Headquarters: Payday Lending

Cardus's "Banking on the Margins" project seeks non-legislative means of solving the moral problems of payday lending.
Appears in Spring 2016 Issue: The Rule of Law, The Way of Love
March 3 rd 2016

SPRING 2016 | We have a conflicted relationship with judgment in our day. We're taught to keep mum about all sorts of questionable moral behaviour in our friends and neighbours until it gets to the point where someone might get hurt. Then we bring down the full coercive force of the state. The tragedy is that as we eviscerate the bonds of lesser judgments— because to judge properly is to show that you care enough about someone to expend moral energy on them—we end up with an impoverished society. And as society becomes more and more impoverished we tend to turn to the one organ that has the capacity to fix those problems: the state.

Payday lending is a case in point. As noted in a recent paper from the Institute for American Values, "For a New Thrift: Confronting the Debt Culture," it used to be that "the combination of personal aversion to debt, the social stigma of overindebtedness, and the grubby image of predatory money lenders provided extralegal checks on the temptation to overborrow."

Even though we had laws preventing usury, they were not the most effective tools for preventing indebtedness. It was the complex mix of lesser judgments that shaped economic behaviour—your auntie's tut-tutting at you when you bought a pair of $200 shoes, or your reflexive need to peak over your shoulder before you entered the pawn shop to hock your watch.

In fact, the moral consensus in Western law is that injunctions against usury were the result, not the cause, of such small judgments.

But today we have moved from a moral consensus whereby particular views are enforced by law to a new moral consensus whereby autonomous rational agents act in their selfinterest guided by regulation. The trouble is that we're not the paragons of solid reason we think we are. Sometimes we are our own worst enemy, especially when we're backed into a corner.

Companies pay a lot of attention to small judgments. As the "New Thrift" paper notes, "Modern anti-thrift institutions spend a lot of money studying the beliefs, habits, and preferences of their customers." Business invests heavily in understanding what makes us tick, and does a very good job of stroking us where it will give us the most pleasure, even if it means broader social breakdown.

As Cardus has progressed with our Banking on the Margins project, we are increasingly convinced that efforts to recover that moral consensus through legislation is likely to fail. What we need to balance our chequebooks, and solve the problems associated with payday lending, is the same dedication to understanding and shaping the "beliefs, habits, and preferences" that payday loan companies have for attracting and keeping customers. In other words, solving the payday loan problem is a cultural problem, maybe even a religious problem.


Brian Dijkema is Program Director, Work and Economics at Cardus and senior editor with Comment. Prior to joining Cardus, Brian worked for almost a decade in labour relations in Canada after completing his master's degree with Cardus Senior Fellow, Jonathan Chaplin. He has also done work on international human rights, with a focus on labour, economic, and social rights in Latin America and China.


Rhys McKendry is a Researcher at Cardus. He has an HBA from the Richard Ivey School of Business at Western University and is a founding Alumnus of the Cardus*U Program. Rhys's areas of interest include: human-centered design, community development, and using market-based strategy to develop solutions to social issues, locally and globally. When Rhys is not at Cardus he spends his time competing in local Ultimate Disc leagues, camping in national and provincial parks, and cheering on one of his favourite Toronto sports teams.