Policy & Advocacy
Predatory Lending Backgrounder, February 2013
Backgrounder on Predatory Banking and Payday Lending, February 2013
Financial Crisis and Consumer Vulnerability
The 2007 financial crash exposed deep inequities in U.S. credit markets. A subprime mortgage bubble left millions of homeowners underwater or facing foreclosure. At the same time, stagnant wages forced many families to rely on credit for everyday expenses, making them targets for predatory lenders.
Predatory Banking Practices
- The Church condemns any geographic or community-based discrimination in credit access and urges fair lending in underserved areas (The Right to a Decent Home, nos. 31–32).
- The Catechism states that exploiting the poor through unjust business practices constitutes theft and violates the seventh commandment (CCC 2409).
- Research shows banks have aggressively marketed substandard, high-cost loans to communities of color and economically distressed neighborhoods.
Payday Lending Harms
- Payday lenders expanded rapidly under permissive state laws, structuring loans so borrowers cannot repay on time and must renew repeatedly, trapping them in debt.
- Federal Reserve and Pew data reveal payday borrowers are overwhelmingly low-income families using loans for basic needs or to cover existing debts—over 17% of 2010 loans paid down other loans.
- The Catechism equates usurious and avaricious dealings that lead to others’ suffering with indirect homicide (CCC 2269).
- Pope Benedict XVI warns that finance, once a tool for human flourishing, has become an oppressive “false divinity” dominating lives.
The Catholic Campaign for Human Development (CCHD) addresses predatory lending by:
- Funding Community Development Financial Institutions and credit unions that provide affordable small-business and personal loans.
- Supporting consumer-protection organizations that fight unfair banking practices. The CCHD and bishops urge collaboration with state Catholic conferences and policymakers to reform laws and regulations that enable predatory lending.