Article II: On Mutuum

S. Th. II-II, q. 78; I-II, q. 105, a. 3, ad 3; III Sent., d. 37, a. 6; Q. D. de Malo 13, a. 4.

574. Mutuum¹ (pret de consommation, simple pret; verbruikleening, leening tot verbruiking of in verbruiksartikelen) is the concession for a time of a fungible thing or of a thing consumable by first use (a. 1892); whence three things are required for its essence:

¹ There is an immense literature on mutuum and usury among theologians, philosophers, jurists, and economists; among Catholics, Protestants, Jansenists, rationalists, socialists, etc. We indicate only certain special writings which can be more useful to priests: Alb. Weiss, Soziale Frage und soziale Ordnung; Pesch, Zinsgrund und Zinsgrenze; A. Vermeersch, in Quaestiones de Iustitia; E. Van Roey, De iusto auctario ex contractu crediti; A. Rijcken, De Leer en de Praktijk der Kerk in zake leenrente; J. De Wit, Het Renteverbod in de middeleeuwsche economie.

1. A fungible thing, consumable by first use, which someone cannot use except by consuming it, either naturally, namely, by destroying it, for example, food and drink; or morally, namely, by alienating it, for example, money, which, if you pay it, perishes for you;

2. The handing over of that thing: for it is a real contract;

3. The obligation of restoring it in the same species, quality, and quantity after some time.

Hence mutuum differs:

1. From commodatum, letting, and deposit: a) because in mutuum the thing must be fungible, otherwise in the others; b) because the thing is not to be returned in individual; c) because in mutuum the dominion of the thing is transferred, and not in the others; and therefore d) in mutuum the thing perishes for the one receiving, in the others for the one handing it over (a. 1893);

2. From donation, in which a thing is handed over to another without any obligation of restoring it;

3. From sale and exchange, in which the thing is to be returned not in the same but in another genus;

4. From exchange, in which one money is immediately given for another diverse money, for example, gold for silver.

575. Obligations arising from mutuum are:

A. For the lender:

1. To hand over a good and whole thing; but if the thing labors under a harmful defect, he must manifest it; otherwise, if he knew it, he is held concerning damages, for example, if he hands over wine which soon turns sour;

2. Not to demand the thing back before the established time, or the time defined by the judgment of prudent men;

3. In itself and with special circumstances excluded, not to demand more than the borrowed thing was worth (a. 1898-1901).

B. For the borrower:

1. To return the thing received in mutuum, at the established place and time or at the place and time defined by the judgment of prudent men, in the same species, quality, and quantity, whether the price has increased or decreased; and therefore, for money, it suffices to give the same numerical sum (a. 1895);

2. But if it is impossible to return in the same species, he must restore the value for the time and place in which the thing is to be returned;

3. If he does not return the thing or its value at the due time, he is held to pay the rate of legal interest from the day of summons or juridical demand (a. 1895-97; 1902-04).

576. Usury (woeker), from use, generally designates the use of any thing, good or bad; but in moral science and in law it is taken in a bad sense for the price of the use of a thing which has no use except its own consumption, and therefore whose use has no value distinct from the thing. It is therefore the price of the use of a thing lent in mutuum, or gain from mutuum as owed by force of the mutuum. It is said:

1. Gain, that is, something estimable by price beyond the principal, whether it is money or anything else, for example, gifts, burdens, protection, a civil obligation of doing something, such as frequenting a workshop, not raising a building, not opening a window, recommending, ceasing from a just lawsuit; but not ceasing from an unjust one;

2. From mutuum, because if it is from another contract, it is not injustice, or it is not usury;

3. As owed by force of the mutuum (alleenlijk om het leenen), because if gain in mutuum does not proceed immediately from the force and nature of mutuum, or from an intrinsic title, but on the occasion of the mutuum by reason of an extrinsic title acceding to it, for example, ceasing gain or emerging damage, it is not usury; and likewise if it is not received as owed, but is conceded wholly voluntarily, from mere gratitude, without any obligation.

Sometimes, however, the word usury is taken in a more general sense and designates any increase beyond the principal to be paid by the borrower, and thus it embraces every interest; and then it is distinguished into lucrative usury, which seeks gain from the force of the mutuum; compensatory usury, which is given for compensating damage; and punitive usury, which is the penalty of negligence in paying.

Today, since generally moderate interest is lawful on account of extrinsic titles, interest (interet; kroos) is customarily distinguished from usury (usure; woeker). Interest is named from offspring, in the manner of the Greeks, among whom tokos, birth, is so called because through use money brings forth its own fruits; but interest is now taken in a good sense for a lawful increase, while usury is now understood as exaggerated or unjust interest: for what is taken beyond that which an extrinsic title permits seems to be taken by force of the mutuum itself.

Now the question is whether, just as in lending a thing for use some gain can be received for the use of the thing, in which case it is no longer commodatum but letting, so also in lending a thing in mutuum something can be received, not sometimes and by accident, but per se, always, and by force of an intrinsic title, from the very force of mutuum. Concerning this there are the following three assertions.

577. Principle I. Every interest beyond the principal, or usury, even the least, received by force of the mutuum is per se prohibited by natural law, and unjust.

It is proved:

1. By a general argument. By natural law itself it is contrary to justice to sell the same thing twice, or to sell what is not, or what is not one's own: for thus there is manifestly constituted an inequality which is contrary to justice. But the usurer does one or the other. Therefore. The minor is proved: either he receives gain for the thing lent in mutuum itself, and then he sells the same thing twice, or receives a double price for the same thing, namely, the thing restored and an increase. Or he receives gain for the use of the thing lent in mutuum, and then he sells what is not, because if there is question of things consumable by their very use, the use is not counted separately from the thing, because it is the very consumption of the thing;² or he sells what is not his own, because he sells the use of a thing which is not his, since he has transferred its full dominion, both useful and direct, to the borrower.³ Therefore he always commits injustice, if not only an equal thing is returned, but interest is added besides, because more is returned than he gave.

² Thus in II-II, q. 78, a. 1.

³ Thus in III Sent., d. 37, a. 6.

"If someone," says St. Thomas, "wished to sell wine and the use of wine separately, he would sell the same thing twice, or would sell that which is not. Hence he would manifestly sin by injustice. And by a like reason he commits injustice who lends wine or wheat in mutuum, asking that two recompenses be given to him: one as regards the restoration of an equal thing, but the other the price of the use, which is called usury."

2. By a special argument concerning money. Money as money is nothing except the measure of the utility of other things, which are compared with one another according to value; and therefore its proper and principal use, for which it was made, is wholly in the exchange by which it is consumed and lost to him who exchanges it for a certain thing (elle n'est rien qu'un instrument d'echange). Hence money of itself is sterile and unfruitful, and has no utility except that of representing all things, no fruit or utility distinct from its consumption. And therefore by its own nature it is a thing consumable by first use; consequently the use of money as such is not distinguished from money itself; therefore the use of money cannot justly be sold or let separately.

Hence is understood the definition of the sin of usury alleged in the Fifth Lateran Council: "this is the proper interpretation of usuries, namely, when from the use of a thing which does not germinate, by no labor, no expense, and no risk, gain and offspring are sought." Cf. Benedict XIV, encyclical Vix pervenit;⁴ likewise condemned prop. 42 by Alexander VII, and 41 and 42 by Innocent XI.⁵

⁴ "That kind of sin which is called usury... consists in this, that someone, from the mutuum itself, which by its own nature demands only that as much be returned as was received, wishes more to be returned to himself than was received, and therefore contends that some gain beyond the principal is owed to him by reason of the mutuum itself...; which is illicit and usurious," prop. 1.

⁵ "It is lawful for one lending in mutuum to demand something beyond the principal, if he obliges himself not to demand back the principal until a certain time," prop. 42 condemned by Alexander VII.

Therefore the specific malice of usury is not in the oppression of the poor, because usury can also be exercised against the rich;⁶ nevertheless oppression of the poor often accedes, and then, besides the essential malice, there is a new malice either of injustice or of injured charity, according as the poor man is oppressed in those things to which he has a strict right or does not have one.

⁶ Thus Benedict XIV: "Nor can any aid be summoned for purging that stain of usury from this, ... that he from whom that gain is demanded solely by reason of the mutuum is not poor but rich..." prop. 2.

"Since ready cash is more precious than money payable later, and there is no one who does not value present money more than future money, a creditor can demand something beyond the principal from the borrower, and by that title be excused from usury," prop. 41 condemned by Innocent XI.

"It is not usury when something beyond the principal is demanded as owed by benevolence and gratitude, but only if it is demanded as owed by justice," prop. 42.

578. Principle II. By accident it can be lawful and just to receive something beyond the principal on account of extraneous titles, which are not had by force of the mutuum itself, and therefore not necessarily and universally, but which can and do in fact accede to the contract of mutuum. Such titles for moderate interest were acknowledged by theologians and by the Church, for example, S. Cong. P. F. 1873: incurred loss (damnum emergens), after St. Raymond of Pennafort, already by St. Thomas, saying in a. 2, ad 1: "for this is not to sell the use of money but to avoid damage"; foregone profit (lucrum cessans), to which St. Thomas does not seem to be favorable (ibid.),⁷ although from his principles it could legitimately be deduced (q. 62, a. 4), afterward, and other titles in the course of time were acknowledged by all and by the Church. They are five:

⁷ Some, however, understand St. Thomas concerning gain that is not probable; or concerning gain to be compensated totally: for, treating of restitution in q. 62, a. 4, he admits that something must be restored for the hope of gain.

1. Incurred loss (damnum emergens), or a positive detriment which the creditor suffers in things already acquired, for example, if through the lack of money or wheat which he hands over in mutuum, he is forced to sell goods or rents at a lower price, or cannot repair a collapsing house, or afterward must buy a thing more dearly, for example, wheat.

2. Foregone profit (lucrum cessans), or the loss of the price which the lender would have gained if he had employed the thing in another contract or business; that is, the gain legitimately and probably hoped for, of which the creditor deprives himself by lending his money to another, such as the impossibility of carrying on a profitable business which otherwise he probably would have carried on.⁸ This can be brought into a pact in two ways: a) only conditionally, namely, if afterward he finds that gain would otherwise have been made, and then it must be compensated in whole; b) absolutely, namely, if from the beginning there is hope of gain, which can equally be compensated, though less than the gain itself.

⁸ Theologians of the eighteenth century seem to have applied right principles too rigorously, not being sufficiently ready to admit presumed foregone profit (lucrum cessans).

3. Special and extraordinary danger of the principal, that is, a serious danger of not recovering the principal, or not except with difficulty, labors, and expenses; namely, a danger distinct from the common danger which is incurred even with the owner. This is estimable by price and is equally compensated if the interest is proportioned to the danger, so that it is greater according as the danger is more imminent.

4. Conventional penalty, that is, a clause by which the borrower obliges himself to pay some increase by way of penalty, if he has not returned the principal at the prefixed time, as is equitable, provided the increase is proportioned to the delay and the delay is culpable; juridical fault suffices for this.

5. Title of the civil law, when the law permits moderate interest to be accepted in order to foster commerce and the common good. But this does not seem to be a title distinct per se, but rather is founded on the presumption of the first three.

579. Principle III. In present economic conditions, in which ordinarily there are extrinsic titles, it is always lawful to receive a moderate increase, even if in some particular case the aforesaid titles are not demonstrated to be present.

For the fluctuation and exchange of things, even fruitful things, has in our time become very easy and continual; industries, commercial undertakings, and industrial societies are almost innumerable, so that whoever wishes can always have a part, with probable hope of gain, in profitable businesses. Hence, if money is given in mutuum, a title of foregone profit (lucrum cessans) also arises. And looking to this condition of things, our law, after it has spoken of merely gratuitous mutuum, also permits the stipulation of interest to be added to the contract of mutuum, and indeed generally, whether for money or for other things, and without restriction, because it presumes that these conditions are always verified (a. 1905-1908).

And thus the contract of mutuum, per se gratuitous, now by accident, on account of special reasons commonly acceding in our days, becomes onerous; whence also the Church, after for many centuries condemning every usury, as is clear from condemned prop. 42 of Alexander VII, and 41-42 of Innocent XI, and from the encyclical of Benedict XIV, from the nineteenth century onward has answered that "confessors are not to be disturbed, nor penitents who in the matter of mutuum conform themselves to civil law or to common practice."⁹ This also the Code of Canon Law authentically published, because the presumption is present that the civil law is just (can. 1543). This practice will be lawful so long as economic conditions remain the same; the recent war demonstrated that this is not necessary.

⁹ Thus various decrees: S. Off. 18 Aug. 1830, and 17 Jan. 1838; S. Poen. 16 Sept. 1830 and 11 Nov. 1831.

The whole doctrine, as to the principles together with the practical solution, is proposed summarily by the Code in the said can. 1543: "If a fungible thing is given to someone in such a way that it becomes his and afterward only the same amount in the same genus is restored, no gain can be received by reason of the contract itself (first principle); but in the furnishing of a fungible thing it is not per se illicit to contract concerning legal gain, unless it is clear that it is immoderate (third principle), or even concerning greater gain, if a just and proportionate title supports it (second principle)."

580. Observations. Although the Scholastics hold gain from money lent in mutuum, or from the proper and principal use of money lent in mutuum, as usurious, nevertheless they do not on that account hold every gain made from money as illegitimate.¹⁰ And indeed some gain can be received from money:

¹⁰ Thus Benedict XIV himself, prop. 3: "Nor is it denied that often one's own money can rightly be placed and expended by another in contracts of a nature altogether diverse from the nature of mutuum, whether for acquiring annual revenues for oneself, or also for exercising lawful commerce and business and receiving honest gains therefrom"; and prop. 4: "It is not to be doubted that in these same contracts there is a manifold lawful mode and reason for conserving and frequenting human commerce and fruitful business itself for the public advantage."

a) If someone were to concede coined money for display or for placing in the place of a pledge, and such a use of money a man can lawfully sell according to St. Thomas himself, q. 78, a. 1, ad 6. For then money is not destined for consumption, but for another use, from which gain is legitimately accepted. It is a secondary and proper use of money, but under this respect money is not a thing merely consumable by first use.

b) Money has a use common with other things, when it is considered not formally as money, but materially as a thing, by reason of the matter from which it is made, or of its figure, or of convenience or distance, etc.; and thus it is considered, not according to its legal and normal value, but according to its natural and real value, which is diverse from the former and varies in various regions. Thus money, like every other thing, can be merchandise which can be sold or exchanged, and especially compared with other money, as happens in the contract of exchange, which St. Thomas calls "a species of exchange of coins for coins" (q. 77, a. 4).

c) "He who commits his money to a merchant or craftsman by way of a certain partnership does not transfer the dominion of his money to him, but it remains his, so that the merchant trades with it, or the craftsman works with it, at his risk; and therefore thus he can lawfully seek a part of the gain proceeding from it as from his own thing," says St. Thomas, q. 78, a. 2, ad 5. In other words, he who enters into a contract of partnership with a merchant or craftsman, furnishing money so that this man may trade or work with it, lawfully receives some gain, because he retains the dominion of the money and undergoes the danger of the principal.

d) Moreover, in the course of time, it was permitted that a moderate gain be received from the institutions of montes pietatis, and from a redeemable rent assigned upon money handed over; this brought about a change of discipline concerning usuries.

a) Montes pietatis are public treasuries in which money and other fungible things were collected, which were handed over in mutuum to the poor, in order to defend them against usurers, by means of a pledge, whose officials take the danger upon themselves, and with a moderate increase on account of expenses necessary for the wages of the officials and the administration of the house.¹¹ Now Leo X, in the Fifth Lateran Council (a. 1515), solemnly declared these mounts lawful and meritorious, "in which, for their expenses and indemnity, something moderate is received beyond the principal, without profit of these same Mounts, solely for the expenses of the officials and of other things pertaining, as stated, to their preservation, for their indemnity only." Therefore not by force of the mutuum, but by reason of labor which merits a wage; not for gain but for compensating work and other expenses; indeed perhaps for more easily collecting the necessary money, but this last thing was not affirmed as legitimate in the said Council.

¹¹ Some are Italian, collected from alms and pious legacies, which had their origin at Perugia in the middle of the fifteenth century; others, from money accepted for rent-charges, are Belgian, permitted by authority in the year 1618; others are mixed. There is customarily civil legislation concerning montes pietatis: thus Belgian law of 30 Apr. 1848.

From the approval of Leo X it happened that wealthy merchants, especially Lombards, obtained from princes the license of receiving moderate gain from mutuum, as was done in the montes pietatis: thus provision was made for the necessities of the poor.

b) The rent contract came more into use around the same time, by force of which the right was acquired of receiving an annual pension, not only from an alienated fruitful thing but also from money handed over to another. That contract indeed differs essentially from mutuum, because money is handed over to another in perpetuity under the condition that an annual rent be paid; but after it was stipulated that the rent could be made redeemable, practically it was no longer distinguished much from an onerous mutuum. For this reason it was prohibited by Pius V (a. 1569) by positive law, but nevertheless was not declared intrinsically unjust against the natural law; therefore the prohibition did not endure, and the redeemable rent was held legitimate by not a few theologians, but under certain conditions, as was noted in n. 565.

c) The triple contract likewise was acknowledged as probably lawful, which, as the name indicates, is a threefold joined contract: namely, of partnership, of insurance of the principal, and of insurance of the gain. Let there be an example: Peter and Andrew enter into a partnership of business, into which Peter contributes 10,000 fr. and Andrew his labor, from which Peter hopes to gain 2,000 fr.: behold the first contract, namely, of partnership. But Peter, who does not wish to risk the principal, offers Andrew 500 fr. that he may insure the principal: behold the second contract, of insurance of the principal. But because he prefers a smaller certain gain to a greater uncertain gain, afterward he sells to Andrew the hope of gaining 2,000 fr. for 1,000 fr.: behold the third contract, namely, of insurance of the gain. Therefore, when the business is finished, Peter will receive 500 fr. But by this manner of acting he in fact receives 5% interest for the money.

Now this contract, consisting of a threefold contract not unjust, is lawful of itself,¹² yet not always, but provided the gain to be made is truly probable: for then the interest is no longer usury, because foregone profit (lucrum cessans) is present, therefore a just extrinsic title.

¹² Sixtus V did not condemn the contract, but unjust modes and an unjust price.

By these and other circumstances it happened that cases in which extrinsic titles occurred became more frequent, and thus little by little they brought about mitigation, not indeed in the doctrine of the Church, but in the practical discipline concerning usuries.

581. Corollaries. To explain the apparent contradiction between the ancient doctrine of the Church rigorously condemning every usury, and the more recent practice or tolerance of moderate interest, others have entered upon a way different from ours, yet not a happier one.

1. Some have distinguished a mutuum of consumption and a mutuum of business, according as the money lent in mutuum ought to serve for buying food and drink, or for carrying on business; they said the former is gratuitous, the latter onerous.¹³

¹³ Thus Le Correur, a Parisian priest of the eighteenth century; Ramboud; Card. de la Luzerne; Cl. Jannet.

But Benedict XIV condemned usury in both.¹⁴ Moreover, the extrinsic end to which the contract is ordered does not change its nature, for money, insofar as it serves for exchange, is always handed over to another so that it may be consumed at his discretion.

¹⁴ "The sin of usury does not cease from this, that he from whom that gain is demanded solely by reason of the mutuum is not poor but rich, nor that he is not going to leave idle the sum given to him in mutuum, but is going to spend it most usefully for enlarging his fortunes, or for buying new estates, or for carrying on profitable businesses," prop. 2.

2. Others have said that a double contract can be made concerning money, just as concerning things not consumable: one gratuitous, mutuum; the other onerous, the letting of money, in which a price is given for the use of the thing which the owner concedes and of which he deprives himself for a determined time, while nevertheless retaining the value of the money.¹⁵ Now the present use of money is worth more than the future use. But:

¹⁵ Thus among others in the nineteenth century Mastrofini and A. Ballerini.

a) In things consumable by first use, the use of the thing is not distinct from the thing, since we can use it only once; and therefore it is not estimable by price nor can it be let. Therefore the lack of unfruitful money per se, if it is without extrinsic detriment, is not worth more than the thing, and consequently is not separately estimable by price.

b) Use and dominion are conceded and are similarly returned, and thus there is equality (S. Th., q. 78, a. 1, ad 5; a. 2, ad 2 and 4).

c) Per se present money is not worth more than future money, if in the present there is no probable hope of gain; and besides, the small inconvenience consisting in deprivation of the faculty of using money is compensated by the greater security, since the danger of the principal is with the borrower.¹⁶

¹⁶ St. Thomas denies that present money is worth more than future money, a. 2, ad 7. Hence delay of payment is equivalently usury, l. c. Likewise St. Antoninus, Sum. Theol., p. 2, t. 1, c. 7, § 7. Therefore the mere possibility of gain does not suffice for demanding interest, because it is only a remote potency; but true probability is required. Moreover, the obligation not to demand back is not a strict personal obligation, but is a mere observance of the real right conceded, just as the obligation not to demand back a thing donated or sold is not a special personal obligation but is the donation and sale itself. But no price can be demanded for satisfying an obligation of justice already undertaken. Therefore.

d) The value is not conserved but conceded to the borrower: for of what service would money without value be to him? Hence the lender has only a right to the thing.

e) The opinion is opposed to the encyclical of Benedict XIV.¹⁷

¹⁷ "This must be diligently noted: someone will falsely, and only rashly, persuade himself that there are always and everywhere at hand, either together with mutuum, other legitimate titles, or even with mutuum excluded, other just contracts, by whose protection as titles or contracts, whenever money, wheat, or anything else of that kind is credited to another, it is always lawful to receive a moderate increase beyond the whole and safe principal. For at least this can be hidden from no one: that in many circumstances, besides the one mutuum, there can be place for no other true and just contract," prop. 5.

3. Others hold money as virtually fruitful and as an instrument of business or production, and indeed always in present economic conditions.¹⁸ Hence he who gives money concedes to another a utility which can be estimated by price and compensated.

¹⁸ Thus several economists, such as Maffei, P. Leroy-Beaulieu, Say, etc., and also certain theologians who thus seem to pursue the reputation of well understanding the circumstances of modern life, such as Lehmkuhl, Pesch, Antoine, etc.

Resp.: Money is not fruitful in itself by an internal fertility properly and immediately, but is called fruitful only improperly and mediately, insofar as someone, with the help of money, buys goods from whose sale or transformation he makes a gain. Hence money is not a real instrument of business or production, but, insofar as it is consumed and exchanged, it serves business and production, and thus is a medium of acquiring real instruments. Money, namely, is not a cause in the production of riches, but only a condition.¹⁹ But the fruitful utility which arises for the borrower is not from the money itself, but from his labor and industry, and therefore it is not to be sold to him; the other utility, by which it is a medium of acquiring fruitful things, is returned by returning the money.

¹⁹ Real capital, or instruments, are the real instrumental efficient cause, and therefore a fruitful thing; not so conventional capital, or money, which is consumable by first use.

But if they called money only virtually fruitful because, with the help of money in present circumstances, almost always someone can enter into a profitable partnership or institute a business for making gain, they would speak the truth: indeed the manner of speaking would not be proper, but in reality they would affirm only what we have said: that only the extrinsic title of foregone profit (lucrum cessans) is always present.

4. Finally, others flee to civil law as to a title per se sufficient, because the law, by force of the State's sovereign dominion, intends to transfer dominion in the same way as in prescription, and thus, for the utility of commerce, incites citizens to lend easily in mutuum.

But:

a) The opinion seems to extend the State's sovereign dominion too far; for it can be greatly doubted whether the State has such power and can require such a thing for the common good, except in economic conditions which already render usury legitimate.²⁰

²⁰ St. Thomas seems to deny this power to civil authority, q. 78, a. 1, ad 3.

b) It is not sufficiently clear concerning the intention of the legislator that he wished to do this, especially in regions where the civil law establishes an increase for certain cases only, and leaves full liberty for most cases. Thus among us. Besides, our civil law supposes mutuum to be a gratuitous contract, and only permits that interest be established (a. 1905).

582. Evolution of moral doctrine concerning mutuum and usury. Since the question concerning the morality of mutuum and usury, especially with special circumstances considered, is rather intricate, it is not strange if Catholic doctrine in this matter was not always known to all and at all times with the same certitude and evidence.

A. In Sacred Scripture:

1. Among the Hebrews, usury was strictly prohibited toward fellow citizens (Ex. XXII, 25; Lev. XXV, 35-37; Deut. XXIII, 19-20; XV, 7-10). This law was not always accurately observed, so that the Prophets had to reprove usuries several times, and praised those who had not given their money at usury (Ps. XIV, 5; LXXI, 14; Ez. XVIII, 5-20; Neh. V, 7, 9). But usury was tolerated as regards strangers (Deut. XXIII, 19-20); from this, however, it does not follow that usury toward brothers was prohibited solely by positive law: for it can be said that toward foreigners only the tolerance of the law was affirmed, not positive lawfulness.

2. In the new law, Christ, expounding the precept of charity, with no distinction made between Jews and foreigners, demands gratuitous mutuum: "Love your enemies; do good, and lend, hoping for nothing thereby; and your reward will be great" (Lk. VI, 35); and he exhorts to the easy concession of mutuum: "Give to him who asks of you; and from him who wishes to borrow of you, do not turn away" (Mt. V, 42). From these, however, it cannot strictly be gathered that usury also is prohibited from justice; just as neither from the parable of the talents can it be inferred that it is lawful, where the Lord thus addresses the lazy servant who had hidden the talent he received: "Therefore you ought to have committed my money to the bankers, and at my coming I would surely have received what was mine with usury" (Mt. XXV, 27). For Christ merely explains what men were accustomed to do in his time, without wishing to approve or reprove the manner of acting, because this did not pertain to the end of the parable, which was to show that only those are to be rewarded who have fruitfully used the talents received from God.

B. Among the nations, namely, the Greeks and Romans, immoderate usury flourished. This was prohibited several times by laws, as among Solon; but the laws permitted moderate interest, for example, ten or twelve per cent; afterward, when Christian emperors reigned, six per cent prevailed. But the philosophers of greater name condemned every usury as alien to nature: thus Plato, as contrary to the equality of citizens (de Leg. V, 742); Aristotle, because money is sterile of itself (Pol. I, c. 3, n. 23), whom Cicero (de Off. II, at the end) and Seneca (de Benef. VII, 10) followed.

C. At the beginning of the Church, Christian moral science had not yet been perfectly formed. They insisted not upon all things, but upon principles and causes of greater moment. Besides, the Church did not have influence in the public and social life of the Empire. Hence it is not strange if the doctrine concerning the injustice of interest was not explicitly proposed, and, a fortiori, if laws were not changed according to it; but we even find that Christians borrowed money from usurers, as Basil, Chrysostom, and Jerome testify.

1. In the first times, the Fathers urged the precept of charity concerning gratuitous mutuum: thus already Clement of Alexandria (Strom. II, 18), Cyprian (de Lapsis, 6), Tertullian (adv. Marc. IV, 17); afterward, in the fourth and fifth centuries, they not only act more vehemently against usurers, as Basil (P. G. XXIX, 263-280), but also say that usury is unjust, because it is unjust to become rich with detriment to one's neighbor: thus, for example, Chrysostom (in Mt. hom. 56) and Leo the Great (serm. 17, otherwise 16); or because money is sterile: thus Gregory of Nyssa (P. G. XLVI, 443-452), Ambrose (book de Tobia, P. L. XIV, 762-794), Augustine (in Ps. XXXVI, P. L. XXXVI, 386).

2. Hence among the Councils there was a tendency increasing from day to day of reprehending and prohibiting every usury, and indeed for all, so that they even demanded from civil legislators a change of the laws which permitted moderate usury.

First, indeed, they strictly prohibited clerics from receiving usuries: thus the canons of the apostles in the fourth century, can. 44; afterward they sometimes extended the prohibition to laymen, as the Council of Elvira (a. 305) and the Fifth Council of Carthage (around a. 419).

Nevertheless, with the legislation of the Empire standing, ecumenical councils did not prohibit usuries except to clerics: thus the First Council of Nicaea (a. 325), when Emperor Constantine shortly before had permitted twelve per cent interest, which afterward Theodosius confirmed (a. 506), and which was admitted by the western Goths in Spain (a. 693). And they allude to this fact who praise, as a work of mercy, those who condone usuries which they can demand, namely, according to law, or remit legitimate usuries, that is, legal ones: thus Sidonius Apollinaris (ep. 24) in the fifth century, Gregory the Great (ep. 38), Gregory of Tours (Hist. Franc. III, 4) in the sixth century.

Nonetheless, little by little the prohibition of usury became common even as regards laymen: thus the Council of Aachen (a. 787), Paris (a. 829), Meaux (a. 845); and indeed in such a way that they sometimes demand restitution of usuries; and the civil law in the time of Charlemagne brought the same prohibition for all.

D. From the time of Gratian (around 1150) usury was prohibited universally in the Church. For he himself inserted into his Decree (p. II, c. 14) those sentences of the Fathers and canons by which usuries are reproved generally. Gregory IX, however, in the Decretals promulgated the title On Usuries (l. V, tit. 18), in which suspension is decreed against usurious clerics, excommunication against laymen.

At the same time, the doctrine of St. Thomas concerning the essential gratuity of mutuum and the injustice of every usury became almost common among the Scholastics. The arguments on which it rests are already found proposed by William of Auxerre and St. Raymond of Pennafort.

But since in the Middle Ages enormous usury often raged, Councils and Pontiffs urge the prohibition more strictly, and indeed of usury of every kind: thus the Third Lateran (a. 1179), the Second Council of Lyons (a. 1274), Vienne (a. 1311), the Fifth Lateran (a. 1515), Sixtus V (a. 1586).

E. In modern times, because of the renaissance of pagan culture, the introduction of free examination by the Protestants, and the change in economic affairs, many tried to break the rigor of Catholic doctrine. Protestants, such as Calvin and Molinaeus, taught the lawfulness of usury, unless it be exercised against the poor or be immoderate; Grotius contended that moderate usury is permitted by natural law and prohibited by divine law, but Pufendorf that it is lawful even by divine law; finally Salmasius held that money can be let and that its use is saleable because it is rendered fertile by human industry. Many jurists and economists said it was necessary for commercial affairs and legitimate on account of the public good. Indeed, not only economists, but also some theologians began to seek out new forms of contracts in which some increase from money would be received justly.

Nevertheless the Catholic Church retained the received doctrine of the Scholastics, and Benedict XIV again proposed and confirmed it in the encyclical Vix pervenit (a. 1745).

Although afterward in practice a mitigation of discipline supervened, this is to be attributed to economic circumstances much changed and to extrinsic titles greatly multiplied, as was explained above. But the traditional doctrine was faithfully retained, as the Code of Law recently testified, which most accurately enunciated it and again proclaimed it in can. 1543.

583. Practical conclusions. A. Just as in the time of Christ (Mt. V, 42), so also in our days, charity can require that we succor a neighbor placed in grave necessity by gratuitous mutuum, namely, when he himself cannot pay an increase, and we can do this without grave inconvenience. Ordinarily, however, the rich are not held to hand over large sums of money in mutuum to the poor, namely, because of the danger of losing the principal; but often they do enough if they give to the poor, even those asking in mutuum, a small sum of money. But outside these cases, it is lawful to accept moderate interest from money lent; indeed anatocism is not prohibited per se, or the agreement by which interest owed and not yet paid produces a new increase (capitalisation des interets), unless this is prohibited somewhere by law. Interest is moderate, however, if it is proportioned to danger of the principal, foregone profit (lucrum cessans), incurred loss (damnum emergens), and other circumstances of places and times, according to the prudent estimation of upright men.

B. Concerning the just rate of interest we note:

1. In those regions in which civil law determines some rate of mutuum which it is not lawful to exceed, such a rate per se obliges in conscience, and the transgressor is held to restore unless he is excused by extraordinary reasons. In our country the faculty of establishing the rate of increase is conceded to the contracting parties themselves. The crime of usury among us is punished only when the usurer habitually proposes interest above the legal rate and at the same time has abused the weakness or passions of the borrower (C. Poen., a. 494). Therefore our legal increase (in civil matter 4½% and in commercial matter 5½%, from royal decree 18 Nov. 1935, and 6% for direct taxes not paid in time from the law of 2 July 1930, reduced to 4% from royal decree 22 Aug. 1934) is not a rate universally prescribed, but only indicates what must be paid when the law itself orders some interest, concerning which there had been no agreement, to be paid, for example, from a debtor in delay; moreover, for the forum of conscience it can be considered as a safe norm of acting.

2. It is not lawful for that reason to raise the interest because the borrower is placed in greater necessity, or because he is going to make greater gain from the money received in mutuum, of which money is the condition, not the cause: for these things contribute nothing to the equality of what is given or received.

3. In ordinary circumstances it is lawful to demand that rate which is established from common practice in a determined place and time, even if someone otherwise would have kept the money wholly idle: for within these limits there always arises the title of foregone profit (lucrum cessans), which he probably would have obtained, if he had wished.

4. In extraordinary circumstances the aforesaid rate can be increased somewhat on account of special titles, for example, great danger or extraordinary foregone profit (lucrum cessans).

5. It cannot be denied that in our days, under various forms, contracts of mutuum with immoderate interest are sometimes entered into; and the encyclical Rerum Novarum enumerates this among the causes of the social crisis: "voracious usury has increased the evil, which, although more than once condemned by the judgment of the Church, nevertheless is exercised by greedy and profit-seeking men under another species." Now he who demands immoderate interest sins against commutative justice and is held to restore the excess.

In practice it is often most difficult to determine the measure of just interest. Thus the Sacred Penitentiary, 18 Apr. 1889, warned that it is dangerous to fix interest by a general rule, and referred the matter to common practice, observed by persons of conscientious judgment in their respective places and times. Likewise the S. C. de Prop. F. once responded, a. 1873, that those are not to be disturbed who receive very great interest, provided account is taken of the quality of the danger and its probability. On the contrary, today, where generally there is greater security of the principal, a truly modest increase is rightly established: 3, 4, 5% before the war, afterward 5 and 6 or even up to 7 or sometimes 8%; but now again less.