead to more difficulty, more hardship, and more vulnerability for borrowers.

Predatory lending affects not just individuals, but families and entire communities. Cumulatively, it’s an industry that as of 2010 collected $3.5 billion every year in fees alone (i.e., interest and other fees), making it increasingly difficult for borrowers to make ends meet, for families to put food on the table, and for whole communities to thrive. Christians should care about payday lending because it’s a system that fundamentally “undermines the dignity of borrower[s] when [their] failure leads to success and profit for the lender.” Predatory lending is an issue of biblical justice and human dignity.

How have the SBC and ERLC engaged with this issue?

In 2014, messengers to the Southern Baptist Convention’s annual meeting made their opposition to the practice of predatory payday lending clear by passing a resolution that: 

To that end, the ERLC has long sought to shed light on the predatory nature of payday lending. From writing Issue Briefs like the one referenced above to serving as a member of the Faith for Just Lending coalition, the ERLC recognizes “these practices should be regulated to restrict this industry’s ability to prey on the poor among us” and advocates for policies (like South Carolina’s Senate Bill 67) that seek to do just that. Recognizing that predatory lending is an issue that directly concerns human dignity, the ERLC has made the support of payday lending regulations one of its 2023 policy priorities.

Jordan Wootten

Jordan Wootten serves as a News and Culture Channel Editor at the Ethics & Religious Liberty Commission and a writer/editor at RightNow Media. He's a board member at The LoveX2 Project, an organization seeking to make the world a better place for moms and babies. Jordan is a graduate of … Read More

Article 12: The Future of AI

We affirm that AI will continue to be developed in ways that we cannot currently imagine or understand, including AI that will far surpass many human abilities. God alone has the power to create life, and no future advancements in AI will usurp Him as the Creator of life. The church has a unique role in proclaiming human dignity for all and calling for the humane use of AI in all aspects of society.

We deny that AI will make us more or less human, or that AI will ever obtain a coequal level of worth, dignity, or value to image-bearers. Future advancements in AI will not ultimately fulfill our longings for a perfect world. While we are not able to comprehend or know the future, we do not fear what is to come because we know that God is omniscient and that nothing we create will be able to thwart His redemptive plan for creation or to supplant humanity as His image-bearers.

Genesis 1; Isaiah 42:8; Romans 1:20-21; 5:2; Ephesians 1:4-6; 2 Timothy 1:7-9; Revelation 5:9-10

Article 11: Public Policy

We affirm that the fundamental purposes of government are to protect human beings from harm, punish those who do evil, uphold civil liberties, and to commend those who do good. The public has a role in shaping and crafting policies concerning the use of AI in society, and these decisions should not be left to those who develop these technologies or to governments to set norms.

We deny that AI should be used by governments, corporations, or any entity to infringe upon God-given human rights. AI, even in a highly advanced state, should never be delegated the governing authority that has been granted by an all-sovereign God to human beings alone. 

Romans 13:1-7; Acts 10:35; 1 Peter 2:13-14

Article 10: War

We affirm that the use of AI in warfare should be governed by love of neighbor and the principles of just war. The use of AI may mitigate the loss of human life, provide greater protection of non-combatants, and inform better policymaking. Any lethal action conducted or substantially enabled by AI must employ 5 human oversight or review. All defense-related AI applications, such as underlying data and decision-making processes, must be subject to continual review by legitimate authorities. When these systems are deployed, human agents bear full moral responsibility for any actions taken by the system.

We deny that human agency or moral culpability in war can be delegated to AI. No nation or group has the right to use AI to carry out genocide, terrorism, torture, or other war crimes.

Genesis 4:10; Isaiah 1:16-17; Psalm 37:28; Matthew 5:44; 22:37-39; Romans 13:4

Article 9: Security

We affirm that AI has legitimate applications in policing, intelligence, surveillance, investigation, and other uses supporting the government’s responsibility to respect human rights, to protect and preserve human life, and to pursue justice in a flourishing society.

We deny that AI should be employed for safety and security applications in ways that seek to dehumanize, depersonalize, or harm our fellow human beings. We condemn the use of AI to suppress free expression or other basic human rights granted by God to all human beings.

Romans 13:1-7; 1 Peter 2:13-14

Article 8: Data & Privacy

We affirm that privacy and personal property are intertwined individual rights and choices that should not be violated by governments, corporations, nation-states, and other groups, even in the pursuit of the common good. While God knows all things, it is neither wise nor obligatory to have every detail of one’s life open to society.

We deny the manipulative and coercive uses of data and AI in ways that are inconsistent with the love of God and love of neighbor. Data collection practices should conform to ethical guidelines that uphold the dignity of all people. We further deny that consent, even informed consent, although requisite, is the only necessary ethical standard for the collection, manipulation, or exploitation of personal data—individually or in the aggregate. AI should not be employed in ways that distort truth through the use of generative applications. Data should not be mishandled, misused, or abused for sinful purposes to reinforce bias, strengthen the powerful, or demean the weak.

Exodus 20:15, Psalm 147:5; Isaiah 40:13-14; Matthew 10:16 Galatians 6:2; Hebrews 4:12-13; 1 John 1:7 

Article 7: Work

We affirm that work is part of God’s plan for human beings participating in the cultivation and stewardship of creation. The divine pattern is one of labor and rest in healthy proportion to each other. Our view of work should not be confined to commercial activity; it must also include the many ways that human beings serve each other through their efforts. AI can be used in ways that aid our work or allow us to make fuller use of our gifts. The church has a Spirit-empowered responsibility to help care for those who lose jobs and to encourage individuals, communities, employers, and governments to find ways to invest in the development of human beings and continue making vocational contributions to our lives together.

We deny that human worth and dignity is reducible to an individual’s economic contributions to society alone. Humanity should not use AI and other technological innovations as a reason to move toward lives of pure leisure even if greater social wealth creates such possibilities.

Genesis 1:27; 2:5; 2:15; Isaiah 65:21-24; Romans 12:6-8; Ephesians 4:11-16

Article 6: Sexuality

We affirm the goodness of God’s design for human sexuality which prescribes the sexual union to be an exclusive relationship between a man and a woman in the lifelong covenant of marriage.

We deny that the pursuit of sexual pleasure is a justification for the development or use of AI, and we condemn the objectification of humans that results from employing AI for sexual purposes. AI should not intrude upon or substitute for the biblical expression of sexuality between a husband and wife according to God’s design for human marriage.

Genesis 1:26-29; 2:18-25; Matthew 5:27-30; 1 Thess 4:3-4

Article 5: Bias

We affirm that, as a tool created by humans, AI will be inherently subject to bias and that these biases must be accounted for, minimized, or removed through continual human oversight and discretion. AI should be designed and used in such ways that treat all human beings as having equal worth and dignity. AI should be utilized as a tool to identify and eliminate bias inherent in human decision-making.

We deny that AI should be designed or used in ways that violate the fundamental principle of human dignity for all people. Neither should AI be used in ways that reinforce or further any ideology or agenda, seeking to subjugate human autonomy under the power of the state.

Micah 6:8; John 13:34; Galatians 3:28-29; 5:13-14; Philippians 2:3-4; Romans 12:10

Article 4: Medicine

We affirm that AI-related advances in medical technologies are expressions of God’s common grace through and for people created in His image and that these advances will increase our capacity to provide enhanced medical diagnostics and therapeutic interventions as we seek to care for all people. These advances should be guided by basic principles of medical ethics, including beneficence, non-maleficence, autonomy, and justice, which are all consistent with the biblical principle of loving our neighbor.

We deny that death and disease—effects of the Fall—can ultimately be eradicated apart from Jesus Christ. Utilitarian applications regarding healthcare distribution should not override the dignity of human life. Fur- 3 thermore, we reject the materialist and consequentialist worldview that understands medical applications of AI as a means of improving, changing, or completing human beings.

Matthew 5:45; John 11:25-26; 1 Corinthians 15:55-57; Galatians 6:2; Philippians 2:4

Article 3: Relationship of AI & Humanity

We affirm the use of AI to inform and aid human reasoning and moral decision-making because it is a tool that excels at processing data and making determinations, which often mimics or exceeds human ability. While AI excels in data-based computation, technology is incapable of possessing the capacity for moral agency or responsibility.

We deny that humans can or should cede our moral accountability or responsibilities to any form of AI that will ever be created. Only humanity will be judged by God on the basis of our actions and that of the tools we create. While technology can be created with a moral use in view, it is not a moral agent. Humans alone bear the responsibility for moral decision making.

Romans 2:6-8; Galatians 5:19-21; 2 Peter 1:5-8; 1 John 2:1

Article 2: AI as Technology

We affirm that the development of AI is a demonstration of the unique creative abilities of human beings. When AI is employed in accordance with God’s moral will, it is an example of man’s obedience to the divine command to steward creation and to honor Him. We believe in innovation for the glory of God, the sake of human flourishing, and the love of neighbor. While we acknowledge the reality of the Fall and its consequences on human nature and human innovation, technology can be used in society to uphold human dignity. As a part of our God-given creative nature, human beings should develop and harness technology in ways that lead to greater flourishing and the alleviation of human suffering.

We deny that the use of AI is morally neutral. It is not worthy of man’s hope, worship, or love. Since the Lord Jesus alone can atone for sin and reconcile humanity to its Creator, technology such as AI cannot fulfill humanity’s ultimate needs. We further deny the goodness and benefit of any application of AI that devalues or degrades the dignity and worth of another human being. 

Genesis 2:25; Exodus 20:3; 31:1-11; Proverbs 16:4; Matthew 22:37-40; Romans 3:23

Article 1: Image of God

We affirm that God created each human being in His image with intrinsic and equal worth, dignity, and moral agency, distinct from all creation, and that humanity’s creativity is intended to reflect God’s creative pattern.

We deny that any part of creation, including any form of technology, should ever be used to usurp or subvert the dominion and stewardship which has been entrusted solely to humanity by God; nor should technology be assigned a level of human identity, worth, dignity, or moral agency.

Genesis 1:26-28; 5:1-2; Isaiah 43:6-7; Jeremiah 1:5; John 13:34; Colossians 1:16; 3:10; Ephesians 4:24