Thou Shalt Not Steal?

In the face of what some economists are now calling a recession, many low- and middle-income Americans are turning to payday lenders, creditors who offer short-term, small-sum loans to desperate consumers. The catch? These lenders generally charge exorbitant interest rates that can trap borrowers with loans they often can't repay. A 2006 report from the Center for Responsible Lending (CRL) found that 90 percent of the revenue generated in the payday-lending industry comes from fees charged to borrowers.

Steven Schlein of the Community Financial Services Association of America (CFSA), which represents the industry, insists that payday lenders are only reacting to consumer demand, which "has been huge and growing since the '90s. There are currently about 24,000 stores. In 2000 there were about 10,000." Critics may consider the practice predatory, but Schlein says "our customers are extraordinarily satisfied. The only people who are complaining is a consumer group out of North Carolina [CRL] that has spread out across the country."

In a paper to be published this spring in the Catholic University Law Review, professors Christopher Peterson and Steven Graves find a surprising correlation between the geographic density of payday lenders and the political clout of conservative Christians. NEWSWEEK's Patrick Enright spoke with Peterson, visiting professor of law at the University of Utah, about their unexpected findings. Excerpts:

NEWSWEEK: What were the top-level results that you found?
Christopher Peterson: We [mapped payday lenders] nationwide, and one of the patterns that started to emerge was a lot of density in the Bible Belt and in the Mormon mountain West, and so we started to try and come up with some way to think about that carefully. We also created an index that measures the political power of conservative Christian Americans … What's interesting and surprising to us is that we found a strong correlation between the number of payday lenders within a geographic area and the political power of conservative Christians within a state. It's a surprising result to us because the natural hypothesis would have been to assume that given biblical condemnation of usury, there would be aggressive regulation and less demand for payday loans in those types of states. I think it's ironic that we actually found that the opposite tended to be true.

What are some potential explanations for the correlation?
If you are someone that reads the Bible and takes that seriously, finding out that there's a disproportionate number of predatory lenders—usurious money-changers, depending on what you want to call them—in your flock, that's a significant fact, irrespective of the why. Speaking to the why, our data don't attempt to create a causal explanation for this pattern. We are not arguing that the reason there are more payday lenders in those states is because they are conservative Christian states, as opposed to poverty, race, income, [or] other potential factors …

Nevertheless, it tends to be the case that state laws in these areas are more permissive of payday lending than in some of the other parts of the country. Throughout the Bible Belt and the Mormon mountain West, there is relatively little regulation of this type of lending … That's clearly a causal factor. But in a sense that just begs the question: it's legal there, but why is it legal there? I don't think anybody's going to come up with a study that answers that. That's more a matter of political speculation, but here's what I suspect may be part of the story: in the 1980s and continuing perhaps even stronger in the 1990s, I think it's fair to say that the Christian right and conservative Christians came to align themselves with conservative Wall Street big-business interests, and that's been effective for pushing a variety of issues that are important to social-values conservatives, such as the abortion debate, some sorts of family questions and perhaps gun rights—those types of things. But consumer protection law and the limits on usurious moneylending have been an inconvenient sticking point in that political alliance, and I think therefore has been put to the side. As that alliance has continued to dominate politics in these areas, the laws that protected people from usurious moneylenders in those states have fallen into atrophy.