The Wandering Heretic

The current, if you excuse the expression, interest in Ohio’s proposed legislation to limit the rates charged by Payday Lenders has been taken up by area pastors. The Payday Lenders reportedly charge up to rates equaling 391% APR in some cases, and the pastors are behind legislation that will limit this rate to 36%. As I have written previously, this legislation will probably drive out the Payday Lenders entirely, who only make an average of 7% profit on the currently “usurious” rates. Once those businesses close, their lack may lead the borrowers in the poor neighborhoods to obtain their funds from more nefarious sources. Be assured, those rates will be even higher than those of the Payday Lenders. The consequences of defaulting on those loans are also much likely to be higher as well. As such, the legislation could have the unintended, but still disastrous effect of putting the poor more at risk of financial and even physical harm then they are now.

However, the issue hinges on the moral nature of interest or at least interest rates. Is charging interest morally allowed? If not, then all banks, not just the Payday Lenders are immoral institutions to be shunned by the Christian Church—actually a historically tenable position. However, if we take interest as being allowed, then to whom are we allowed to charge it? If allowed, when does the interest rate cross over to usury? How high is the rate morally allowed to go and for how long? These questions must be answered before we can judge as to the oppressive nature of the Payday Lenders and start putting caps on the amounts they are allowed to charge for their services. If, as I contend, laws are legislated morality then these moral questions must be answered before HB 333 can be evaluated in terms of Christian approval or disapproval.

Being a Protestant Christian, I take my moral queues from the Scriptures. Being inclined to the Reformed wing of Christianity, I take my guidance not just from the New Testament but from the Older Covenant as well. Unfortunately, the passages relating to this topic do not systemize easily. For example, Jesus only mentions interest in the context of the parable of the man who buried his talent in the ground (Mat 25:27; Luke 19:23). In the first place, the details of a parable are difficult to apply to morality outside of the main point of the parable itself (witness the parable of the dishonest steward—Luke 16:1-8). In this case, the demand that the slave should have given the money to bankers so that the master could receive it back with interest may only have been used to illustrate that the Master was “a hard man who reaped where he did not sow and gathered where his did not scatter.” On its own, this parable does not necessarily indicate the moral or immoral nature of interest.

Aside from this parable, there is no other mention of lending funds with interest in the New Testament. Therefore, the Old Covenant stipulations must be our source of guidance on this issue. There the issue is less ambiguous. The general attitude toward interest in the Old Covenant is extremely negative. Witness the various tirades of Ezekiel on the subject:

he who has not given out on interest, neither has taken any increase, that has withdrawn his hand from iniquity, has executed true judgment between man and man, has walked in my statutes, and has kept my ordinances, to act in accordance with them; he is vindicated, he shall surely live, says the Lord YHWH. If he fathers a son who is violent, a shedder of blood,…has done a disgusting thing, has given out on interest, and has taken increase; shall he then live? He shall not live: he has done all these disgusting things; he shall surely die; his blood shall be on him. Now, look, if he fathers a son, that sees all his father’s disgraceful acts, which he has done, and he sees, and does not do such;… that has not received interest nor increase, has executed my ordinances, has walked in my statutes; he shall not die for the iniquity of his father, he shall surely live. (18:8-17; CGV)

In you they have taken bribes to shed blood; you have taken interest and increase, and you have greedily gained of your neighbors by oppression, and have forgotten me, says the Lord YHWH.(22:12)

Note, the prophet does not rally against excessive interest. He decries charging interest at all. He does this, not in a vacuum, but in response to the very Law of God; or in his wording, “the statues and ordinances.” His reaction is to the people’s disobedience to what has been written and so forbidden by God. The statute in this case is Ex 22:25: “If you lend money to any of my people with you who is poor, you shall not be to him as a creditor; neither shall you lay on him interest.”

There are many curious facets to this command if read literally. For instance, it appears to limit it to “my [that is God's] people,” and specifically to the subset of God’s people who are “poor.” This would indicate that this command is limited to poor Israelites in the land and is therefore not a universal; that is, charging interest is only evil if given to poor Israelites. It may have no bearing on foreigners who outside of Israel. The Jewish Study Bible agrees, at least in its commentary on this particular passage:

[The context of the passage concerns]charitable loans to countrymen who have fallen on hard times. Lending to them is a moral obligation and must be done without further increasing the borrowers poverty by requiring interest, which could be ruinous…Loans to foreigners were not subject to this rule, since visiting foreigners were usually businessmen. If they borrowed it was for business and not to survive poverty. (Pg 157; emphasis added)

So to fellow Israelites in poverty, the interest rate was zero. To the foreigner, or non-Israelite, the interest rate was whatever the market would bear. This is not an interpretation of the above passage. The Old Covenant specifically allows for this.

Do not charge your brother interest on money, food, or anything that can earn interest. You may charge a foreigner interest, but you must not charge your brother interest, so that the LORD your God may bless you in everything you do in the land you are entering to possess.(Deut 23:19-20)

Therefore, according to the Bible, there is no such thing as we commonly call “usury.” This is because we are making trying to make a universal application to what God deemed was particular. Your interest rate was determined by who you were and who was doing the lending. If you were an Israelite lending to a poor Israelite, your allowable rate was zero. Not 391%, not 36%, not even 1 below prime; zero. If you were an Israelite lending to a non-Israelite or perhaps to an Israelite not in poverty (for business purposes), then God did not define any rate restriction. It could be rate that you desired or that the market would bear, even the “high” rates of the Payday Lenders.

Per the above exposition, Ezekiel was objecting to Israelites charging other poor Israelites interest. He would not care a fig if that same Israelite charged a foreigner interest and even less what rates foreigners charge each other. According to the Bible then, depending on who received your loan, your allowable interest rate is either zero or as high as the market will bear. There is no other defined “rate restriction.”

In short, the answer to this blog’s headline is: usury begins at anything above zero if you are an Israelite lending to a poor Israelite and it does not exist at all if you are not. This makes the entire matter less easy to apply today. In the New Covenant times, who constitutes a “poor Israelite” and who constitutes a “foreigner?” Working toward the answer to that question may point the way to a better solution than the legal fiat proposed by HB 333.

Next: Working Toward a Solution.

This entry was posted on Saturday, April 19th, 2008 at 6:28 am and is filed under Subversive Verse of the Month. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site. Or, if you wish, you can find all the posts Caine