V. Conclusion
The payday lending crisis is a symptom of a larger social mobility problem in the United States--regulating payday lenders will be a significant step towards improving our nation's economy and creating a fairer economy for our poor. Upward social mobility in the United States has all but become stagnant in recent years, and payday lenders profit from and promote this stasis. To illustrate, in Denmark, Finland, Norway, Sweden, and the United Kingdom, between twenty-three and thirty percent of sons and daughters born to fathers who were in the bottom fifth of their country's earnings remained in the bottom fifth. However, in the United States, the same statistic rises to forty-two percent. The U.S. Census reported 46.2 million people were living in poverty in 2010, the highest poverty rate since 1959.
A lending industry that profits from a weakening economy and targets the underclass as their most lucrative borrowers creates constitutional consequences that must be addressed. The terms of these loans, the coercive nature of the lenders, and the demoralizing and destructive consequences for the borrowers reflect exactly what the framers of the Thirteenth Amendment sought to eliminate. A line can be drawn to distinguish payday loans from other types of loans. Historically, loans have not been interest-only loans. Not every loan presents the issues of peonage and promotion of the badges and incidents of slavery as a means of greater income. Payday loan consumers must be protected. These loans, at the very least, must be regulated to do away with the involuntary servitude they create.
Seventeen states have already effectively banned payday lenders. Continuing this trend would solve this constitutional issue most effectively. Until all states safeguard borrowers from payday lenders, federal involvement is appropriate and the Thirteenth Amendment is, as demonstrated, a proper federal mechanism for Congress to use in regulating payday lending.
There is a danger in not recognizing the Thirteenth Amendment issues payday lenders present. There is essentially a caste in American society that has extremely limited economic opportunity, no political stake in their community, and is socially isolated. This raises serious Thirteenth Amendment concerns. Payday lenders trap an already vulnerable group, keeping them tethered to the dire economic situation that they live in, while profiting from it.
There is a solution already in place in our Constitution. The Supreme Court has never struck down Congress when exercising its Thirteenth Amendment powers. The Thirteenth Amendment is the vehicle that Congress should use to regulate payday lenders. Instituting federal usury caps would halt triple digit interest rates in this country, and provide legal protection for the poor. Placing a national usury cap on these types of loans would be a huge step toward preventing the cycle of debt payday lenders promote. Borrowers would still have the opportunity to borrow, but the impossible interest rates that act as a strangle-hold on debtors would not be a part of the loans.
There is a broader danger if Congress fails to act on this Thirteenth Amendment problem. If Congress does not recognize and remedy the fact that these lenders are preying upon underclass in America, they fail to recognize that the underclass is a viable part of our economy and our society that deserves the same protections as those who already have a minimum stake in society. The underclass will continue to be disempowered, and will continue to suffer from the badges and incidents of slavery. If our country allows payday lenders to continue to profit from the underclass because of their economic, political, and social isolation, our country is not only approving these predatory, practices, but saying that it is acceptable for the underclass to be shackled to their place in society, and that it is acceptable for payday lenders to profit from their suffering.
Finally, to allow payday lenders to continue preying on the underclass, to allow them to continue making loans that de facto enslave borrowers, is to allow them to act without regard for the purpose of the Thirteenth Amendment, for it is an act taken against democracy, against the dignity of the toiling millions, against liberty, the peace, the honor, the renown, and the life of the nation.
. Zoe Lees will graduate from University of New Mexico School of Law in 2013.
