Usury is Catholic

[Timothy17]

Charging interest on loans is totally kosher with the Catholic Church, according to my RCIA instructor.

Someone want to explain to me at what point the Church stopped protesting charging people interest? I know (everyone does) that in the Middle Ages this was known as “usury” and forbidden. When did the Church officially recant this? And don’t just cite Vatican II or a Pope, actually link a document and the paragraph.

We rightfully protest abortion, for example, but we ignore the systematic and merciless plundering of entire nations, peoples and families on a global scale. Interest is the business of misers and the consequence is economic misery - why doesn’t the Church protest and condemn this? Maybe poor people and people who have a genuine interest about social justice might just take a second look at the Church if they saw that some of our teachings/rules weren’t just about sexual behaviour but also about defending and protecting the poor.

Honestly, have we just lost our nerve or are we simply too afraid to rock the establishment or is it more likely that too many Catholics are betrothed to loans to dare speak against the practice?

Recently it was my Aunt’s 50th birthday celebration, and they showed a slideshow and quoted some interesting statistics. One was the average salary a person made in 1960: $5,300.00, and the other was the average price of a house, $12,700.00. Someone could actually save their money for a few years and straight-up and outright buy their house, with the help of parents. Now, people need 25-40 year loans to afford one.

Why doesn’t the Church call a spade a spade and protest usury and an economic system based upon it?

 

[philippaul]

Usury is really defined as a lack of charity. If companies did not charge interest on loans, why would they loan money to anyone? I believe that certain loans with interest are actually in keeping with charity: they can allow you to buy a car that costs $20,000 that will get you to work making money to support your family when you don’t have that $20,000 in cash.

That being said, some loans with extremely high interest are indeed taking advantage of certain people. That’s why there are laws in place to make sure there’s a limit on interest. Now, maybe a debate could be brought forth on compounded interest but you have to admit that charging a fee relative to the amount being loaned is very reasonable and good for all.

Also, banking was not explicitly outlawed by the early Christians. Were you aware that Callistus when he was younger, (Pope Callixtus I) was a banker of sorts? I did some reading on some websites. There was nothing I could find that showed the early Roman Catholic Church was against earning a reasonable profit by charging interest on loans. In reality, loans must produce some kind of profit else the business will fail. Based on what I’ve been able to read, Callistus’ Christian customers did expect a return on their deposits. What happens if people default on their loans? There has to be a risk/reward factor else why ever loan people money if you don’t have to or the borrower is not your family?

Just my two cents. Peace be with you.

 

[beckycmarie]

As philippaul pointed out, charging interest is not necessarily usury.

See the Catholic Encyclopedia entries on Interest and Usury.

Here is what the Church actually teaches on usury, from the Vatican document, Compendium of the Social Doctrine of the Church:

323 On the other hand, economic goods and riches are not in themselves condemned so much as their misuse. **The prophetic tradition condemns fraud, usury, exploitation and gross injustice, especially when directed against the poor **(cf. Is 58:3-11; Jer 7:4-7; Hos 4:1-2; Am 2:6-7; Mic 2:1-2).

341. Although the quest for equitable profit is acceptable in economic and financial activity, recourse to usury is to be morally condemned: “Those whose **usurious and avaricious dealings lead to the hunger and death of their brethren **in the human family indirectly commit homicide, which is imputable to them”.[714] This condemnation extends also to international economic relations, especially with regard to the situation in less advanced countries, which must never be made to suffer “abusive if not usurious financial systems”.[715] More recently, the Magisterium used strong and clear words against this practice, which is still tragically widespread, **describing usury as “a scourge that is also a reality in our time and that has a stranglehold on many peoples’ lives”.**716]

Source: Compendium of the Social Doctrine of the Church

 

[jtodisco]

I agree with much of what you have to say Timothy. Though I can appreciate that some gain is needed in order to keep any loaning organization afloat, the current standards of what is “normal” and “acceptable” in this regard is excessive.

I remember not long ago my priest talking about how years ago loans between churches would be done with an interest rate of 1% (I’m not sure if that’s how it’s still done or not). The whole idea was that there would be some gain for the lender, but not at the expense of another.

There is a small international movement that is slowly gaining momentum which tries to tackle this problem. Various groups now offer things like “micro-loans”, which are loans (usually) made to individuals who need less money that most banking institutions would be willing to lend out. Normally these people would be forced to borrow more money than they needed in order to get the start up money for their business, or farm, or what not. This combined with high interest rates obviously caused/causes problems. Many of these micro-loan groups not only work with small borrows, but also keep interest rates low. And the amazing thing is that many of these micro-lenders are doing a pretty good business making enough money to expand and/or inspire others to follow their lead.

Anyway, in the end though I think that if this issue really concerns you that (for now) the best thing you can do is try to live according to your conscience since it is probably unlikely that there is going to be a big Church-wide or nationwide change in the way we as a world do business. So if you don’t like the practices of a loaning institution, then (if possible) do not support them with your money in any way. If anyone asks you why you’re doing this, let them know your misgivings. If you hear of someone needing a loan but worried about being able to afford the interest, perhaps (if you are financially capable) offer to loan them the money at a more reasonable rate.

God bless you for the concern you have for your fellow man.

"The tenth commandment forbids greed and the desire to amass earthly goods without limit. It forbids avarice arising from a passion for riches and their attendant power. It also forbids the desire to commit injustice by harming our neighbor in his temporal goods:

When the Law says, ‘You shall not covet’, these words mean that we should banish our desires for whatever does not belong to us. Our thirst for another’s goods is immense, infinite, never quenched. Thus it is written: ‘He who loves money never has money enough.’

It is not a violation of this commandment to desire to obtain things that belong to one’s neighbor, provided this is done by just means. Tradtional catechesis realistically mentions ‘those who have a harder struggle agaisnt their criminal desires’ and so who ‘must be urged the more to keep this commandment’:

…merchants who desire scarcity and rising prices, who cannot bear not to be the only ones buying and selling so that they themselves can sell more dearly and buy more cheaply; those who hope that their peers will be impoverished, in order to realize a profit either by selling to them or buying from them…physicians who wish disease to spread; lawyers who are eager for many important cases and trials." (CCC 2536 - 2537)

 

[Timothy17]

Thank you everyone for your contributions.

I still feel, in my deepest gut, that it’s serious folly to build nations on a premise (lending at interest) that is inherently merciless. It’s dangerous. I am not protesting earning interest on things like investments, but charging interest on loans. Loans, except in cases of desperation, generally appeal to our ambitions or vanity. Saving is not only more prudent and less dangerous, it leaves you with cash in case anything might go wrong, like losing your job.

Things to need to change, IMO. Common sense and basic financial wisdom would go a long, long way to helping families and economies grow and posper.

 

[jtodisco]

Saving up money for purchases and not spending beyond your means is obviously the best way to go about things, however you must keep in mind that for some people this is quite literally impossible to do. Many people simply do not earn enough money, try as the might, in order to support themselves and their family. Why that happens is a whole different topic (though related) but I won’t go off topic to discuss how it is that honest and hardworking people can still manage to starve at the end of the day. Anyway, so long as there are people who are desperate and/or ignorant there will be others willing to prey on them for profit. Our duty as followers of Christ is obviously to not behave in such a manner as that, and whenever possible help those who need our help.

And I do agree with you that to base a society’s economy on immorality is a sure way to create an immoral society.

 

[Dale_M]

Recently it was my Aunt’s 50th birthday celebration, and they showed a slideshow and quoted some interesting statistics. One was the average salary a person made in 1960: $5,300.00, and the other was the average price of a house, $12,700.00. Someone could actually save their money for a few years and straight-up and outright buy their house, with the help of parents. Now, people need 25-40 year loans to afford one.

Yes, but the average house back then was smaller than it is today, at least in the US. And simpler, with less luxuries. And with smaller yards.

However, land prices have skyrocketed in many urban areas and this is often a crucial part of the price, too.

 

[mpb74]

Timothy, I take your original post as well intentioned. Greed and selfishness have been character defects of mine from time to time. I feel embarrassed to look in the mirror when I realize i am acting or thinking that way. One of the great things about being raised Catholic is the activation of a healthy conscience and the deep seated knowledge that despite my best efforts, my human nature leads me to sinfulness. That said, I think your post omits the problem of interest needed to keep pace with inflation.
If you lend me $1000.00 today, you deserve the same amount back. It is only just. If I didn’t give you the same amount back that you lent me I would know I cheated you. You may have desired to go on a papal pilgrimage with that money. If I pay you back $1000.00 five years from now you may not be able to take that pilgrimage with that money. If inflation has made that thousand dollars to only have the purchasing power of $700.00 compared to when you lent me the money, I am not giving you justice because I have taken something from you. If you don’t mind the loss of purchasing power that is generous of you. I don’t believe it is greed however to expect full return of my purchasing power. (When I do personally lend money to individuals, I go in with the expectation I will not see a penny in return. I prevents feelings of resentment and injustice, which may only demean my character. plus they don’t ask again.) I am assuming you live in the US where we are on the verge of hyper inflation, imho.
As to the price of a house our government is quite complicit in the extreme increase in housing cost in the US 0ver the last 15-20 years or so. When the government began to require lenders to give loans to people with 0 to 3% down payment they caused a shortage. Assuming every person has a right to shelter, we are not entitled to own a private home, especially one we cannot afford. The banks gave these loans because they were protected from loss by government programs. Now we the taxpayers are on the hook for all the forclosures while many private individuals made hundreds of thousand of dollars on the sales of their property. I believe that is unjust.
Just curious, and I am not asking you to answer, but do you accept interest on any money you put in a bank, that is not in an investment? Dan

 

[manualman]

I don’t think you will find an official repeal of the principle that usury is a sin.

What happened is more like economics became a much more complex field and it became much harder to define the line between fair return on investment and usury. I tend to agree with the OP that the global economy today is WAY over the line into clear usury on a routine basis.

Long ago there was really no such thing as inflation. The value of money was stable, most things were bartered and currency was really just a resting place for excess capital not needed at the moment. In that light and situation, it IS unfair to charge interest for capital that is otherwise unproductive anyways, especially if the loan is secured in some way. But economics shifted radically and whole economies became reliant on cash instead of barter. Inflation began as early governments took advantage of cash based systems by simply printing more money (forging coins really) to fund their activities. Once that happened it was clearly unjust to disallow interest on loans.

I think the Church didn’t so much repeal any teaching on usury as became unable and unqualified to draw the line between legitimate and usurious loans.

But the principles are out there and it is OUR job (laity) to apply them. Personally, I don’t think my 5% home mortgage is usurious. But I’ll be danged if I’m going to go into credit card debt - those guys are blatant usurers. Car loans sometimes are too. Drive the beater until you can save enough to buy either another used car or even enouugh for new.

 

[tafan]

For what it is worth, I also think the Church needs to be more outspoken about usury, including a good definition of what constitutes sinful usury in today’s economy. IMO, there is a lot of it going on in today’s economy and it is targeting the poor and lower middle class. This includes 25% credit card rates, pawn shop loans, pay day loans, auto-matic lines of credit, tax-return loans, etc.

I tried to start a thread about it last week, but it went no where. I am considering writing a couple of letters to bishops, etc. It is a big problem, and the church is silent on the issue.

 

[JimG]

There are usurious interest rates, but defining them is a matter of prudential judgment. The Federal Reserve at the moment can hardly be charged with usury since it is practically lending money at zero percent to banks at the discount window.

As a result, banks are paying you maybe 1% on the money you loan them by having your deposits there. Some elderly people essentially have to live on the interest from their lifetime accumulated savings. At current interest rates, they can no longer do that. I would consider that the current interest rates on deposits and CD’s (and those are just loans from the public to the bank) are so low that they nearly constitute theft.

 

[Darkbloom]

I still feel, in my deepest gut, that it’s serious folly to build nations on a premise (lending at interest) that is inherently merciless. It’s dangerous.

That’s the flaw with your argument. It is based on emotion. Interest is a price like any other, in this case the price of money and the risk of loosing that money.

Also, what exactly is the difference between a loan and an investment? If I “invest” in Google, for example, I am essentially loaning them money in the hopes I get my principle plus extra (interest).

 

[Georgia]

This debate is like discussing the difference in having a glass of wine with dinner and in going on an all-out bender. One is wrong and the other is not.

Lending money has a cost, a cost that must be recovered through interest. Risk has a price, again something that must require potential reward in line with the risk.

Lending money at extreme rates is sucking the blood of those desperate enough to get the loans. Payday loans, title loans, and the like seem to me to touch the edge of what a decent society should allow. Poor people driven to those loans are the worse for the lending. They would be better served if those were not available. Paying back at several hundred percent annual rates may work in the short term, but it leaves the people in a far worse position in the long term.

There is nothing wrong with my getting a mortgage at a market rate. There is also nothing wrong with my buying a car with interest rates that are not shocking. Both systems work well. Sure, people once paid with cash, but our paychecks are now cut in half with various deductions and people have higher standards of living. Both have an effect on available cash.

 

[manualman]

For what it is worth, I also think the Church needs to be more outspoken about usury, including a good definition of what constitutes sinful usury in today’s economy. IMO, there is a lot of it going on in today’s economy and it is targeting the poor and lower middle class. This includes 25% credit card rates, pawn shop loans, pay day loans, auto-matic lines of credit, tax-return loans, etc.

I tried to start a thread about it last week, but it went no where. I am considering writing a couple of letters to bishops, etc. It is a big problem, and the church is silent on the issue.

The thing is that they can’t! The Church is not granted infallibility in matters of economic science. She doesn’t have a charism for divining the line between a fair interest rate and a usurious one. She has been given the insight to declare that there is one and why, but it becomes an individual prudential judgement the we each need to apply.

Same reason the Church has never published a detailed book listing in excruciating detail each “serious reason” where it is permissible for a couple to use NFP to avoid pregnancy rather than just leaving it up to God. Can’t be done. Too many permutations and variables. People just need to learn the principles and live by them.

 

[JimG]

I still contend that in general, interest rates are way too low, and are being held at artificially low levels. There are widows who depend on interest income to live. They can’t live on less than 1%, which is what they are getting now. So they spend down their savings and outlive their income, becoming a burden on society.

Credit cards and payday loans, however, have always charged interest rates that are way too high. At the same time, it may be that their loans have a much higher risk of loss. I’ve often wondered, if a payday loan customer could obtain the same amount of money from a bank branch next door to a payday loan shop at cheaper interest rates, would they patronize the bank branch instead of the payday lender?

And why routinely pay 25% or more interest rates on credit card purchases for something that ought to be bought with cash? I once asked someone why he didn’t just pay off his credit card every month (he could afford it.) His reply was, “what’s the point of having a credit card if you don’t carry a balance? You’re not really getting any credit then, are you.?”

 

[Cambridge]

After reading these passages, listed at Wikipedia, from The Old Testament, it seems like any follower of Christ who charges another one interest might be guilty of usury. Of course, the exception of inflation might apply, but we have a current rate of inflation of only about one percent. So, charging more interest than that, seems like it could be usury. Incidentally, charging interest to a non-follower/rejector of Christ, based on these Old Testament passages, seems to be o.k. I suppose there, the not too harsh rule might seem consistent with the entire Bible and Tradition.

There’s another verse, near one of those passages, that mentions returning your brother’s coat to him, if it is the only one he has to sleep in at night. In other words, even lending at no interest, did not give you the right to retain some collateral, even when the loan had not been repaid, if it caused the borrower to go without something he needed, for the basic necessities of life.

Incidentally, the use of the word “brother,” in context, appears to refer to any Israelite.

[Exodus 22:25] 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.
[Leviticus 25:36] Take thou no usury of him, or increase: but fear thy God; that thy brother may live with thee.
[Leviticus 25:37] Thou shalt not give him thy money upon usury, nor lend him thy victuals for increase.
[Deuteronomy 23:19] Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury of any thing that is lent upon usury:
[Deuteronomy 23:20] 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. (KJV)

en.wikipedia.org/wiki/Usury#The_Old_Testament

 

[JimG]

After reading these passages, listed at Wikipedia, from The Old Testament, it seems like any follower of Christ who charges another one interest might be guilty of usury.

So is it OK to save money by putting it into a savings account at a bank or credit union? By doing so, you are lending money to them at interest. Are you guilty of usury?

With the current artificially low interest rates, I suggest that the moral fault lies with paying too little interest rather than too much. The bank is not paying me enough interest for the use of my money. (Not just me, of course, most depositors–i.e. lenders–are being deprived of a just income.)

 

[JackQ]

Charging interest on loans is totally kosher with the Catholic Church, according to my RCIA instructor.

Someone want to explain to me at what point the Church stopped protesting charging people interest? I know (everyone does) that in the Middle Ages this was known as “usury” and forbidden. When did the Church officially recant this? And don’t just cite Vatican II or a Pope, actually link a document and the paragraph.

We rightfully protest abortion, for example, but we ignore the systematic and merciless plundering of entire nations, peoples and families on a global scale. Interest is the business of misers and the consequence is economic misery - why doesn’t the Church protest and condemn this? Maybe poor people and people who have a genuine interest about social justice might just take a second look at the Church if they saw that some of our teachings/rules weren’t just about sexual behaviour but also about defending and protecting the poor.

Honestly, have we just lost our nerve or are we simply too afraid to rock the establishment or is it more likely that too many Catholics are betrothed to loans to dare speak against the practice?

Recently it was my Aunt’s 50th birthday celebration, and they showed a slideshow and quoted some interesting statistics. One was the average salary a person made in 1960: $5,300.00, and the other was the average price of a house, $12,700.00. Someone could actually save their money for a few years and straight-up and outright buy their house, with the help of parents. Now, people need 25-40 year loans to afford one.

Why doesn’t the Church call a spade a spade and protest usury and an economic system based upon it?

I give up.

 

[Cambridge]

So is it OK to save money by putting it into a savings account at a bank or credit union? By doing so, you are lending money to them at interest. Are you guilty of usury?

With the current artificially low interest rates, I suggest that the moral fault lies with paying too little interest rather than too much. The bank is not paying me enough interest for the use of my money. (Not just me, of course, most depositors–i.e. lenders–are being deprived of a just income.)

To offset inflation; maybe, but to pay you an income, why? You aren’t producing anything.

http://t1.gstatic.com/images?q=tbn:ANd9GcT-vEHs73rpIbz2UvTY7soCFcH_bbdl9YDjEP5GYk9IZMbefmvyWg

 

[JimG]

To offset inflation; maybe, but to pay you an income, why? You aren’t producing anything.

The interest paid on a savings account will not offset inflation.

If you spend less than you earn, you will have savings. You can either put savings in a bank account, thereby charging interest for it, with little (but not zero) risk, or you can invest it in stocks or business for the hope of earning more income, but at a higher risk.

If a widow receives a life insurance settlement, she can either spend it, in which case she will surely not outlive the income, or she can invest or save it, and live off the dividends or interest, leaving the original amount untouched. That’s the correct way to handle life insurance proceeds. But should she receive zero income for this risk?

It has been said that there are only two sources of income: people working, and money working. Neither works for free, although the Fed seems to think now that widows should invest and save for zero income.