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Usury

Contents

Introduction

The Church has changed (as opposed to developed) its teaching on a number of occasions. The clearest example is that of Usury. It serves to refute the proposition that the Church has never officially taught moral error.

According to the "Catholic Dictionary", {New York: Macmillan, 1949):

USURY is strictly speaking profit exacted on a loan of money just because it is a loan. This is unjust, because money as money has no value save in its use. But interest may be justly charged for reasons extrinsic to the loan itself, such as the danger of non-repayment or loss of opportunities of other profit. In modern times this latter extrinsic title always exists owing to economic conditions. The amount of interest that may be reasonably charged is determined by the common estimation of the intelligent man; in the sin of usury this amount is exceeded.
Of course, "the danger of non-repayment or loss of opportunities of other profit" is inevitably associated with any loan in any circumstances or society. It existed in ancient times just as much as modern. This danger and loss is intrinsic to the act of lending, that is why to lend money is an act of generosity. It involves a loss of utility on the part of the lender and a gain on the part of the borrower. That is why the borrower is keen to borrow! The only difference is that now we do not think of money having "no value save in its use" any more than a plough or a house or almost anything else: what would be the value of a plough save for its use (and the fact that, like money, it could be exchanged for something else). The use of a plough is for ploughing, for a sculpture is to please the eye, for a CD is to entertain the ear (without a CD player it has no use and hence no value), for money is as convenient exchange. The modern mind is more comfortable with the idea that the only value that anything has is in its use! The error in the teaching is simply and directly in the assertion "This is unjust, because money as money has no value save in its use." While the premise is arguably correct, the conclusion does not follow from it, because the significance of the premise is misconstrued.

Scripture

Public loans and the humane spirit of the law in Christian nations have taught us to draw a clear line between lawful and usurious interest; but in the ancient world interest was always usurious. The Egyptian law contented itself with prohibiting interest which was more than 100%; the laws of Menu permitted an interest of 18% or even 24%, and 12% is, or was till quite lately, a minimum rate in the East. The Mosaic Law prohibits all lending at interest. This is plausibly because: The most ancient code only prohibits lending at interest to poor Hebrews:
If thou lend money to any of my people that is poor by thee, thou shalt not be to him as an usurer, neither shalt thou lay upon him usury. [Ex 22:25]
Leviticus repeats tbe precept of Exodus, forbidding also interest in kind [Levit. 25:35-37].
Take thou no usury of him, or increase: but fear thy God; that thy brother may live with thee. Thou shalt not give him thy money upon usury, nor lend him thy victuals for increase. [Lev 25:36,37]
Deuteronomy forbids interest to be taken from Hebrews generally [Deut. 23:20];
Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury of any thing that is lent upon usury: Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury: that the LORD thy God may bless thee in all that thou settest thine hand to in the land whither thou goest to possess it. [Deut 23:19,20]
Lending at interest generally is disaproved of in the strongest terms in the Psalms and Proverbs [Ps. 15:5, Prov. 28:8].

Nehemiah, after the exile, restored the observance of the law against taking interest from Hebrews, and made the usurers restore 1% of the money per month [2 Esdr. 5:11].

The Prophets condemned usury. They never distinguish between moderate and excessive levels of interest.

Behold, the LORD maketh the earth empty, and maketh it waste, and turneth it upside down, and scattereth abroad the inhabitants thereof. And it shall be, as with the people, so with the priest; as with the servant, so with his master; as with the maid, so with her mistress; as with the buyer, so with the seller; as with the lender, so with the borrower; as with the taker of usury, so with the giver of usury to him. The land shall be utterly emptied, and utterly spoiled: for the LORD hath spoken this word. [Is 24:1,2]

Woe is me, my mother, that thou hast borne me a man of strife and a man of contention to the whole earth! I have neither lent on usury, nor men have lent to me on usury; yet every one of them doth curse me.   [Jer 15:10]

He that hath not given forth upon usury, neither hath taken any increase, that hath withdrawn his hand from iniquity, hath executed true judgement between man and man. [Ez 18:8]

Hath given forth upon usury, and hath taken increase: shall he then live? he shall not live: he hath done all these abominations; he shall surely die; his blood shall be upon him. [Ez 18:13]

That hath taken off his hand from the poor, that hath not received usury nor increase, hath executed my judgements, hath walked in my statutes; he shall not die for the iniquity of his father, he shall surely live. [Ez 18:17]

In thee have they taken gifts to shed blood; thou hast taken usury and increase, and thou hast greedily gained of thy neighbours by extortion, and hast forgotten me, saith the Lord GOD. [Ez 22:12]

The New Testament gives no definite rule on the subject, though Christ's words, "Give to him that asketh thee" [Mt. 5:42] might be taken to exclude lending at interest.

Tradition

The Fathers

The Fathers are united in regarding all interest as usury, and, therefore, as a species of robbery. Their general opinion was that the prohibitions in the Old Testament bound Christians, and that in more astringent form, since the taking of interest from strangers had only been tolerated among the Jews for the hardness of their hearts. [Compiled from Henry Percival, ed, "The Seven Ecumenical Councils", pp 36-38, and Addis and Arnold "A Catholic Dictionary"] define usury as taking interest. The word Epiphanius employs is tokolhyia: taking interest.

Synodical Laws

There is no doubt that council after council, and pope after pope condemned usury. As soon as the Church could meet openly the long series of synodical condemnations of usury began: The earlier authorities only forbade under penalty the clergy from taking interest. This does not mean that the taking of interest was considered to be permissible for the laity. Such a thing, says Leo, is lamentable in the case of any Christian, and so of course specially reprehensible in clergymen. The mediaeval canon law extended the penalties to laymen. Thus the second Lateran Council, 1139 AD [c. 13, lib. v. Decret. tit. 19, c. 3, cf. c. 7], condemns usurers to excommunication and deprives them of Christian burial.
Furthermore, we condemn that practice accounted despicable and blameworthy by divine and human laws, denounced by Scripture in the old and new Testaments, namely, the ferocious greed of usurers; and we sever them from every comfort of the church, forbidding any archbishop or bishop, or an abbot of any order whatever or anyone in clerical orders, to dare to receive usurers, unless they do so with extreme caution; but let them be held infamous throughout their whole lives and, unless they repent, be deprived of a christian burial.
[Second Oecumenical Council of the Lateran (1139) Canon 13]
Clement V in the Council of Vienne[Clem. lib. v. tit. 5, "De Usuris", c. Ex gravi] declares it heresy to maintain pertinaciously that usury is not a sin.
Serious suggestions have been made to us that communities in certain places, to the divine displeasure and injury of the neighbour, in violation of both divine and human law, approve of usury. By their statutes, sometimes confirmed by oath, they not only grant that usury may be demanded and paid, but deliberately compel debtors to pay it. By these statutes they impose heavy burdens on those claiming the return of usurious payments, employing also various pretexts and ingenious frauds to hinder the return. We, therefore, wishing to get rid of these pernicious practices, decree with the approval of the sacred council that all the magistrates, captains, rulers, consuls, judges, counsellors or any other officials of these communities who presume in the future to make, write or dictate such statutes, or knowingly decide that usury be paid or, if paid, that it be not fully and freely restored when claimed, incur the sentence of excommunication.
They shall also incur the same sentence unless within three months they delete from the books of their communities, if they have the power, statutes of this kind hitherto published, or if they presume to observe in any way these statutes or customs.
Furthermore, since money-lenders for the most part enter into usurious contracts so frequently with secrecy and guile that they can be convicted only with difficulty, we decree that they be compelled by ecclesiastical censure to open their account books, when there is question of usury. If indeed someone has fallen into the error of presuming to affirm pertinaciously that the practice of usury is not sinful, we decree that he is to be punished as a heretic; and we strictly enjoin on local ordinaries and inquisitors of heresy to proceed against those they find suspect of such error as they would against those suspected of heresy.
[Pope Clement Vth at the Oecumenical Council of Vienne (1311-1312) Canon 29]
There is no doubt that any sum payable in addition to the capital was understood to be usurious. This follows from the fact that  the Church's condemnation of Usury had the practical consequence of making all forms of money lending the preserve of Jews. They were explicitly allowed by the Torah [Deut 23:19,20] to charge interest on loans made to gentiles. This had the further and most unfortunate consequence of making the Jews into a hated group of monopolists who were perceived, rightly or wrongly, as exploiting their position to the detriment of "God fearing Christians" and the economy in general.

If it had generally been thought that it was legitimate to make charges in consequence of
"titles running in parallel to the loan contract" (see Vix Pervenit, below),
then this could not have happened!

Between 1569 and 1586 three papal bulls were issued, each unequivocally denouncing usury.


Vix Pervenit

Benedict XIV
promulgated on 1st of November 1745



 [Extracts]

 #3.

I. The nature of the sin called usury has its proper place and origin in a loan contract. This financial contract between consenting parties demands, by its very nature, that one return to another only as much as he has received. The sin rests on the fact that sometimes the creditor desires more than he has given. Therefore he contends some gain is owed him beyond that which he loaned, but any gain which exceeds the amount he gave is illicit and usurious.

II. One cannot condone the sin of usury by arguing that the gain is not great or excessive, but rather moderate
or small; neither can it be condoned by arguing that the borrower is rich; nor even by arguing that the money borrowed is not left idle, but is spent usefully, either to increase one's fortune, to purchase new estates, or to engage in business transactions. The law governing loans consists necessarily in the equality of what is given and returned; once the equality has been established, whoever demands more than that violates the terms of the loan. Therefore if one receives interest, he must make restitution according to the commutative bond of justice; its function in human contracts is to assure equality for each one. This law is to be observed in a holy manner. If not observed exactly, reparation must be made.

 III. By these remarks, however, We do not deny that at times together with the loan contract certain other titles - which are not at all intrinsic to the contract - may run parallel with it. From these other titles, entirely just and legitimate reasons arise to demand something over and above the amount due on the contract. Nor is it denied that it is very often possible for someone, by means of contracts differing entirely from loans, to spend and invest money legitimately either to provide oneself with an annual income or to engage in legitimate trade and business.  From these types of contracts honest gain may be made.

 IV. There are many different contracts of this kind. In these contracts, if equality is not maintained, whatever is received over and above what is fair is a real injustice. Even though it may not fall under the precise rubric of usury (since all reciprocity, both open and hidden, is absent), restitution is obligated.  Thus if everything is done correctly and weighed in the scales of justice, these same legitimate contracts suffice to provide a standard and a principle for engaging in commerce and fruitful business for the common good. Christian minds should not think that gainful commerce can flourish by usuries or other similar injustices. On the contrary We learn from divine Revelation that justice raises up nations; sin, however, makes nations miserable.

V. But you must diligently consider this, that some will falsely and rashly persuade themselves - and such people can be found anywhere - that together with loan contracts there are other legitimate titles or, excepting loan contracts, they might convince themselves that other just contracts exist, for which it is permissible to receive a moderate amount of interest. Should any one think like this, he will oppose not only the judgement of the Catholic Church on usury, but also common human sense and natural reason. Everyone knows that man is obliged in many instances to help his fellows with a simple, plain loan. Christ Himself teaches this: "Do not refuse to lend to him who asks you." In many circumstances, no other true and just contract may be possible except for a loan.  Whoever therefore wishes to follow his conscience must first diligently inquire if, along with the loan, another category exists by means of which the gain he seeks may be lawfully attained.

#5.
Therefore We address these encyclical letters to all Italian Archbishops, Bishops, and priests to make all of you aware of these matters. Whenever Synods are held or sermons preached or instructions on sacred doctrine given, the above opinions must be adhered to strictly. Take great care that no one in your dioceses dares to write or preach the contrary; however if any one should refuse to obey, he should be subjected to the penalties imposed by the sacred canons on those who violate Apostolic mandates.

CHANGE IN TEACHING

Although Benedict XIV here condemns usury and interest, the seeds of change are present even in his condemnation. This is because the existence of "certain other titles", as later elucidated by the Catholic Dictionary, might be inevitable, endemic and contextually intrinsic to the nature of the case. Hence while condemning the charging of any interest (even on the grounds that the lender will otherwise not have a share in the profit that the borrower means to make with the capital) Benedict winks (whether he knew it or not) at the idea that there will be an inevitable charge to pay for the loan in view of these unavoidable "other titles".

Conclusions

The ancient teaching forbade all loan charges. It does not help to argue that circumstance have changed. In reality they have not in any way that matters. While the Fathers were right to insist on the imperative principle of loving one's neighbour, they were wrong about the technical facts of economic science.

One might suppose that the scriptural condemnation of usury was based on the presumption that the only people in a position to lend were those who had amassed a superfluity of wealth and had nothing better to do with their capital than to heap it in sacks with no possibility of gain and the definite risk of loss by theft. In such circumstances it would be wrong to profit from a neighbour's destitution. Of course it is immoral to lend at any rate of interest to someone money that one has no other use for. If one has no use for a thing, it has no value to one! This is seeking to profit directly from another's misery. Indeed, if one has not sufficient drive or imagination to put money to use, there is an argument (which Jesus proposed) that it should be taken from you and given to someone else who has! The miserly hoarding of wealth is disinflationary, anti-social and tends towards economic depression and social injustice.

Apart from the Biblical injunctions, the fathers and synods based their arguments on the principle, derived from Aristotle (as a Platonist, I sense a gloat coming on), that money was in itself barren. As this is objectively not the case: only an unimaginative mind makes money barren: money is pure potential awaiting resolution, there are clear grounds for overturning the long standing prohibition. It can be understood as a mistaken deduction based on misguided common-sense. Of course, if  this style of argument can be used to expose "traditional" moral teaching as un-Apostolic secular wisdom in our present area of concern, then presumably it can be used with similar effect in fields other than economics.

There is no way round the Biblical, Patristic and Magisterial teaching taken together, except to say that our understanding of money has improved and we now see that the traditional teaching was an understandable mistake all along.

Given its history, from being one of the most commonly reprobated crimes of the Middle ages, to being positively approved of in contemporary canon law, it is interesting to note that the "Catechism of the Catholic Church" does not discuss usury or the charging of interest. The only mention is in #2449:

Beginning with the Old Testament, all kind of juridical measures .... [such as the] prohibition of loans at interest .... answer the exhortation of [Deut 15:11]
no comment is made at all on the intrinsic rightness or wrongness; or the finality; or the immediate end of the deliberate decision to charge interest! Amusingly, slavery is explicitly condemned.

Conservative Catholics may insist that the Church still condemns excessive interest. However, there is no evidence of this. Finance houses charge consumer credit rates of 30% or more, yet their board members are not threatened with excommunication. Neither are they condemned as having banker natures which are intrinsically disordered with a tendency towards usury.

Acknowledgement

This document was inspired by an earlier study by Paul Halsall to be found in his "Compedium of Errors" on the Gay Catholic Handbook website.


Appendix: Entry "Usury" in "A Catholic Dictionary"

[Addis and Arnold: 10th Edition 1928 AD, very slightly edited by Pharsea]

Usury, in its wider signification, means all gain made by lending. This is a sense which usury often has in the classics, and, so understood, usury occurs whenever a man lends capital at interest. Now, however, usury signifies unjust gain on a loan, unjust because not justified by the loss, risk, and so on, of the lender or the advantage to the borrower, or because the amount of gain is exorbitant. In this latter case usury i.e. forbidden both by the natural law and by the Bible. It is always unjust, and its wickedness is aggravated when advantage is taken of the needs of the poor to secure usurious interest. But we shall see presently that both in the Old Testament and for a long time in Christian Legislation little distinction was made between the two kinds of interest. The laws of the Old Testament on the subject had a most important influence on Christian feeling, so that something must be said about the former here.

Usury in the Bible

Public loans and the humane spirit of the law in Christian nations have taught us to draw a clear line between lawful and usurious interest; but in the ancient world, as it is in the East at this day, interest was always usurious. The Egyptian law contented itself with prohibiting interest which was more than 100%; the laws of Menu permitted an interest of 18% or even 24%, and 12% is, or was till quite lately, a minimum rate in the East. Partly, no doubt, for this reason, partly because in an agricultural nation like Israel loans were only asked by those whose need put them at the creditor's mercy, partly to encourage kindness towards the poor, the Mosaic Law prohibits lending at interest. The most ancient code [Exod 21-23] prohibits lending at interest to poor Hebrews. Deuteronomy forbids interest to be taken from Hebrews generally [Deut. 23:20]; Leviticus repeats the precept of Exodus, forbidding also interest in kind [Levit. 25:35-37]. Lending at interest generally is reprobated in the strongest terms in the Psalms and Proverbs [Ps. 15:5, Prov. 28:8]. Nehemiah, after the exile, restored the observance of the law against taking interest from Hebrews, and made the usurers restore 1% of the money per month [2 Esdr. 5:11]. The New Testament gives no definite rule on the subject, though of course the spirit of Christ's words, "Give to him that asketh thee" [Mt. 5:42] excludes lending at interest.

Usury in The Pagan World

Both Plato ["Laws" #742] and Aristotle condemned the putting out of money at interest. The latter says:
"The most hated sort of money-making, and with the greatest reason, is usury, which makes a gain out of money itself, and not from the natural use of it. For money was intended to be used in exchange, but not to increase at interest. And this term usury, which means the birth of money from money, is applied to the breeding of money because the offspring resembles the parent. Therefore of all modes of making money this is the most unnatural" ["Politics" i. #10,11].
The money-lender's trade presented much the same aspect in the Roman State as in the old Eastern world. Loans were still usually made to the needy who could not protect themselves. The "usura centesima" (1% per month) was under the later Republic and the Empire the legal rate of interest.

Usury in the Church

These views of the Greek philosophers and Roman lawyers account for the feeling of the Church on the matter down to modern times.
The Fathers
The Fathers are unanimous in regarding all interest as usury, and, therefore, as a species of robbery. Their general opinion was that the prohibitions in the Old Testament bound Christians, and that in more astringent form, since the taking of interest from strangers had only been tolerated among the Jews for the hardness of their hearts. Tertullian ["Adv. Marc." iv. 24,25], Cyprian ["Testimon." iii. 48], Ambrose ["De Tobia" throughout; see especially l4 and 15], Basil ["in Ps." xiv.], Jerome ["in cap xviii. Ezech."], Chrysostom ["in Matt. Hom." lviii al. lvii], Augustine ["De Bapt. contr. Donat" iv. 9, "in Ps." xxxvi] Theodoret ["in Ps." xiv 5], is their condemnation of interest, appeal, or at least add a reference, to the Old Testament. Other Fathers, probably from mere accident and for the sake of brevity, omit any such appeal, e.g. Apollonius [apud Euseb. "H.B." v. 18], Commodian ("Adv. Gent. Deos" 65], Lactantius ["Inst.'' vi. 18], Epiphanius [in the "Egposit. Fid." at the end of the "Haer." n. 24], Augustine [Ep. 153].

These passages are all explicit. For example, Tertullian: "foeneris se, redundantiam; quod est usura"; Ambrose: "quodcunque sorti accidit"; Jerome: "usuram appellari et superabundantiam quicquid illud est, si ab eo quod dederit, plus acceperint", define usury as taking interest.  The word Epiphanius employs is tokolhyia, taking interest; "it is unjust", says Lacetantius, "to take more than one gave".

Conciliar and Papal Laws
From early times the clergy were forbidden, under penalty, to take interest. So: Canon. Apost. 44; Council of Arles 314 AD (c. 12); of Nicaea (c. 17); Laodicea (c. 4); Leo I. [Ep. 5, "Ad Episc. Gampan."], Council in Trullo (c. 10). Not that taking interest was considered by these authorities permissible in laymen; such a thing, says Leo, is lamentable in the case of any Christian, and so of course specially reprehensible in clergymen. The mediaeval canon law extended the penalties to laymen. Thus the second Lateran Council, 1139 AD [c. 13, lib. v. Decret. tit. 19, c. 3, cf. c. 7], condemns usurers to excommunication and deprives them of Christian burial. Clement V in the Council of Vienne [Clem. lib. v. tit. 5, "De Usuris", c. Ex gravi] declares it heresy to maintain perniciously that usury is no sin. It is plain from St. Thomas [2a 2ae, q. 78] that all taking of interest was still regarded as usury. Further, Alexander III. [lib. v. Decret. tit. 19, c. 6] decides a case proposed by the Bishop of Genoa. The merchants of that city used to sell spice above the market value, agreeing to wait a stated time for payment. The Pope replies that such a contract, unless there was some doubt whether the market price might not rise or fall in the meantime, though not strictly speaking usurious, was sinful.
The Modern View
It became more and more evident that commerce could not exist without a rate of interest, and reflection showed many just grounds on which a moderate rate could be exacted. Such are the risk to the lender, the loss to which he is put by the want of capital with which he might trade, the fruit which the money yields, and so on. The law can remove many of the dangers of usury by fixing a legal rate, and the poor are now just the persons who would suffer most, were all interest prohibited.

It was long, however, before opinion adapted itself to new circumstances. Luther consistently, and Melanchthon with some hesitation, stood where the Fathers and canonists had stood before them. Bossuet represents Calvin as the first theologian who propounded the modern distinction between interest and usury, and this seems to be true, so far at least as writing goes, though, according to Funk ["Zins und Wucher" p. 104], Eck and Hoogstraten had defended the same distinction at Bologna. Bossuet himself maintains the old doctrine as of faith ["Traite de 1'Usure"], and this though he was fully aware of the arguments on the other side. He rejects as sinful the charge of interest on the general ground that the lender could have used the capital he lends in trade, though, very inconsistsntly, he allows interest to be charged if the lender has forgone a particular and definite gain which he had in prospect.

Benedict XIV, in his encyclical to the Italian bishops, ["Vix pervenit" (1745)], condemned the doctrine that interest might be taken, merely on the ground of loan, however low the rate of interest, and although the borrower might be ever so rich and have profited by using the money in trade, though he leaves the questions about the accidental or extrinsic reasons for taking interest, the risk, lose of profit, and so on, quite unsettled. Further, this Pope, according to Ballerini [loc. cit. p. 615], allowed books defending the modern view to be dedicated to him. Keen controversy on the point among Catholics had arisen during that century, and the work of the famous Scipio Maffei (1675-1755) on the laxer side ["dell' impiego del danaro"] had attracted great attention.

In 1830 AD, the Congregation of the Holy Office, with the approval of Pius VIII, decided that those who regarded the fact that the law fixed a certain rate of interest as in itself a sufficient reason for taking it were "not to be disturbed''. This principle is now accepted throughout the Church, though the Holy See has given no positive decision on the matter. Even the laws restraining the clergy from taking interest are entirely obsolete.

Gury accepts the position tolerated in the decree of the Sacred Congregation, and argues that the State has power in certain cases to transfer the property of one subject to another. No doubt. But where is there the faintest proof that the State means to exercise this power in the case, and to transfer the interest from the pocket of the borrower to that of the lender? We may add that the Fathers, in the places quoted above, expressly deny that the State law makes usury lawful. Ballerini, rejecting Gury's explanation, argues that the words "loan" and so on imply spontaneous liberality, but that interest may be taken if there has been a previous contract to that effect. It is scarcely necessary to answer that the Fathers and Schoolmen meat much more than a truism like this: that a man must not require interest if he professes to lend without it.

Later on, Gury (ii. p. 611) seems to give the true reason. The ancient world believed that money was barren, and the Schoolmen inherited this principle from Aristotle. Experience proves that money, far from being barren, "produces fruit and multiplies of itself" [Gury, loc. cit.]), and a man may justly take e.g. 5% or more for money which is well worth that to the merchant, bank, railway company, or whatever, who receive the loan.

Bibliography



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