Section — Noldin, Summa of Moral Theology
Section 3. On Interest and Usury
582. Notions. Interest (foenus, Zins) is gain licitly received from mutuum, which is commonly called interesse. A threefold interest is distinguished: legal, common, and conventional.
a. Legal interest is that which is constituted by law.
Legal interest is not had everywhere: for there are civil societies in which laws of this kind either never existed or once existing have been abolished.1 But where laws determine the quantity of interest which at the same time they prohibit to be exceeded, those laws oblige in conscience, so that he who exceeds it is bound to restitution, unless there is extraordinarily great danger of the principal or ceasing profit.
b. Common interest is that which is constituted from the common use of men.
Common interest is especially had where legal interest does not exist; but even in regions in which legal interest has been established, common interest sometimes exists at the same time, and exceeds it. He who exceeds common interest commits injustice, unless peculiar circumstances make the excess honorable.
c. Conventional interest is that which is constituted by agreement and consent of lender and borrower.
Conventional interest has place where neither legal nor common interest is had. Its measure must be determined not from the profit which the borrower receives from the money lent by mutuum, but from the common hope of profit which the lender could have received from the possession and use of the money, and from an external title, if in a particular case a title of this kind is present.
1 Legal interest in Austria formerly was six percent (6 percent) each year; afterward, however, when that law was abolished in 1886, interest even of any greater height is not forbidden by law.
583. The measure of licit interest cannot be determined by a general norm, because the circumstances of places, times, and persons, on which the quantity of just interest depends, are very diverse. Generally it can be said that that interest is licit which, with the conditions of industry and commerce in a determined region attended to, is constituted by the common judgment and use of men.
a. From natural law the borrower is not bound to pay interest where nothing has been agreed concerning paying it, especially if money is lent for a short time. But attention must be given to what positive law or the received custom of the place establishes in this matter.1
b. In our European regions, licit interest from the very fertility of money in ordinary circumstances is 4-5 percent. In order that greater gain can be received, a special cause must be present, such as the titles constitute on account of which interest could be required in ancient times, unless the borrower himself spontaneously offers greater gain because of the extraordinary utility which he himself is going to receive from the mutuum. From these special causes it can happen that even great interest, 10-20 percent, is licit and just.2
1 C.G. Section 608 s. agrees with natural law.
2 Holy Office, Dec. 18, 1872.
584. On usury. 1. Usury (Wucherzins) is gain unjustly received from mutuum. Since every gain received from mutuum by reason of the mutuum itself is unjust, usury can be defined: gain received from the mutuum itself; and because in present times from any pecuniary mutuum some interest is licitly received, usury can be defined as excessive interest.
a. Usury is taken in the formal and objective sense; formally it is a contract by which the lender obligates the borrower to giving something beyond the principal from the sole title of mutuum; objectively it is gain received from mutuum by force of the mutuum.
b. In ancient times every gain received from mutuum was presumed illicit; therefore every interest was considered to have the character of usury, whence it happened that in canon law interest signified the same thing as usury, and usurers were said to be those who accepted interest from mutuum. But today there is a broad difference between interest or licit gain and usury or unjust gain. The reason for the difference is that in ancient times only an external title rendered interest licit, but a title of this kind was rarely present; therefore every interest was presumed unjust, unless the existence of an external title could be demonstrated. But today interest in general is considered just, even if no external title is present, because the circumstances of the time attribute to money itself a value which it did not have before.
Usury is divided into open, when it is expressly required by reason of the mutuum, for example, I lend you one hundred under this pact, that you return to me one hundred and five; and into cloaked, when it lies hidden in another contract which contains a lending by mutuum, by force of which gain is required. Therefore it is covered as if by another contract as by a cloak, as if someone sells something at a higher price precisely because of deferred payment.
Usury, formally, is a sin against commutative justice; and since it must be equated with theft, the gravity of the matter must be determined in the same way as in theft.