Usury

Usury.—The sin of usury is committed in two ways.

(a) Usury in the strict sense is the taking of interest by reason of intrinsic title (i.e., on account of the use) for money or other fungible loaned on condition that it be restored in kind (mutuum). This is unjust since it exacts payment for that which is nonexistent, that is, for use, as a distinct value, of a fungible whose only value is in its use (see Aristotle, Politics, Bk. I, Ch. 10, 1258b 2-8; St. Thomas, Summa Theologica II-II, q. 78, a. 1). This was the opinion of most medieval theologians based on the fact that money was solely a medium of exchange. Interest was permitted, however, on the grounds of extrinsic titles, e.g., compensation for the expense of a transaction (damnum emergens), the loss of opportunity to make good bargains (lucrum cessans).

(b) Usury in the wide sense, which is all too common, is the taking of interest for a fungible loaned at mutuum, where there is an extrinsic title (e.g., the loss or inconvenience suffered by the lender) for the interest, but the rate charged is unjust, exceeding that fixed by law or that which is fair and reasonable (see Canon 1543). This is unjust when the lender takes more than his loan is worth; it is uncharitable when the lender does not demand more than the worth of his loan, but does exact what is due in a heartless manner. Examples of usury in the wide sense are the acts of loan sharks who take advantage of the distress of the poor to make them pay enormous interest for small loans, or who hold the debtor to the strict letter of the agreement at a great loss to him.

In recent years a new concept of usury in the wide sense has emerged. It is based upon the fact that in modern times the function of money has changed. In ancient times it was solely a medium or measure of exchange that could not be turned easily into capital. With the emergence of the capitalistic system, opportunities for investment increased, and money assumed the role of a factor of production. Money assumed a new value and function: it became virtually productive, and so today money does fructify. To place money, then, at the disposal of another to be employed in profitable ventures constitutes an economic service and, as such, is worth its price as any other service. This price of money constitutes modern interest, which seems to differ radically from the old contract of interest and to be more one of hire or lease. So viewed, interest, or the price of money, is determined in the same way as the price of any other service; the unjust price, or usury, is an excessive price. This is the modern concept of usury.