For the most part, America abolished debtors prisons in 1833, and they were found unconstitutional in 1983 (Bearden v. Georgia). I say for the most part because that offer doesn't apply to things like fines and court fees [1].

Assuming you're truthful in your application for the loan, it's not theft. It may be a poor decision on the part of the lender, but of course, that's why interest rates exist and scale with your likelihood of nonrepayment.

[1] https://www.forbes.com/sites/nicksibilla/2019/08/30/federal-...

In the first scenario the borrower can't pay their rent, is evicted and possibly becomes homeless.

In the second scenario the worst case is that the payday lender becomes insolvent, the company collapses, and the workers go and find other jobs because they're not the ones suffering financial stress.

How is that worse.

While I agree with the comments about predatory lending, I kind of feel that it has more to do with being more financially aware before agreeing to such loans. Payday lending is closer to the predatory lending practices, but I see the same kind of attitude among borrowers at lower interest rate products as well.

Borrowing when you know that you will not be able to repay the loan (or with the intention of not repaying) is also wrong.

> In the second scenario the worst case is that the payday lender becomes insolvent, the company collapses, and the workers go and find other jobs because they're not the ones suffering financial stress.

In this case, the employees of the so called lender are rendered jobless and they don't meet their financial obligations and might become homeless themselves.

Your comparing someone who is in immediate financial stress to a layed off employee who may run into trouble in the future.