Yet closer regulation of lending practices is not necessarily the kindest solution. Society's moral duty to those in need is to let the market provide ample access to capital, argues Jamie O'Brien, an instructor in business at Notre Dame University. While he supports state usury laws that cap interest rates, he argues that some high-interest loans are necessary to cover a lender's risks and shouldn't be regulated to the detriment of the would-be borrower. When lenders can't charge higher rates to high-risk consumers, he argues, such would-be borrowers will simply not get the credit they seek.
"As a Christian, I believe we should all help our fellow man or woman however we can," Mr. O'Brien says, adding that in ideal cases repayment is not expected. But often, he says, "When a legal protection is put in place, either capping rates or fees, costs will be passed on to customers and you're going to see a lot of people forced out of the market."
Unethical lending practices threaten the health of the whole system, say some financiers. The Mortgage Bankers Association, for example, favors a national standard to protect consumers in borrowing. "Abusive lending is fraud, pure and simple," said Association chairman Robert Couch in an Aug. 27 statement. "Ridding the industry of abusive lending is a high priority for us, as it threatens the very basis of the best system of supplying housing capital in the world."
Many of the world's major religions address the question of lending. Most view lending as moral only if the lender is sincere in desiring to help meet the borrower's essential needs - rather than helping the borrower to indulge in capricious desires - and also if the lender helps the borrower move toward self-sufficiency.