Usury or Charging Interest

[Holly3278]

Hello everyone. For the past day or two I have been periodically thinking about usury. Usury is a sin. It seems to be the same thing as charging interest on a loan or something. Would it be that charging interest on a loan or other debt would be the sin of usury?

Also, I may be wrong about usury being a sin. I looked up usury in the Catechism of the Catholic Church but it did not come up with any results.

 

[PaulfromIowa]

As a practical matter, our economy depends on the loaning of money. Interest must be charged above the rate of inflation or the money would be a gift. It is true that many medieval Christians thought that charging any interest was usury but that is now regarded as incorrect.

 

[Starrsmother]

There is a HUGE difference between charging a reasonable interest for the privilege of using someone else’s money–such as in a home loan or car loan or even if a family member loans you money and charges a reasonable interest rate—and usury. Usury is not only mentioned in the bible, but in our laws here in the USA too. Usury involves charging a ridiculously high amount of interest–usually because the person borrowing the money desperately needs it and thus they are in no position to say no. An example of usury is loaning a friend $100 for a week until pay day so their electricity doesn’t get turned off but asking for $50 in interest for those 7 days until they can repay the borrowed money.,

Another “sort of” example is what happens often after a hurricane–where someone buys up huge amounts of bottled water and then sells it at 4 times the normal going cost because they know they can do so, as nobody can go without H2O.

There is absolutely nothing wrong with charging or paying reasonable and fair interest on borrowed money. No sin is involved! I’m pretty sure that even the Vatican bank charges and pays out interest on its accounts!

 

[dmar198]

Hello everyone. For the past day or two I have been periodically thinking about usury. Usury is a sin. It seems to be the same thing as charging interest on a loan or something. Would it be that charging interest on a loan or other debt would be the sin of usury?

Not quite. In its modern sense, usury is charging excessive interest on people who are desperate for cash. Usury is typically called predatory lending now, and usurers are typically called loan sharks.

In its ancient sense, usury was charging interest on money that someone needed to purchase items of basic necessity. Its ancient sense was tied to the way money was used in economies where money was scarce. In a poor economy, the lower class doesn’t have much money, and the money they have is almost exclusively used for items of basic necessity. When people have “extra” money, they can use it for things like recreation and expanding their income through investments. Those things aren’t necessary, and if people have a good reason to borrow money to pay for such things, it is not a sin to charge them for your loan.

In the patristic ages and the scholastic age, you sometimes see authors who condemned all interest-taking because there were virtually zero people who were in a position to borrow money for non-necessary reasons. People who had lots of money didn’t need to borrow, and people who had little money couldn’t afford to borrow for recreational or other purposes. If they requested a loan, it wasn’t because they wanted to borrow money, it was because they needed to.

Also, I may be wrong about usury being a sin. I looked up usury in the Catechism of the Catholic Church but it did not come up with any results.

Usury is a sin, but in our economy usury is not identical to charging interest.

The Catechism mentions usury in two passages: CCC 2269 and CCC 2438.

CCC 2269 says: “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.”

CCC 2438 says: “There must be solidarity among nations which are already politically interdependent. … In place of abusive if not usurious financial systems…there must be substituted a common effort to mobilize resources toward objectives of moral, cultural, and economic development, redefining the priorities and hierarchies of values.”

Other recent condemnations of usury are collected here: forums.catholic-questions.org/showthread.php?p=10755905

Please let me know if this post was any help.

 

[Seraphim73]

Another “sort of” example is what happens often after a hurricane–where someone buys up huge amounts of bottled water and then sells it at 4 times the normal going cost because they know they can do so, as nobody can go without H2O.

That’s not usury that’s price controlled economics. There is no such thing as a “normal” price for something.

 

[LeafByNiggle]

That’s not usury that’s price controlled economics. There is no such thing as a “normal” price for something.

You are right that it is not usury. It is taking unfair advantage of people’s misery, and it is unjust.

 

[Seraphim73]

You are right that it is not usury. It is taking unfair advantage of people’s misery, and it is unjust.

It has nothing to do with being fair or just and everything to do with the law of supply and demand. The reality is water bottles, just like every other resource, is scarce. That’s even more true in the case of a natural disaster. The water has to be rationed someway. That is an inescapable reality.

So lets think through what actually happens in situations like this instead of relying on emotion. If water quadruples in price people who may have bought cases of water at a lower price, maybe even stockpiling it, will now buy much less water. That leaves more of the water, which if you remember is a scarce resource, for other people to buy.

Secondly what happens to the supply of water in a situation like this? Because they are getting four times the “normal” price for water suppliers from miles and miles away are going to be rushing as quickly as they can to truck water to the disaster site in order to take advantage of the higher prices. In fact many will be likely to take extraordinary steps and be willing to take a much greater risk for the higher profits.

As a result the area is flooded with water bottles. Supply goes through the roof and prices come down very very quickly, most likely to less that what the “normal” price was before the disaster. So the so called unfair and unjust price gouging winds up making more water available for those who need it and creates an influx of additional needed supplies. Whereas price gouging laws do tremendous harm to those they are supposed to protect by creating dramatic shortages and actually discouraging people from shipping more supplies to the affected area.

 

[LeafByNiggle]

It has nothing to do with being fair or just and everything to do with the law of supply and demand. The reality is water bottles, just like every other resource, is scarce. That’s even more true in the case of a natural disaster. The water has to be rationed someway. That is an inescapable reality.

So lets think through what actually happens in situations like this instead of relying on emotion. If water quadruples in price people who may have bought cases of water at a lower price, maybe even stockpiling it, will now buy much less water. That leaves more of the water, which if you remember is a scarce resource, for other people to buy.

Secondly what happens to the supply of water in a situation like this? Because they are getting four times the “normal” price for water suppliers from miles and miles away are going to be rushing as quickly as they can to truck water to the disaster site in order to take advantage of the higher prices. In fact many will be likely to take extraordinary steps and be willing to take a much greater risk for the higher profits.

As a result the area is flooded with water bottles. Supply goes through the roof and prices come down very very quickly, most likely to less that what the “normal” price was before the disaster. So the so called unfair and unjust price gouging winds up making more water available for those who need it and creates an influx of additional needed supplies. Whereas price gouging laws do tremendous harm to those they are supposed to protect by creating dramatic shortages and actually discouraging people from shipping more supplies to the affected area.

The behavior cited by Starrsmother was when somebody buys up huge quantities of bottled water to turn around and sell for a huge profit. This is not the same thing as when some supplier raises the price on the water he has already collected. That might be justified as a reward for thinking ahead. But when someone finds himself in a position to buy up the very same water that the people in need could have bought themselves, without providing any value-added service, such as extended distribution, that person is unjustly benefiting. He did not add any value. He did not take any risks. He was just lucky enough to be the first on in the store when it opened. Such a person performs no service - adds no value. He is not to be praised for anything.

 

[Seraphim73]

The behavior cited by Starrsmother was when somebody buys up huge quantities of bottled water to turn around and sell for a huge profit.

I imagine you have a job. If so you work for a profit. And the more profit the better. Would you turn down a raise if offered? I guess it’s only a problem when the other guy makes a huge profit.

This is not the same thing as when some supplier raises the price on the water he has already collected. That might be justified as a reward for thinking ahead. But when someone finds himself in a position to buy up the very same water that the people in need could have bought themselves, without providing any value-added service, such as extended distribution, that person is unjustly benefiting. He did not add any value. He did not take any risks. He was just lucky enough to be the first on in the store when it opened. Such a person performs no service - adds no value. He is not to be praised for anything.

I don’t know where you think the suppliers got the water unless they bought it. Are you saying it’s only ok to make a profit if you guessed future market conditions and not if you react to them?

(love Tolkein by the way)

 

[LeafByNiggle]

I imagine you have a job. If so you work for a profit. And the more profit the better. Would you turn down a raise if offered? I guess it’s only a problem when the other guy makes a huge profit.

It is not the huge profit that is a problem. I have no problem with anyone making 400% or 1000% or greater profit. It is only the conditions surrounding that profit that are sometimes objectionable. During times of exceptional mass tragedy and great human suffering, we don’t generally look kindly on someone whose first thought is how to turn this tragedy to his advantage.

I don’t know where you think the suppliers got the water unless they bought it. Are you saying it’s only ok to make a profit if you guessed future market conditions and not if you react to them?

Yes, I think that kind of “reaction” to the situation has only one purpose - to hoard resources that those in need could have gotten by themselves if you had done nothing. That just adds another level of middleman where none was needed. Now if that enterprising person not only bought up the water, but also used his boat to bring it to where people were in need - people who could not get to the store themselves - that would be an added service that might justify a huge profit. But someone who just inserts himself in the middle because he was lucky enough to be able to do so first - that person deserves to be despised.

(love Tolkein by the way)

Glad you recognized the title. Not many do.

 

[Abu]

Holly3278 #1
Usury is a sin. It seems to be the same thing as charging interest on a loan or something. Would it be that charging interest on a loan or other debt would be the sin of usury?

It is not the same as “charging interest on a loan.”

Scripture, the Fathers of the Church, the decrees of councils and popes condemn the taking of interest on loans to the poor and the greed of usurers, but say nothing about the charging of interest in general.

Deuteronomy 23:20: “You may charge interest to a foreigner,” indicating that interest-taking is not presented as inherently evil or sinful. The larger ethical issue of the morality of interest-taking is not addressed in the Old Testament. Rather, interest was viewed only as a problem of social justice. The problem of commutative justice, i.e., of equivalence of value in an exchange of present for future goods, remained quite untouched (Thomas F. Divine, S.J., Interest, 10).

With free enterprise as developed by the Late Scholastics, the Church defined what is meant by usury. Session X of the Fifth Lateran Council (1515) gave its exact meaning: "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."

Consequently, as loaning money did involve loss of profit to the lender and further risk of loss from delay in returning the money loaned, this did justify interest that is just and justifiable.

Today, the term “usury” is usually reserved for taking excessive (i.e., unusually high for the economic conditions) interest on a loan because of someone’s circumstances: The greed of the lender takes unjust advantage of the weakness or ignorance of the borrower. [See *Encyclopedia of Catholic Doctrine, Our Sunday Visitor].

 

[JimG]

I would like to charge my bank more interest on the money they borrow from in the form of my savings deposits. A lot more. Unfortunately, the Fed keeps undercutting me by keeping them artificially supplied with free money.

 

[JoeSchmeau]

For those of us raised in the U.S., it’s difficult to imagine that charging interest could be considered a sin. For me, I used to interpret usury very strictly as it was in the early church. In those days, usury mean the charging of any interest. Period. So what’s changed? Inflation. If a lender doesn’t charge some nominal interest today, that lender will effectively be losing money.

 

[tafan]

Usury is a huge problem in today’s economy: eg outrageous interest on CC’s after a late payment, payday loans, pawn shops, etc. The poor are taken advantage of immensely.

One problem is that it is not well understood what is usurious and what is not in today’s world. It is, IMO, one of the failure’s of the modern Church that it has not been addressed more clearly and forcefully. All anyone can say is that it is charging excessive interest, but this is not quite accurate. If one is loaning money towards a productive enterprise, the interest rate can be very high and still be moral.

However, for unproductive loans (ie consumer loans), the interest rate must be low. One is justified to be compensated for their risk only to the point that the interest does not create a burden on the borrower to repay.

 

[LeafByNiggle]

Usury is a huge problem in today’s economy: eg outrageous interest on CC’s after a late payment, payday loans, pawn shops, etc. The poor are taken advantage of immensely.

One problem is that it is not well understood what is usurious and what is not in today’s world. It is, IMO, one of the failure’s of the modern Church that it has not been addressed more clearly and forcefully. All anyone can say is that it is charging excessive interest, but this is not quite accurate. If one is loaning money towards a productive enterprise, the interest rate can be very high and still be moral.

However, for unproductive loans (ie consumer loans), the interest rate must be low. One is justified to be compensated for their risk only to the point that the interest does not create a burden on the borrower to repay.

What do you do when the default rate is so high that the lender just keeps loosing money unless he raises his rates to usurious levels? It would be OK if the lender were a charity. But if not, should loans just not be available under any terms at all? It seems to me that the worst thing is not the rates themselves, but the deceptive way those rates and terms are hidden from the borrower.

 

[sallybutler]

States used to have usury laws that limited how much interest could be charged by banks and other lenders. Businesses got those overturned, which is why they can charge 30% on credit cards, 100% or more on payday loans. If I remember correctly, usury laws were one way of convicting loan-sharks.

 

[tafan]

What do you do when the default rate is so high that the lender just keeps loosing money unless he raises his rates to usurious levels? It would be OK if the lender were a charity. But if not, should loans just not be available under any terms at all? It seems to me that the worst thing is not the rates themselves, but the deceptive way those rates and terms are hidden from the borrower.

First of all, its not a problem. For example, do financial research on credit card companies and you will find that default rates are surprising low.

But more importantly, a lender has not right to make money via usury. If the risk of such that the only way it is profitable is to place an undue burden on the borrower to pay it back, that type of loan should NOT be available. Trust me, I have been through the effects (with a family member, not myself) and the worse thing about these loans are the rates and the effect of those rates. Do not fall into the trap of reasoning that these people who are so desperate for cash are better off paying usurious rates rather. That is what every pawn shop owner and payday loan provider has told themselves for ever.

 

[LeafByNiggle]

First of all, its not a problem. For example, do financial research on credit card companies and you will find that default rates are surprising low.

But more importantly, a lender has not right to make money via usury. If the risk of such that the only way it is profitable is to place an undue burden on the borrower to pay it back, that type of loan should NOT be available. Trust me, I have been through the effects (with a family member, not myself) and the worse thing about these loans are the rates and the effect of those rates. Do not fall into the trap of reasoning that these people who are so desperate for cash are better off paying usurious rates rather. That is what every pawn shop owner and payday loan provider has told themselves for ever.

When I asked if loans for people who have no means to pay it back should just not be available at all, that was not a rhetorical question. “No” is a perfectly acceptable answer, especially if the only option is usurious rates.

 

[ProVobis]

Hello everyone. For the past day or two I have been periodically thinking about usury. Usury is a sin. It seems to be the same thing as charging interest on a loan or something. Would it be that charging interest on a loan or other debt would be the sin of usury?

Also, I may be wrong about usury being a sin. I looked up usury in the Catechism of the Catholic Church but it did not come up with any results.

There is always a cost of lending money, including the element of risk in not getting it back. It is not sinful to at least cover those costs, call it interest, closing costs, whatnot. If this is your livelihood, a modest amount of profit isn’t evil either. Usury is an entirely different matter.

 

[total_Catholic]

What do you do when the default rate is so high that the lender just keeps loosing money unless he raises his rates to usurious levels? It would be OK if the lender were a charity. But if not, should loans just not be available under any terms at all? It seems to me that the worst thing is not the rates themselves, but the deceptive way those rates and terms are hidden from the borrower.

THIS! I worked in the consumer lending field for 12 years, you know the small loan companies of the world, etc. and while the rates are high, the default rate is very high. The fact that every town has about 4-5 of these places all competing for the same type of borrower doesn’t help either.

Now, I still do believe that every borrower should accept personal responsibility. Trust me, I’ve made loans to people who would thank me to my face for this money and then rant and cuss me when it was time to pay back and then get righteous about my “high interest rates”. Never mind the fact that they willingly signed the paperwork to obtain the loan.

It was always an unwritten rule never to divulge the rate, which I thought was stupid and just run the loans with all the “optional” insurance already written in. So both sides in this type of industry are never fully clean to begin with. Thank GOD I left that **** behind in late 2009. I do collections now, but mainly medical and utility and some people will ask me if their bills have interest and I’ll chuckle and go “No sir, I’m not a consumer lender”.

Reasonable interest is good. The lender HAS to make money to keep the doors open to further sell the product, but unreasonable rates and shady dealings never get you anywhere and while not judging, the majority of the people in this field are your typical Sunday protestants (if you live in the south, you know what I mean).