Usury or Charging Interest

[Seraphim73]

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.

I don’t claim to have a good definition of usury but it seems to me most places such as payday loan stores and pawn shops have to charge a very high interest in order to have any chance of recouping their losses. The reality is the people who take out these loans are far, far more likely to default on them. It’s not a matter of anyone taking “advantage” of the poor. It’s simply just a matter of businesses having to account for a much higher cost of doing business.

 

[LeafByNiggle]

I don’t claim to have a good definition of usury but it seems to me most places such as payday loan stores and pawn shops have to charge a very high interest in order to have any chance of recouping their losses. The reality is the people who take out these loans are far, far more likely to default on them. It’s not a matter of anyone taking “advantage” of the poor. It’s simply just a matter of businesses having to account for a much higher cost of doing business.

Yes, but it is not clear that the business they are doing should be done at all. By anybody. The “taking advantage” part is when they convince the borrower that they need to borrow the money in the first place.

 

[Starrsmother]

I can’t say what does or does not amount to usury in this day and age. Some people would say that usury is the reality behind every pawn shop. I think what God wants though is that in our personal life we be generous and helpful to our brothers and sisters as much as possible. In other words, if we knew that someone was in such poor financial status that they would have to go to a pawn shop and IF we are able to help them, we should step up.

 

[Seraphim73]

Yes, but it is not clear that the business they are doing should be done at all. By anybody.

Frankly that’s none of your business or mine. Apart from some kind of coercion or fraud if people want to freely enter into a contract we should butt out.

 

[dmar198]

Frankly that’s none of your business or mine. Apart from some kind of coercion or fraud if people want to freely enter into a contract we should butt out.

I think you are making a mistake by thinking that it should be legal because it’s done with consent. Consensual prostitution should remain illegal, and usury should be banned too because it is just as sinful as fraud and coercion and it is just as much an abuse of the poor as those are.

 

[SyroMalankara]

I think you are making a mistake by thinking that it should be legal because it’s done with consent. Consensual prostitution should remain illegal, and usury should be banned too because it is just as sinful as fraud and coercion and it is just as much an abuse of the poor as those are.

Not that I am promoting it or anything, but while prostitution has almost always been illegal, it has also historically almost always been tolerated - akin to the Dutch marijuana laws, I suppose. It’s only when fundamentalist Protestants and Puritans (the morality police) got involved that prostitution became something that one or both parties could be locked up for.

 

[SyroMalankara]

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. 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.

What about microlending? Normally these were hi-risk loans with very high “interest”, but could be seen as necessary as well. For example, an inventor has an idea and needs $2000 immediately, and is willing to pay you the initial $2000 back along with 50% of any profit, or even some other high number. Is that usury or ‘the cost of doing business’?

I heard on NPR/BBC last week that Germany is dealing with a very serious chance of monetary DEflation. Meaning people are unwilling to spend on good/services today, because prices are dropping so rapidly. Many are also weary of taking on a substantial loans when costs of good may be less than the amount needed to be borrowed.

 

[ProVobis]

What about microlending? Normally these were hi-risk loans with very high “interest”, but could be seen as necessary as well. For example, an inventor has an idea and needs $2000 immediately, and is willing to pay you the initial $2000 back along with 50% of any profit, or even some other high number. Is that usury or ‘the cost of doing business’?

Contracts should always be honored unless signed under duress. What seems to be most problematic are rates (or other costs) pushed up on existing loans. There is an element of fraud involved in stating what the minimum payment is, then jacking up the rate on the amount yet to be repaid.

 

[LeafByNiggle]

What about microlending? Normally these were hi-risk loans with very high “interest”, but could be seen as necessary as well. For example, an inventor has an idea and needs $2000 immediately, and is willing to pay you the initial $2000 back along with 50% of any profit, or even some other high number. Is that usury or ‘the cost of doing business’?.

Micro investing (not micro lending) is not usury regardless of the return on investment. The difference is that if the venture fails, the borrower does not pay anything back. Micro lending as you have described it is also OK because the “interest” rate is zero if the venture fails. Usury is only when the borrower has to pay back the loan with huge interest regardless of the outcome of the venture.

 

[LeafByNiggle]

Frankly that’s none of your business or mine. Apart from some kind of coercion or fraud if people want to freely enter into a contract we should butt out.

I was not suggesting any legal interference with usury lending. I was only commenting on what is usury and the fact that usury is immoral.

 

[Seraphim73]

I think you are making a mistake by thinking that it should be legal because it’s done with consent. Consensual prostitution should remain illegal, and usury should be banned too because it is just as sinful as fraud and coercion and it is just as much an abuse of the poor as those are.

Well prostitution most definitely should be legal. If your individual rights are not being violated then it’s none of your business.

 

[ProVobis]

Micro investing (not micro lending) is not usury regardless of the return on investment. The difference is that if the venture fails, the borrower does not pay anything back. Micro lending as you have described it is also OK because the “interest” rate is zero if the venture fails. Usury is only when the borrower has to pay back the loan with huge interest regardless of the outcome of the venture.

Which is probably why some of the banks are hesitant on giving out long-term loans even at 3 1/2%, or so I hear.

 

[mikekle]

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.

Whats practical doesnt matter to God though. I do believe usury is wrong too, but it seems most of the world and people have been ‘conditioned’ to think otherwise, they are led to believe it is normal and it has to be this way, but sometimes I wonder if this is true.

I think this is just another example of modern society trying its best to justify something that we should not be taking part in, even the church justifies it in modern times…I mean, what is the world coming to?!! LOL

It makes me wonder if there is not other things that the church is also justifying today that people should not be doing, using ‘modern times’ as an excuse to make people think its all ok.

 

[Seraphim73]

Whats practical doesnt matter to God though. I do believe usury is wrong too, but it seems most of the world and people have been ‘conditioned’ to think otherwise, they are led to believe it is normal and it has to be this way, but sometimes I wonder if this is true.

I think this is just another example of modern society trying its best to justify something that we should not be taking part in, even the church justifies it in modern times…I mean, what is the world coming to?!! LOL

It makes me wonder if there is not other things that the church is also justifying today that people should not be doing, using ‘modern times’ as an excuse to make people think its all ok.

I’ve never quite understood this kind of thinking. No one has an issues with a baker charging money for bread or a butcher charging for meat. What is the problem with a lender charging for his product?

 

[LeafByNiggle]

I’ve never quite understood this kind of thinking. No one has an issues with a baker charging money for bread or a butcher charging for meat. What is the problem with a lender charging for his product?

When a butcher or a baker charge a certain amount for their product, they charge the same amount for every customer. But a lender’s product is priced differently for different people. For more information, see this reference.

 

[mikekle]

I’ve never quite understood this kind of thinking. No one has an issues with a baker charging money for bread or a butcher charging for meat. What is the problem with a lender charging for his product?

That is human style thinking, remember God is much different, we cannot understand why he thinks the way he does, we just have to trust that he is correct, if he says usury is wrong…then its wrong…period, no amount of justifying or comparing it to other industries or practices will change that.

Main point, we cannot understand Gods logic on everything.

 

[dmar198]

That is human style thinking, remember God is much different, we cannot understand why he thinks the way he does, we just have to trust that he is correct, if he says usury is wrong…then its wrong…period

Yes but God does not say that all interest is usury.

 

[Abu]

Unless and until posters listen to the teaching of the Church they will continue to be immersed in confusion:
Session X of the Fifth Lateran Council (1515) gave usury 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."

Thus the reasonable and necessary charging of interest on loans. “Usury” is now 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]. Hence loan sharks.

Some seem to be misled on both economics and morality.

 

[Seraphim73]

When a butcher or a baker charge a certain amount for their product, they charge the same amount for every customer. But a lender’s product is priced differently for different people. For more information, see this reference.

But they do not charge the same for every cut of meat. Every borrower is not the same. Following your logic there is no justification for an insurance company charging more to insure a sixteen year old who just got their license vs a forty five year old who has never had an accident. Or a life insurer charging more for an eighty year old vs a thirty five year old.

 

[Seraphim73]

That is human style thinking, remember God is much different, we cannot understand why he thinks the way he does, we just have to trust that he is correct, if he says usury is wrong…then its wrong…period, no amount of justifying or comparing it to other industries or practices will change that.

Main point, we cannot understand Gods logic on everything.

Indeed. But yet we are human beings with rational minds. Unless you are going to say all interest is usury there has to be a subjective decision made somewhere. Who is going to make that decision?