Thou Shalt Not Steal?

So you trace this result partly to the connection between conservative Christians and conservative financial interests?
We think that's probably part of the explanation. That doesn't by itself explain this pattern geographically, however … I want to be really clear about that point. I don't want to be seen as suggesting that payday lenders are moving to these areas because conservative Christians want it more or that that's the causal explanation for it. This is a correlation that we've seen that's a significant and important point that is facilitated by the laws in those states. That's all we're saying.

How does this correlation compare to other factors, like income level?
We ran the same correlation test on the percent of the population that lives below the poverty line within each geographic area and we found that the correlation was stronger with our measure of the political power of conservative Christians. We also ran the same test against the percent of the population that's not white, sort of a composite measure of minorities. And again we found that there was a stronger correlation between payday-lender density and conservative Christian political power.

That's really interesting, because you'd think it would be much more closely tied to income level.
You would, wouldn't you? I think part of the thing that may prevent that is that there's a lot of poverty and racial diversity in some parts of the country where this sort of lending isn't tolerated.

It seems that predatory lending is coming more and more to legislators' attention. How do you think that's factoring into this, if at all? Are the states that have cracked down really the ones that need to be doing so?
I think that any state that doesn't have traditional usury limits is going to develop a payday lending problem. It's not so much that the states in, say, the Northeast are cracking down; the better way to say it is states in other parts of the country have given up on the traditional approach … In 1965 every state in the United States, all 50 states in the Union, had traditional usury limits that capped interest rates generally from between 18 percent to about 42 percent annually … In the past 15 to 20 years many states have relaxed those limits, allowing payday lenders to come in and do business at interest rates that average about 450 percent. [The industry argues that typical payday loans are for a period of two weeks, so lenders' interest rates actually aren't that high—only when critics extrapolate them to a full year do they seem exorbitant. A $15 charge on a $100 two-week loan, Schlein says, can be considered an interest rate of 15 percent. In accordance with the Truth in Lending Act, the CFSA's Web site displays a map of annual interest rates in each state, from a low of 156 percent in Oregon to a high of 869 percent in Maine and Montana.]

Why have those laws been relaxed?
I think that part of the explanation is that the alliance between social-values conservatives and big-business conservatives was a big change in the balance of power with respect to consumer protection law or limits on usury. Once that happened, around the country a lot of states started to deregulate, started to less aggressively prevent usurious loans.

Do you get the sense that there's any wider return to the usury laws we used to have 40 years ago?
I think that the pendulum is starting to swing in that direction. For a long time we were only seeing more and more states moving toward deregulation, and I think that that had a lot to do with how aggressive the trade associations for payday lenders were. They're very effective political advocates. They dedicate a significant portion of their revenue to campaign finance and to gifts for legislators around the country, and they have effective lobbyists and public relations firms. I think that helped contribute to the deregulatory trend. But my sense is that a lot of the state legislatures are starting to wise up, and it's likely that there may be a trend to start reversing some of the gains that the payday lending industry has made.

© 2008