Usury: Understandings of Just Lending

By John R.P. Russell 

July • 2013

http://holydormition.blogspot.com/2013/07/1-usury-understandings-of-just-lending.html

With an Afterword by Michael Hoffman

The Church’s constant condemnation of usury, which has its origins in the teaching of Jesus Christ, excellently exemplifies the nature of Catholic social teaching as contrasted with dogmatic teachings. In the interest of social justice, the Church must always respond to social realities. While the essence and energies of God are constant, human social and economic situations, which include the Church but also everyone else, are in constant flux. While the Church must constantly seek justice and condemn injustice, particularly and preferentially on behalf of the poor, the concrete shape and features of that justice necessarily change in response to new situations. While the Church constantly condemns usury, the definition of usury has necessarily undergone change. Concern for economic justice, however, is changeless.

Usury originally meant the loaning of money with any interest and the early Christian tradition originally regarded this as always a grave sin. Usury has taken many forms and many of these are extant realities. Nowadays, loans with interest are the very stuff of American economic life. Most Americans are in debt – often debt so enormous that, each month, they are able to pay off only the interest – and many accept this as a quotidian fact. The forms and quantities of loans, the types of creditors and debtors, and the rates of interest all vary widely in the present economic milieu – from credit cards to student loans, from mortgages to savings accounts. Usury affects everyone, but most of the upper and middle class in this society do not seem to mind. This is because it does not generally deprive them of the necessities or even the comforts of life. Unfortunately, “at the moment, millions across the globe suffer at the hands of others who would happily keep them in poverty through excessive and crushing interest rates.”[1] The term “usury” has come to mean, not just loaning with interest, but rather, loaning with exorbitant interest. Undeniably, some interest rates are usurious, as is clear from the ruinous and binding effect they have on the lives of many poor.

"Currently the worst manifestation of unjust lending in the United States is the ‘payday’ loan, which is specifically designed to keep people in debt; with interest rates up to 400 percent, these companies amass profits in the amount of approximately $4.2 billion annually, intentionally creating financially desperate circumstances for individuals and their families."[2]
Yet other kinds of interest, such as that gained in savings accounts, seem to do no one any harm. Nonetheless, according to scripture and the tradition of the early Church, any interest rate is usurious. Furthermore, not only were the lives and well-being of the poor at stake, so also was the salvation of the lenders because usury was considered a grievous sin.

[1] Ihssen, Brenda. “‘That which has been wrung from tears’: Usury, the Greek Fathers, and Catholic Social Teaching.” Reading Patristic Texts on Social Ethics. Ed. Johan Leemans et al. Washington D.C.: Catholic University of America Press, 2011. 125.

[2] Ibid.

Biblical and Patristic Foundations of Catholic Social Teaching on Usury

The early Christian uncompromising rejection of usury in all its forms had its earliest origin in the scriptures. To this day, “a primary source for Catholic social ethics is the social teaching of the Bible.”[1] In the Hebrew Bible, each part of the Tanakh – the Torah, the Prophets, and the Writings – contain prohibitions against usury. From the Torah, Leviticus directly proscribes the practice: “You shall not lend him your money at interest” (25:37). Among the Prophets, the Lord said to the prophet Ezekiel: “If a man is righteous and does what is lawful and right... [he] does not lend at interest or take any increase” (18:5, 8). From the Writings, Psalm 15 celebrates the one “who walks blamelessly, and does what is right, and speaks truth from his heart” in part as one “who does not put out his money at interest” (15:2, 5). In the New Testament, Jesus maintained and even intensified this teaching. He taught, And if you lend to those from whom you hope to receive, what credit is that to you? Even sinners lend to sinners, to receive as much again. But love your enemies, and do good, and lend, expecting nothing in return (Luke 6:35).

Jesus is saying that not only should people lend without taking interest, but they should also lend even to their enemies from whom they may not even receive back the principal. Jesus wants his followers to give freely to all who have need.

The early fathers of the Church take the teaching of Jesus and the scripture to heart. They seek to follow it literally and in all cases, though, of course, their constant condemnation of the practice of usury demonstrates that the practice went on in full force throughout the patristic period. Sometimes the fathers strongly appealed to the authority of scripture, as with Clement of Alexandria (c. 195), who wrote, “Let it suffice to remark that the Law prohibits a brother from taking usury.”[2] Yet, he also has more developed reasons for his disapproval of usury. He deems it “right not to take usury for money” because he recognizes that it is better “with open hands and heart to bestow on those who need.”[3] If one needs a loan, a gift would serve him still better, and serving others is what Christ means his followers to do. The command against usury, says Clement, is “marked by philanthropy” and concern for the poor.[4]

Yet not even the notion of using interest for charity would persuade Commodianus (c. 250) that usury could be permissible. Concerning this, he writes, You have lent on usury, taking twenty-four percent, yet now you wish to bestow charity that you may purge yourself, as being evil, with that which is evil. The Almighty absolutely rejects such works as these. You have given that which has been wrung from tears.”[5]

This passage is interesting. On the one hand, its rejection of usury is absolute. On the other, it describes usury with specificity: “twenty-four percent.” Could this mean that a more moderate interest rate would not be usurious? If so, this would place him against the general opinion of the fathers. “For the Greek Fathers, however…, any percentage above the amount loaned was usury, and usury was equally foul regardless of the percentage of interest.”[6] They regarded it as a kind of theft, always born of avarice. They thought of it as the sale of nothing, a fraud, an abuse. They did not consider the time and risk of the lender as having any value that the borrower could justifiably have to pay for.

Just as petty theft is still theft and still a sin, so low-interest was still a sin even if its consequences were bearable by all concerned. Commodianus, however, decries usury precisely for its evil consequences. He says it is “wrung from tears.” For Commodianus, then, would an interest rate that did no harm and deprived no one of need be usurious? It seems that, primarily, usury is evil primarily for the harm that it does to the poor.

It is clear that the Old and New Testaments and, in continuity with these scriptures, the fathers of the early Church forbade usury absolutely as a social evil against the poor. In the context of discussing the special concern in the Hebrew prophetic books for the poor and those cut off from familial support structures, Curran, in Catholic Social Teaching 1891-Present, writes, “Usury or interest-taking on loans was forbidden, at least in the community”[7] Usury, as discussed above, unjustly afflicted the poor.

This is Curran’s only comment on usury in this book, which, after all, deals not primarily with scripture or Christian antiquity, but with the present and the more recent past. Perhaps it is partly possible to gauge the perceived importance of this issue in contemporary Catholic social thought by looking at the lack of attention paid to it – except as a historical issue – by contemporary Catholic ethicists. Thomas Massaro actually lists interest taking on loans as one of the “economic questions about which the Church has chosen to remain silent.”[8] Specifically, Massaro states, “the Church has chosen to remain silent” on “the proper… interest rates on federal college loans.” Note that his question is not whether or not such interest rates are permissible at all. That seems to be a settled question in contemporary social ethics – but when was it settled and how? Is usury no longer an important issue of social justice?

[1] Charles E. Curran. Catholic Social Teaching 1891-Present. Washington D.C.: Georgetown University Press,   2002. 2.
[2] Clement of Alexandria. “The Stromata.”Ante-Nicene Fathers. Ed. Alexander Roberts and James Donaldson. Vol. 2. Peabody: Hendrickson Publishers, 1885. 366.
[3] Ibid.
[4] Ibid.
[5] Commodianus. “The Instructions of Commodianus.”Ante-Nicene Fathers. Ed. Alexander Roberts and James Donaldson. Vol. 4. Peabody: Hendrickson Publishers, 1885. 216.
[6] Ihssen, Brenda. “‘That which has been wrung from tears’: Usury, the Greek Fathers, and Catholic Social Teaching.” Reading Patristic Texts on Social Ethics. Ed. Johan Leemans et al. Washington D.C.: Catholic University of America Press, 2011. 128
[7] Curran, 2.
[8] Massaro, Thomas. Living Justice. Lanham: Rowman & Littlefield Publishers, Inc., 2012. 124.

Usury in the Catholic Social Documents

Massaro's statement ending the last post is a comment on John Paul II's 1987 encyclical Sollicitudo Rei Socialis (SRS), which states that "the Church does not have technical solutions to offer" and that "the Church does not propose economic… systems or programs, nor does she show preference for one or the other, provided that human dignity is properly respected and promoted."[1] This proviso keeps the Church in the discussion on usury. While it is true that the economic situations of contemporary life are scarcely comparable to those of Christian antiquity, and that thus it is improper to follow unilaterally the economic and social prescriptions of antiquity in the present context, it is also true that the Church's concern for human dignity and her concern for the welfare of the poor remains. Consequently, while some interest rates on loans may now be permissible, usurious interest rates are not. The meaning of "usury" now requires nuance.

In his landmark 1891 encyclical on social justice, Rerum Novarum (RN), Pope Leo XIII demonstrates an awareness of the constant teaching of the Church in condemnation of usury. He writes that "rapacious usury" has increased the evil of "misery and wretchedness, [which] press so heavily at this moment on the large majority of the very poor."[2] Such usury, he writes, "although more than once condemned by the Church, is nevertheless, under a different form but with the same guilt, still practiced by avaricious and grasping men."[2] Leo XIII acknowledges that the Church has repeatedly condemned usury and he repeats that condemnation for the same reasons. However, he introduces a descriptor perhaps previously unnecessary – "rapacious." To condemn "rapacious usury" is perhaps to indicate that there may be usury that is not "rapacious." Perhaps, given new economic conditions, there could be interest rates on loans that are not motivated by greed or excess.

Leo XIII gives a clearer idea later on in the encyclical about what he might mean by rapacious usury: "The rich must religiously refrain from cutting down the workman's earnings… by usurious dealing."[3] In this paragraph, he lays down the principle that makes usury evil. He writes, "To make one's profit out of the need of another, is condemned by all laws, human and divine."[3] He makes clear that rich employers must refrain from "usurious dealing" against their poor workers "because the poor man is weak and unprotected, and because his slender means should be sacred in proportion to their scantiness."[3] Usury, then, is an evil because it deprives the poor of even the little they have earned – thus keeping them poor and beholden to their creditors. The poor must be given aid and opportunity to overcome their poverty, not loans designed to keep them bereft even of the little they could otherwise accumulate. The Church always opposed usury due to its tendency to oppress the poor.

Forty years after Rerum Novarum, Pius XI demonstrates an understanding of the grave importance of lending practices and the effect they can have on the whole of society. In 1931, he writes in Quadragesimo Anno (QA),

"In our days…immense power and despotic economic domination is concentrated in the hands of a few…. This power becomes particularly irresistible when exercised by those who, because they hold and control money, are able also to govern credit and determine its allotment,[4] for that reason supplying, so to speak, the life-blood to the entire economic body, and grasping, as it were, in their hands the very soul of the economy, so that no one dare breathe against their will."[5]  Those who determine who may receive loans and at what interest rates, however ruinous, have far too much power over the poor. This is especially so given that those most likely to attain to such high positions may tend to be precisely those least likely to demonstrate compassion for others. "Unrestrained free competition… permits the survival of those only who are strongest. This often means those who fight most relentlessly, who pay least heed to the dictates of conscience."[6] If these "strongest" are the people to whom regulation of interest rates is given, those who are "weakest" – the poor – have much to fear. It is necessary to ensure that those with the needs of the poor foremost in mind are those who determine interest rates.

 With concern for the poor, Pope John XXIII, in his encyclical of 1961, Mater et Magistra (MM), continued the Church's teaching on usury by repeatedly emphasized the role of government in regulating credit, along with many other economic issues, with the ultimate goal of overcoming gross economic inequalities.

Pope Paul VI, with his 1967 encyclical Populorum Progressio (PP), may have been the first Church authority to every actually recommend loans as a means of helping the poor. Loans are one of many means of working toward "building a world where every man… can live a fully human life, freed from servitude."[7] Just as it is clear that usury can be a means of causing servitude, so does Paul VI now recognize that loans with low interest can actually be an aid toward climbing out of a position of servitude. Speaking specifically about the benefits of wealthy nations lending money to developing countries, he writes, "Rates of interest and time for repayment of the loan could be so arranged as not to be too great a burden on either party, taking into account free gifts, interest-free or low-interest loans, and the time needed for liquidating the debts."[8] He recommends as means of aid firstly, "free gifts," secondly, "interest-free… loans," and only lastly, "low-interest loans." The preference for absolute giving in charity remains. However, it is nonetheless remarkable for a pope to refer positively to low-interest loans when the fathers of the Church regarded interest of any kind as a grave sin.

Usury – in the sense of high-interest loans – remains a problem to this day. The comparatively recent (1986) USCCB document of the, Economic Justice for All (EJA) found it necessary to observe injustices taking place due to high interest rates. For example, "persistent high interest rates that make it difficult to repay or refinance loans" for many farmers experiencing various economic problems in the 1980s.[9] These "otherwise viable family farms… are threatened with bankruptcy or foreclosure."[10] The USCCB recommends a policy of "reduced rates of interest and programs of debt restructuring" to correct this injustice.[10] In other words, those in a position to do so should alleviate the suffering of those laboring under usurious interest rates.

The USCCB also recognizes, however, the possibility of offering low-interest loans as a means of aiding the poor. Echoing Populorum Progression, Economic Justice for All specifically recommends that industrialized nations provide assistance to Third World nations in the form of "low-interest/long term loans."[11] However, it first recommends not loans but "grants." A gift remains the primary recommendation, though now bishops of the Church are comfortable recommending moderate interest rates as a means of assistance to the poor, whereas long ago any interest rate would have been considered theft. A principle for the rich to keep in mind when they lend to the poor is to offer the loan not for their own profit or gain primarily, but for the good of the poor to whom they lend.

[1] SRS 41; Catholic Social Thought: A Documentary Heritage (CST). Ed. David J. O’Brien and Thomas A. Shannon. Maryknoll: Orbis Books, 2012. 455. emphasis mine.
[2] RN 2; CST 15.
[3] RN 17; CST 21.
[4] The phrase, “determine its allotment,” is elsewhere translated, “rule the lending of money.”
[5] QA 105-106; CST 67.
[6] QA 107; CST 67.
[7] PP 47; CST 264.
[8] PP 54; CST 266.
[9] EJA 223; CST 749.
[10] EJA 242; CST 753.
[11] EJA 265.

An Eastern Christian Perspective on Usury

Contemporary Eastern Christian commentators on usury are few. One important Eastern Christian thinker on this subject, however, is Metropolitan Hierotheos Vlachos of Nafpaktos and Agios Vlasios, who is probably most famous for his book Orthodox Psychotherapy. In his essay, "Interest, Usury, Capitalism," Vlachos provides a nuanced perspective on usury that is substantially in harmony with the contemporary Catholic understandings of the subject discussed in the last post. Concerned to demonstrate continuity with the Hellenic fathers on this subject, he condemns usury in the strongest possible language. However, he also provides an understanding of usury that does not include every instance of interest taking. He acknowledges some exceptions.

For example, he writes, "In certain cases like acquiring a house, one can say that loans are beneficial." Housing is a legitimate need and if a loan provides for this need without harming anyone, then it is worthwhile. He continues, "In these cases, a fair society can be of help to those in need – without of course causing damage to those who aren't." Should the lender violate that principle by charging usurious rates of interest, the loan would be impermissible. If the rates are not usurious, however, and "if this is put into effect in a legal and fair manner, then it can function along the principle of brotherly love." Even balanced and measured benefits for the banks are legitimate, he writes, so long as they do not impede the freedom of the borrower.

A second exception he brings up is the use of savings accounts. He writes, According to contemporary reality, the hoarding of money in Banks is considered a necessity and interest is something fair and legitimate. No one can deny such a logical possibility, especially for householders. However, people can use something as seemingly innocuous as a savings account immorally, Vlachos maintains. What principally matters is the intention. If the account exists to provide for need, then it is a good. If, however, it exists to provide for the passions, then it is an evil. Vlachos writes, The crucial matter is that when bank savings are seen in the context of the passion of acquisition and avarice, and more so when charity and philanthropy are withheld and Man's hopes now hinge on money and his faith in God's Providence is cast out, then this cannot be justified by ecclesiastic morality.

As noted above, Vlachos condemns usury with the strongest possible language: "We must stigmatize and cauterize usurers who exploit the anguish of their fellow-man and who remain unemotional in the presence of their misfortune.” Vlachos does not understand usury to be avoided simply by mutual agreement or mutual benefit. Rather, taking interest may only be justified as a means of providing for legitimate needs – not as a way of providing for unnecessary pleasures or comforts. For, in the service of these ends, it deprives one of opportunities for charity and philanthropy. He writes, "When lending is linked to hedonism, easy living, bliss, the quest for wealth etc., then it cannot be acceptable." There is a tendency, particularly in American society with its highly inflated luxurious standards of living, to regard pleasures as needs and comforts as requirements. Condemning this capitalist attitude, Vlachos writes, "We should not increase our "needs." We should not strive to live opulently; that way, we will not be forced to borrow money, because that is the way we will lose our freedom."

As a means of avoiding the subjugation consequent to the multiplication of perceived "needs," Vlachos recommends two things. Firstly, he recommends frugality and "the ascetic lifestyle, which also involves avoiding luxury and bliss." Secondly, he recommends generosity and a reasonable detachment from our possessions. He writes, "Those who have money should practice philanthropy and provide interest-free loans to those who are in need of money for coping with the hardships of their life." Therefore, while lending with interest is at times morally permissible, this does not absolve the wealthy from the moral obligation to lend without interest in ways that will benefit the poor, which Jesus commands (Luke 6:35).

As with the Catholic understanding, Vlachos sees need or poverty as the barometer of determining whether an instance of lending with interest is usurious. If a particular loan results in providing for genuine needs all around and avoids the stain of avarice then it may indeed be justifiable. A principle for the rich to keep in mind when they lend to the poor is to offer the loan not for their own profit or gain primarily, but for the good of the poor to whom they lend. Should the wealthy loan with subjugating interest – as still happens today – it remains a moral crime.

A Contemporary Pastoral Approach to Usury

Whereas in former eras it may have been usual for confessors to hear anxiety about any small interest taken on a loan, in the present era they are not likely to hear any concern over it at all. If usury of any kind is a sin, it is news to most of the faithful. Consciences  are often ill formed on the subject - or not formed at all. Many Catholics have swallowed completely the assumption of capitalist economies that the endless pursuit of gain is worthwhile and permissible. Money and possessions – once widely regarded by Christians as dangers to the well-being of the soul, temptations to avarice, and as obstacles to relationship with God (cf. Matt 6:24; Luke 16:9-13) – many now regard instead as signs of God's blessing. This is an interesting cultural and theological change. It may be time for pastors to address this issue, so dear to the consciences of the early Christians, with those entrusted to their care.

The changes that the social teaching on usury has undergone compound the problem of teaching effectively on proper lending practices. The one constant has been concern for the welfare of the poor. The primary reason that some kinds of low-interest loans are permissible is because, in the current economic system, these can actually help the poor directly, rather than hindering or enslaving them. Other high-interest loans practiced in this economy remain usurious – even sinful in their oppression of the poor – and pastors should again condemn these practices forcefully. Radically, loans should exist primarily for the benefit of the borrower, not the lender. The Church must constantly seek economic justice and condemn economic injustice on behalf of the poor. In the present economic situation, that may no longer mean a unilateral condemnation of all kinds of interest taking, but it must still mean condemning usurious interest. [End quote from John R.P. Russell]

MICHAEL HOFFMAN’s AFTERWORD

Mr. Russell wrote: "Pope Paul VI, with his 1967 encyclical Populorum Progressio (PP), may have been the first Church authority to ever actually recommend loans as a means of helping the poor.”

The first pope to "actually recommend loans [at interest] as a means of supposedly helping the poor, was Leo X, who, in 1515, granted permission for the establishment of so-called “charity banks” (Monte di pieta), the first of many gradual encroachments on the Biblical, apostolic, patristic, conciliar and papal dogma against usury.

Another statement by Mr. Russell: "The primary reason that some kinds of low-interest loans are permissible is because, in the current economic system, these can actually help the poor directly, rather than hindering or enslaving them. Other high-interest loans practiced in this economy remain usurious – even sinful in their oppression of the poor – and pastors should again condemn these practices forcefully. Radically, loans should exist primarily for the benefit of the borrower, not the lender. The Church must constantly seek economic justice and condemn economic injustice on behalf of the poor. In the present economic situation, that may no longer mean a unilateral condemnation of all kinds of interest taking, but it must still mean condemning usurious interest.”

Perhaps you do not realize the extent to which what you are advocating here is a branch of situation ethics. You have used the situation of modernity to claim that the eternal law against interest on loans of money may be abrogated for the sake of present circumstances ("the current economic system”), allowing, in your view, for what you call non-predatory loans that allegedly help the poor.

But if you are going to revise divine law in this matter of loans, what keeps you or any other Christian from declaring other revisions based on the ethics of the moment? For example, it can be said that in the modern world where community and friendship have atrophied and individuals are more isolated than ever, that the evangelical virtue of poverty is no longer recommended since people need to be affluent in order to supply basic needs formerly supplied by the community and a network of friends. Home insurance must be afforded and purchased, often at high rates, to compensate for the fact that if your house burns, no neighbors or community will come to rebuild it themselves.

By this reasoning all sorts of loopholes can be created in what God intended as the eternal law. Where does it end? It can only end at the point where we rescind the very first loophole we ever created in any dogma, and all subsequent escape clauses.

Once temporal chauvinism comes into play, and the zeitgeist becomes any kind of factor in determining our allegiance to, or rejection of, God’s truth, every other divine command and dogma is up for grabs, from birth control to the laws against homosexual eros and “matrimony.”

***