Usury

[track2004]

Okay, so my father is a Loan Officer at the local bank. His job would have been considered immoral and usurous as little as 500 years ago. The Bible comes out agains usury and there were even a few concils that did. So my question is what changed?

The concept of usury is still a major issue in developing countries, espically Muslim ones, because they see usury as immoral. We evidently used to but got over it. In the Bible it seems to be talking about charging obscene amounts of interest, but still Dante had an entire circle for Usuers. So I'm confused. How and why did this change? And what do you all think about it?

[LittleLes]

[quote name='track2004' date='Jul 22 2005, 10:25 AM']Okay, so my father is a Loan Officer at the local bank.  His job would have been considered immoral and usurous as little as 500 years ago.  The Bible comes out agains usury and there were even a few concils that did.  So my question is what changed? 

The concept of usury is still a major issue in developing countries, espically Muslim ones, because they see usury as immoral.  We evidently used to but got over it.  In the Bible it seems to be talking about charging obscene amounts of interest, but still Dante had an entire circle for Usuers.  So I'm confused.  How and why did this change?  And what do you all think about it?
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RESPONSE:

No. The traditional Catholic position (and one could argue infallible by way of the ordinary universal magisterium) was that charging ANY interest regardless of the amount was sinful and restitution had to be made.

This is the first portion of the papal encyclical Vix Pervenit on the subject:

"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."

Littleles

[peach_cube]

[quote name='LittleLes' date='Jul 22 2005, 12:58 PM']RESPONSE:

No. The traditional Catholic position (and one could argue infallible by way of the ordinary universal magisterium) was that charging ANY interest regardless of the amount was sinful and restitution had to be made.

This is the first portion of the papal encyclical Vix Pervenit on the subject:

"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."

Littleles
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Les,

The problem that was discovered shortly after this encyclical was that it could also be used to condemn any type of trade (Ibelieve it was in the 11 century). Shortly, there after it was clarified to add that monatary gain was allowed by the lender, as long as the transaction in question had significant risk. (I'll find the source if you want) This clarification then made it so traders could not be charged and financial transactions would be allowed as long as a significant risk was shown.

Do I think that lending institutions today have a significant risk toward their ability to make monatary gains. Certainly people go bankrupt and do not follow through on payments to loans, but I believe that the law is written so that their really is not a significant risk to their ability to make money. That is just my opinion. Someone who works for a banking institution may say otherwise. When major lending corporations can make billions per year I tend to lean towards it being immoral.

[jasJis]

[quote]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."
[/quote]It seems to me that this is speaking against changing intrest, payment on demand, etc. For example, Loaner would loan somebody 100 coins but only hand them 95. The 5 coin difference was the cost of the money. Usury came to play when the Loaner woul start charging additional intrest and compound it (intrest on intrest and 'late fees') then would foreclose on the collateral. It's basically a citation against taking advantage of others in times of need. All the terms and costs of the loan or transaction must be clarified. Another trick was to leave repayment terms open ended than demand full payment immediately in order to confiscate the collateral. Note this: "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." What else do you think it means "once the equality has been established." You can charge for the cost of the loan, but the cost must be fairly established and adhered to.

[LittleLes]

[quote name='peach_cube' date='Jul 22 2005, 11:23 AM']Les,

The problem that was discovered shortly after this encyclical was that it could also be used to condemn any type of trade (Ibelieve it was in the 11 century).  Shortly, there after it was clarified to add that monatary gain was allowed by the lender, as long as the transaction in question had significant risk.  (I'll find the source if you want) This clarification then made it so traders could not be charged and financial transactions would be allowed as long as a significant risk was shown.

Do I think that lending institutions today have a significant risk toward their ability to make monatary gains.  Certainly people go bankrupt and do not follow through on payments to loans, but I believe that the law is written so that their really is not a significant risk to their ability to make money.  That is just my opinion.  Someone who works for a banking institution may say otherwise.  When major lending corporations can make billions per year I tend to lean towards it being immoral.
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RESPONSE:

This encyclical is from 1745. But it marked the transitional period where Church teaching went from the condemnation of charging any interest to allowing and even encouraging the charging of interest. under a different name.

The second part of the encyclical makes provision for this change.

"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."

If creates a moral fiction. While charging interest is still technically a sin, if the interest is claimed to be an "other title," charging interest is OK. It just can't be called "interest" because of the biblical injunction against charging interest

The prohibition against charging interest ,like the moral legitimacy of chattel slave ownership, is one of the traditional Catholic moral teachings that have changed.

LittleLes

[Socrates]

[quote name='LittleLes' date='Jul 22 2005, 12:58 PM']RESPONSE:

This encyclical is from 1745. But it marked the transitional period where Church teaching went from the condemnation of charging any interest to allowing and even encouraging the charging of interest. under a different name.  

The second part of the encyclical makes provision for this change.

"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."

If creates a moral fiction. While charging interest is still technically a sin,  if the interest is claimed to be an "other title," charging interest is OK. It just can't be called "interest" because of the biblical injunction against charging interest

The prohibition against charging interest ,like the moral legitimacy of chattel slave ownership, is one of the traditional Catholic moral teachings that  have changed.

LittleLes
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More spamming of a dead topic.

This is [url="http://www.catholic.com/thisrock/1997/9709fea3.asp"]refuted here.[/url]

[LittleLes]

[quote name='jasJis' date='Jul 22 2005, 12:19 PM']It seems to me that this is speaking against changing intrest, payment on demand, etc.  For example, Loaner would loan somebody 100 coins but only hand them 95.  The 5 coin difference was the cost of the money.  Usury came to play when the Loaner woul start charging additional intrest and compound it (intrest on intrest and 'late fees') then would foreclose on the collateral.  It's basically a citation against taking advantage of others in times of need.  All the terms and costs of the loan or transaction must be clarified.  Another trick was to leave repayment terms open ended than demand full payment immediately in order to confiscate the collateral.  Note this: "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."  What else do you think it means "once the equality has been established."  You can charge for the cost of the loan, but the cost must be fairly established and adhered to.
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RESPONSE:

The original teaching was simple and unambiguous:

"...any gain which exceeds the amount he gave is illicit and usurious."

Please note the operative phrase is "any gain."

Equality is established when the borrower pays back precisely the amount he actually received from the lender and no more.

But this teaching has been changed, as noted above.

[jasJis]

[quote name='LittleLes' date='Jul 22 2005, 01:41 PM']RESPONSE:

The original teaching was simple and unambiguous:

"...any gain which exceeds the amount he gave is illicit and usurious."

Please note the operative phrase is "any gain."

Equality is established when the borrower pays back precisely the amount he actually received from the lender and no more.

But this teaching has been changed, as noted above.
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[/quote]No it hasn't changed. Read again.
"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."

Your misinterpretation would mean that all trade would be illicit. Your interpretation doesn't make sense in the context of the paragraph. Why would the equality have to be established unless there is room for discussion. One also has to look at the simplistic economic understanding of the time. Until much more recently, the concept of economics was a net-sum model. They did not comprehend how profit (and especially interest) grows an economy (GDP). Your simplistic and twisted misinterpretation must ignore 'estabishing equality'.

[LittleLes]

[quote name='jasJis' date='Jul 22 2005, 02:32 PM']No it hasn't changed.  Read again.
"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."

Your misinterpretation would mean that all trade would be illicit.  Your interpretation doesn't make sense in the context of the paragraph.  Why would the equality have to be established unless there is room for discussion.  One also has to look at the simplistic economic understanding of the time.  Until much more recently, the concept of economics was a net-sum model.  They did not comprehend how profit (and especially interest) grows an economy (GDP).  Your simplistic and twisted misinterpretation must ignore 'estabishing equality'.
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RESPONSE:

The traditional teaching of the Church on loaning for interest was that any amount gained in excess of the amount loaned was illicit and had to be returned.

"...any gain which exceeds the amount he gave is illicit and usurious".

"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."

I'm not trying to justify the economics of it. I'm just stating the traditional teaching of the Church based on its interpretation of scripture.

Until it changed, like the teaching on the licitness of slavery.

[track2004]

Okay just wanted to make sure the Church changes. Like the licitness of charging interest and the illicitness of slavery.

[LittleLes]

[quote name='track2004' date='Jul 22 2005, 08:26 PM']Okay just wanted to make sure the Church changes.  Like the licitness of charging interest and the illicitness of slavery.
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RESPONSE:

Yes, indeed. The Church changed her moral teachings regarding chattel slavery and charging interest. But this poses two questions:

(1) The Church maintains that she always interprets scripture correctly. But both these teachings were based on the church's interpretation of scripture. Yet both were reversed. Does this mean that scripture itself was in error, or that the Church was in error in its interpretation of scripture?

(2) And regarding infallibility, we are told that in the area of faith and morals, whatever the church has taught at all times and in all places in infallibly taught by virtue of the universal ordinary magisterium. But for more than 3/4th of her history, the church taught the moral licitness of chattel slavery and the illicitness of loaning at interest. But these teachings were reversed. Therefore, didn't an "infallible" teaching of the magisterium change because it was in error?

[Aloysius]

there is no change in regards to the teaching regarding usury-interest.

charging interest on an unproductive loan is wrong. if the loan is productive the lender can share in the profit made by the loan, but if the loan is not profitable interest is no more morally licit than property tax.

modern conditions have really ruined the previous Catholic understanding of money in its relation to real production and real goods. If one is completely in charge of the lending, they should take into account and only charge interest based upon how much profit the loan produces. but your father as a loan officer at the bank can't really control that and should work within the system. as Aquinas said, if a lender is predetermined to charge money at interest anyway they can be worked with provided there is a good aim in mind.

oh, and littless, that last post has nothing to do with the topic of this thread.

interest/usury is a dangerous concept that has promoted less and less of a society of OWNERSHIP and more and more of a society of RENTERSHIP... coupled with property tax, it is nearly impossible to truly own private property anymore. that was the ultimate wisdom behind our Catholic condemnation of usury/interest ("usury is not excessive interest, it is any interest at all on an unproductive loan" --Hillaire Belloc)... ownership. it was Martin Luther who first gave some leeway to charging interest while still having reservations... and John Calvin really broke it down more.

The Church may not talk about it as much anymore, but the luminous decision of the Second and Third Lateran Councils stand infallibly condemning usury (charging any interst at all on an unproductive loan) as an immoral practice.
[quote]Lateran II canon 13 "Furthermore we condemn that practice accounted despicable and blame worthy 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."

Lateran III canon 25 ""Nearly everywhere the crime of usury has become so firmly rooted that many, omitting other business, practice usury as if it were permitted and in no way observe how it is forbidden in both the Old and New Testament. We therefore declare that notorious usurers should not be admitted to communion of the altar or receive Christian burial if they die in this sin."
[/quote]
I think we don't talk about it much now because we have basically lost the battle for now against usury, it's everywhere and really cannot be stopped since it is already so deeply rooted in the socio-economic reaity of the day.

for instance, utlimately people shouldn't have to borrow money for something as basic to mankind as a house, a shelter. however, with the modern condition of the world, they sadly do need to borrow money. There is no one who is going to lend them money without wanting to make a profit, so they are going to 'sell the use of money' as is forbidden by traditional morality. since the endeavor of buying a house is something that is a completely unproductive loan, there is no way except by interest a lender would make money, and since we're so deep rooted in it that to own a home you need to borrow money, lending money at usury becomes something that cannot be avoided in the present conditions. there would have to be a massive shift in the socio-economic realities of the day... and that's not happening anytime soon.

[Aloysius]

[quote name='jasJis' date='Jul 22 2005, 03:32 PM']No it hasn't changed.  Read again.
"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."

Your misinterpretation would mean that all trade would be illicit.  Your interpretation doesn't make sense in the context of the paragraph.  Why would the equality have to be established unless there is room for discussion.  One also has to look at the simplistic economic understanding of the time.  Until much more recently, the concept of economics was a net-sum model.  They did not comprehend how profit (and especially interest) grows an economy (GDP).  Your simplistic and twisted misinterpretation must ignore 'estabishing equality'.
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your view of previous economic understandings is a bit of chronological snobbery, there were very profound scientific economic understandings emerging throughout the middle ages. They were founded on Aristotle and the concept of money being closely related to actual goods.

"How the Catholic Church built Western Civilization" is a must-read book, especially their chapter on economic development during the middle ages. G.K. Chesterton and Hilaire Belloc also have good reads about these subjects.

Anyway, to the original question, I answer with Aquinas

[quote]To take usury for money lent is unjust in itself, because this is to sell what does not exist, and this evidently leads to inequality which is contrary to justice....

Now money, according to the Philosopher (Ethics v, Polit. i) was invented chiefly for the purpose of exchange: and consequently the proper and principal use of money is its consumption or alienation

whereby it is sunk in exchange. Hence it is by its very nature unlawful to take payment for the use of money lent, which payment is known as usury: and just as man is bound to restore ill-gotten goods, so is he bound to restore the money which he has taken in usury....

A lender may without sin enter an agreement with the borrower for compensation for the loss he incurs of something he ought to have, for this is not to sell the use of money but to avoid a loss. It may also happen that the borrower avoids a greater loss than the lender incurs, wherefore the borrower may repay the lender with what he has gained. But the lender cannot enter an agreement for compensation, through the fact that he makes no profit out of his money: because he must not sell that which he has not yet and may be prevented in many ways from having....

It is lawful to borrow for usury from a man who is ready to do so and is a usurer by profession; provided the borrower have a good end in view, such as the relief of his own or another's need.[/quote]

I would, based on the last sentence, think your father is fine because it is not his decision to lend based on usury, but the bank who is "ready to do so" and your father is simply applying the bank's policies with a good end in view, helping those who need loans.

The wisdom of the Church in condemning interest in the past is visible today in the high costs of homes, the instability of our modern society and culture (in that people are always moving moving moving, properties are never really owned).

slavery is a whole other animal for another thread and another time (preferably without the input of the obstinant littleless repeating the same garbage that didn't convince me the last hundred times he tried to argue it)... but I personally don't believe there is a change in the moral teachings as they were ever taught by the universal ordinary magisterium or by the Councils at all because of my understanding of the different natures of different types of quoteunquote "slavery"

[Aloysius]

Oh, and just to defend my definition of usury as any interest at all upon an UNPRODUCTIVE loan, I point to the definitive decision of the tenth session of the Fifth Lateran Council

[quote]"For that is the real meaning of usury: when, from its use, a thing which produces nothing is applied to the acquiring of gain and profit without any work, any expense or any risk."[/quote]

[LittleLes]

[quote name='Aloysius' date='Jul 24 2005, 03:53 PM']there is no change in regards to the teaching regarding usury-interest.


[/quote]
RESPONSE:

You are correct. The biblical prohibition against charging interest remains on the books:

For example Eziekiel 18:13:
"But if he begets a son who is a thief, a murderer, or who does any of these things (though the father does none of them), a son who eats on the mountains, defiles the wife of his neighbor, oppresses the poor and needy, commits robbery, does not give back a pledge, raises his eyes to idols, does abominable things, LENDS AT INTEREST AND EXTRACTS USURY--this son certainly shall not live. Because he practiced all these abominations, he shall surely die; his death shall be his own fault."

And from the Catholic Encyclopedia, there is this:

"Nevertheless, the 12th canon of the First Council of Carthage (345) and the 36th canon of the Council of Aix (789) have declared it to be reprehensible even for laymen to make money by lending at interest. The canonical laws of the Middle Ages absolutely forbade the practice. This prohibition is contained in the Decree of Gratian, q. 3, C. IV, at the beginning, and c. 4, q. 4, C. IV; and in 1. 5, t. 19 of the Decretals, for example in chapters 2, 5, 7, 9, 10, and 13. These chapters order the profit so obtained to be restored; and Alexander III (c. 4, "Super eo", eodem) declares that he has no power to dispense from the obligation."

However, around the 1700's, the Catholic Church changed this teaching somewhat and taught that if interest was called a "parallel title" instead, then interest could be charged without sin.

Apologists have developed very lengthy rationalizations trying to avoid this fact of history and scripture, because the Church is not suppose to change a teaching that is infallible by way of the universal ordinary magisterium. Still, it can be found in the papal encyclical Vix Pervenit.