Most of us would not extend credit to somebody with low odds of returning it, so why do should we expect companies and organizations to behave differently? I feel like wrapping this up as in the pretty words "systemic inequality" is framing it as some constructed oppressive structure, which I'm loathe to do.
You don't like the term "systemic inequality" yet you're framing the problem in terms of our current system: very impersonal, only-the-numbers-and-ROI matters.
If you phrased it as "most of us would choose to exploit the more desperate because they have very little alternatives instead of willingly helping out" you might trigger different instincts. Instincts that would favor restricting interest rates and favoring a stronger social safety net.
There are more generous and forgiving systems that have existed successfully elsewhere in human history, so they're not incompatible with human nature, so yes, I think it's fair to characterize the American system as iniquitous.
Why should someone else's desparation and need be solely viewed through the lens of economic opportunity for someone else?
In it's simplest form, to make a loan, you have to have the resources to loan out to begin with. Furthermore, dereliction of debt is expected. There is no guarantee that people will repay in a timely manner, and missed payments/discharged debts are not uncommon. As such, interest rates can serve to create a sustainable system by helping to cover these debts.
Discount any consideration of their ability to repay, and what you give is no longer a loan, but a gift. A gift at the cost of others that you loan to.
What would be a more personal approach when figuring out whether or not to loan the money to someone?
And that condition will always benefit those who can return back. It's not about being newcomer or stranger, it's about being able to identify if it's a loan you can do.
Denying a 2% discount to people who are likely to default: ???