Section — Prümmer, Manuale Theologiae Moralis
§ 4. On Loan for Consumption and Usury
Preliminary note. The doctrine concerning loan for consumption and usury today presents almost no practical difficulty for the confessor. Therefore we treat this matter briefly, indicating the summary heads of this doctrine. Almost innumerable works have been written concerning loan for consumption and usury. Among modern moralists Tanquerey90 has treated this matter most sufficiently.
90 De iust. n. 864-906.
284. A loan for consumption91 is a contract by which ownership of a thing consumable by its first use and fungible is delivered to another with the obligation that a thing of the same value be returned at its proper time.
It is said: "of a thing consumable by its first use and fungible," to distinguish a loan for consumption from a loan for use and from hiring, in which a non-consumable thing is given with the obligation of returning the same thing individually. A loan for consumption is likewise distinguished from a deposit and the other contracts enumerated in the preceding paragraph for the same reason, and furthermore because the thing lent, under this its individual form, immediately passes into the ownership of the recipient, which does not occur in contracts of loan for use, deposit, etc.
Therefore the object of a loan for consumption is a thing consumable by its first use and fungible, e.g., wine, oil, and especially money. Every such thing, however, is unfruitful in itself. A thing can be fruitful: 1. naturally, as a tree produces fruits; 2. artificially or industrially, as a merchant with the aid of money buys merchandise, from the sale of which he makes profit; 3. civilly, as a leased house produces the price of the lease. Cf. above, n. 208.
91 Contract of loan for consumption (Darlehensvertrag).
285. Usury is defined by St. Thomas as "the acceptance of a price for the use of a thing lent for consumption,"92 or, considered objectively, "the price of the use of a thing lent for consumption." The Fifth Lateran Council, session 10, explains this definition more broadly: "For this is the proper interpretation of usuries: when, namely, from the use of a thing which produces nothing, without labor, without expense, and without risk, gain and offspring are sought to be acquired." Therefore the essence of usury consists in the acceptance of gain from a pure loan for consumption. For if gain is accepted by reason of another extrinsic title, e.g., emerging loss, risk, etc., it is not usury. Likewise, it is not usury if gain is indeed accepted from a loan for consumption, but by a gratuitous and not an onerous title.93
Although according to the force of the words usury and interest are not distinguished, nevertheless, for the sake of clarity, it is better that usury always be taken in a bad sense, but interest (or return, or increase) in a good sense. Therefore usury is either gain from a pure loan for consumption or excessive gain94 received from money lent, e.g., 30 percent. But interest is gain licitly received from a loan for consumption. Interest is distinguished as either legal, which is determined by the law of the country; customary, which is established by common usage in some business; or conventional, which is determined by agreement of the lender and borrower. Legal and customary interest is judged to be just. Conventional interest, however, is not just unless, after consideration of the circumstances of places, times, and persons, it corresponds to the gain ceasing and the risk to the principal which the lender must undergo. No other more exact measure can be given concerning the amount of interest. On April 18, 1889,95 the Sacred Penitentiary, to the question whether it was lawful to receive eight or ten percent interest, responded: "Since it is dangerous to determine the fruit of money by way of a rule, the Venerable Father in Christ, the bishop making the request, is to decide the matter in individual cases according to the common practice observed by men of conscientious conscience in the respective places and times." I think that in our times, under ordinary conditions, interest exceeding 20 percent is usurious and unjust,96 because it greatly exceeds the amount established in public banking institutions, commonly called banks. From this, however, I do not wish to condemn shares of industrial companies which give 30 percent or even 50 percent annually, because such an increase is not interest properly so called, but the fruit of commerce conducted. Usury taken in this evil sense is gravely punished also by civil codes97 and induces an obligation of restitution.
92 S. theol. 2, 2, q. 78, a. 1.
93 Cf. Billuart, De contract. diss. 4, a. 1 and 2.
94 Usurious interest (Wucherzins). Usury is often taken in a broader sense for the abuse of any need of one's neighbor. Thus, e.g., we speak of a usurious price, a usurious wage, etc.
95 Collect. de Prop. Fide n. 1702.
96 In his time D'Annibale taught (Summula Theol. mor. II, 535): "As a rule, I would say that interest of seven percent is not immoderate; above ten percent, immoderate."
97 Cf. German Penal Code § 302.
286. Principle. Usury properly so called is contrary to positive divine law, ecclesiastical law, and natural law.
Thus the most common opinion, which Benedict XIV in the book On the Diocesan Synod98 calls the doctrine of the Catholic Church, and which almost only D'Annibale99 contradicted in these words: "It is established by no manifest law, whether natural or divine, that usuries are illicit in themselves or otherwise forbidden. Indeed, rather, the contrary is inferred from the manner of acting of the Catholic Church."
Proof 1. It is contrary to positive divine law. From the many texts of Sacred Scripture100 we select only two. It is said in Psalm 14: "Lord, who shall dwell in Thy tabernacle?" Among others there is enumerated: "He that hath not put out his money to usury." Therefore usury excludes from heaven. In the Gospel101 it is said: "Lend, hoping for nothing thereby." Concerning the meaning of this passage, see Billuart.102
Proof 2. It is contrary to ecclesiastical law. There are five ecumenical councils which prohibited usury, namely, the Third, Fourth, and Fifth Lateran Councils, the Second Council of Lyons, and the Council of Vienne.103 Likewise, Sixtus V reproved "the abyss of usuries, hateful to God and men, condemned by the sacred canons, and contrary to Christian charity." Alexander VII proscribed proposition 42: "It is lawful for the lender to demand something beyond the principal if he obliges himself not to reclaim the principal until a determinate time."104 Cf. also propositions 41 and 42 condemned on March 2, 1679, by Innocent XI.105 But Benedict XIV especially established a certain doctrine concerning usuries in his encyclical Vix pervenit of November 1, 1745.106 The Code of Canon Law, canon 1543, also proposes the same doctrine.
Proof 3. It is contrary to natural law. Therefore St. Thomas says: "To accept usury for money lent is in itself unjust."107 He proves this thesis in this manner: it is contrary to justice, and consequently to natural law, to sell that which does not exist or to sell the same thing twice. But the usurer does this. Therefore he sins against justice and natural law and consequently is bound to restitution. The major is evident. The minor is proved: in fungible things consumable by their first use, which are the proper object of usury, the things themselves and their use are morally the same. Therefore, just as it would be plainly ridiculous and unjust if a merchant, after selling wine for a just price, wished in addition to sell the use or consumption of the wine, so would one act unjustly if, besides the wine lent for consumption, he demanded something else for the use of that wine. Moreover, money, concerning which usury principally exists, is manifestly not morally distinguished from its use. Therefore nothing can be sought for the use of money lent for consumption; and if something has nevertheless been accepted, it must be restored. St. Leo the Great says beautifully: "Interest on money is the funeral of the soul."108
98 L. 10, c. 4, n. 2.
99 L.c., n. 533.
100 E.g., Ex. 22:25; Lev. 25:35-37; Deut. 23:19f.; Ez. 18:8 and 13.
101 Luke 6:35.
102 L.c.
103 The texts are cited by Lehmkuhl, Theol. mor. I, n. 1302.
104 Denz. n. 1142.
105 Ibid., n. 1191f.
106 Ibid., n. 1425ff., or better in the instruction of the Sacred Congregation for the Propagation of the Faith of 1873, where several decrees concerning usury are given (Collect. de Prop. Fide n. 1393).
107 S. theol. 2, 2, q. 78, a. 1.
108 Sermon 17 (16), Migne, Patr. lat. 54, 181.
287. Extrinsic causes legitimating interest. Although usury is never lawful and a loan for consumption properly so called must always be gratuitous, nevertheless extrinsic causes are present on account of which some increase or interest can be demanded in a contract of loan for consumption. St. Thomas109 already sets forth such causes, and Benedict XIV110 expressly teaches this. Four causes or titles are wont to be enumerated: 1. risk to the principal; 2. a conventional penalty; 3. gain ceasing or emerging loss; 4. civil law or legal premium.
Risk to the principal111 is a special, not general, danger by which it is prudently feared that the lender may not recover his property. Such a special danger is often present, especially if someone entrusts his money to certain banking institutions or debtors who are not very secure. It is evident that some interest can be accepted on account of such danger.112 For a thing possessed outside danger is valued more than the same thing placed in danger.
A conventional penalty is established for the case in which the borrower, through culpable delay, defers the repayment of the principal beyond the stipulated time. For this cause to be sufficient and just, it is required that the penalty imposed be moderate and that the delay in payment be truly culpable.
Emerging loss and gain ceasing. Gain ceasing is the failure of some proximately expected gain which the lender certainly would have had if he had assigned the money lent to other uses at hand. Emerging loss, however, is the positive detriment which the lender must undergo because of the contract of loan for consumption. That these causes also suffice for demanding proportionate interest in a loan for consumption is evident of itself and is admitted by all today.113
109 S. theol. 2, 2, q. 78, a. 2 ad 2: "He who gives a loan for consumption can without sin bring into the agreement with the one who receives the loan compensation for loss."
110 De synod. dioec. l. 10, c. 4.
111 The principal (sors) is the same as what today is commonly called "capital."
112 Thus also the Sacred Congregation for the Propagation of the Faith declared in 1645 (Collect. de Prop. Fide n. 117 ad 3).
113 Older authors disputed very subtly concerning these two titles of a loan for consumption. Cf. Cajetan, Comm. in 2, 2, q. 78, a. 2. Indeed, some doubted whether St. Thomas admitted gain ceasing as a sufficient title for a loan for consumption. Today those disputes are of little practical usefulness, since in the lending of money sufficient titles for moderate interest are always present. Billuart, De contract. diss. 4, a. 5, discusses the individual titles of interest excellently. D'Annibale (Summula theol. mor. II, n. 531) quite undeservedly cites St. Thomas (De malo q. 13, a. 4 ad 14) as though not even emerging loss were a sufficient title for receiving interest.
288. 4. Legal premium or civil law. From the sixteenth century onward it was sharply disputed whether civil law, in the absence of other titles, could render usury lawful. Today this dispute seems to be ended. For to the doubt: "Whether penitents who, on the title of law alone, received moderate gain from a loan for consumption in doubtful or bad faith can be sacramentally absolved without any burden of restitution imposed, provided they sincerely repent of the sin committed because of doubtful or bad faith and are prepared with filial obedience to stand by the mandates of the Holy See," the Holy Office responded on January 17, 1838: "Affirmatively, provided they are prepared to stand by the mandates of the Holy See."
In the same sense the Sacred Penitentiary responded several times, e.g., August 14, 1831; November 11, 1831; February 11, 1832; November 23, 1832.114 The Sacred Congregation for the Propagation of the Faith, gathering almost all the resolutions of the Sacred Congregations issued up to the year 1873, concludes in these words: "Although all other titles may be lacking ... the title of civil law alone can also be regarded as sufficient in practice, both by the faithful and by their confessors, who consequently are not permitted to disturb their penitents concerning this matter so long as this question remains under judgment and the Holy See has not explicitly defined it."115 The Code of Canon Law, canon 1543, establishes the same: "In the furnishing of a fungible thing, it is not in itself illicit to agree upon legal gain, unless it is clear that this is immoderate, or even upon greater gain if a just and proportionate title supports it."
The reason is that, by force of high dominion and by reason of the public good, there belongs to the supreme legislator the right of transferring ownership of this increase from the borrower to the lender; and this all the more because the subjects consent spontaneously. And in truth, in present times commerce would be impossible and the public good would be gravely injured if a moderate increase or interest were not permitted.
Other authors116 proceeded otherwise, thinking moderate interest to be lawful even without extrinsic legitimating titles. For in present times an increase or interest is demanded and accepted almost solely for money lent. But money today is not altogether sterile, but is truly, as it were, fruitful. Certainly money does not beget money as a cow begets a calf; but just as a rented house produces gain, so in almost the same way does money lent. Furthermore, money today is the principal instrument of trade and can immediately and without any difficulty be converted into fruitful things. Hence a contract by which money is delivered to another under the condition of legitimate interest is no longer a proper loan for consumption or usury, in which a sterile thing is delivered, but a contract of its own kind.117 Consequently, the most grave prohibitions enacted against usury can no longer be applied to money lent. Whether this opinion is true does not clearly appear. For although money today can much more easily be converted into fruitful things than in ancient times, it does not yet follow from this that it has changed its nature and of itself has become fruitful.
For practice. All, whether clerics or laity, can with a safe conscience receive moderate interest, indeed even compound interest or interest upon interest,118 from money lent, so that there is never an obligation of restoring such interest received. For today the extrinsic titles indicated above are always present. But what interest is moderate depends upon risk to the principal, gain ceasing, and emerging loss. Therefore, in regions where there is a legal rate or an admitted custom, this is to be followed. Indeed, something more can be accepted if the money is delivered to those companies commonly called joint-stock companies, sociétés par actions. But it is never lawful to abuse the need of the borrower in order to extort immoderate interest, since otherwise both justice and charity are injured.119
114 Cf. Denz. n. 1612 and note 1.
115 Collect. de Prop. Fide n. 1393.
116 Lehmkuhl, Theol. mor. I, n. 1313; Weiss, Apologie des Christentums IV, 794ff.; Tanquerey, De iust. n. 902; Henry Pesch, Lehrbuch der Nationalökonomie V, 226ff.
117 It is called a contract of credit (Kapitaldienstvertrag).
118 Compound interest (Zinseszins, intérêt d'intérêt, compound interest).
119 Since in ancient times grave penalties were established against every usury, some attempted to evade these penalties through disguised usury by entering into the triple contract or the "Mohatra" contract. The triple contract is one contract of partnership and two contracts of insurance. E.g., Peter asks Paul for 10,000 francs to carry on some business, promising him a portion of the gain, namely, 1,000 francs. Behold the contract of partnership. For Peter and Paul conduct a business in which Paul furnishes the money and Peter the work. When this contract has been made, Paul, who fears risk to the principal, offers Peter 300 francs so that he may be willing to insure the principal. Behold the first contract of insurance. Paul, furthermore fearing for the profit, offers Peter another 200 francs so that he may be willing also to insure the profit; and this is done. Behold the second contract of insurance, by which the triple contract is completed. Therefore, for the 10,000 francs lent, Paul receives 500 francs, or 5 percent; cf. the constitution of Sixtus V, Detestabili avaritiae, 1586. - The Mohatra is a species of purchase for disguising usury. Behold an example: Peter asks Paul for 1,000 francs. Paul responds that he can neither lend this money gratuitously nor with usury, since usury is gravely prohibited; but he proposes this manner of acting: I sell you my horse for 1,100 francs, and you give me a promissory note in which you promise that after a year you will pay this sum. Immediately you sell the horse back to me for 1,000 francs, which sum I deliver to you. Therefore Peter has the 1,000 francs sought, but after a year he must pay 1,100 francs, or 10 percent, for the money lent. On March 2, 1679, Innocent XI condemned proposition 40: "The Mohatra contract is lawful, even with respect to the same person and with a contract of resale entered into beforehand, with the intention of gain" (Denz. n. 1190).
289. Scholion 1. On montes pietatis, savings banks, and banks.
A mons pietatis is a fund of money or other lendable things collected for this purpose: that the poor, upon giving a pledge and moderate interest, may receive from it on loan those things which are necessary for them. Today they are called pawnshops, Pfandhäuser, monts de piété. The Fifth Lateran Council120 and the Council of Trent121 approved montes pietatis, first established at Orvieto in 1463 or Perugia in 1467. At that time they existed for the relief of the poor, since only very moderate interest was demanded; but now, since these montes pietatis have often passed to private persons and the interest demanded is not rarely excessive, for various reasons montes pietatis are sometimes rather mountains of iniquity. It is greatly to be desired that the government diligently supervise and restrain institutions of this kind.
Savings banks (Sparkasse, caisse d'épargne, savings-bank) are established either by municipalities or by private persons to receive sums of money, not of such great quantity, and to pay suitable interest for the money received. The purpose of these institutions is to foster thrift, especially among persons of moderate fortune; this is certainly excellent. It is lawful to place money in these savings banks, as the Sacred Penitentiary expressly declared on February 25, 1836.
Banks (Bank, banque, bank) exist everywhere in the world and are of great service to commerce of different kinds. Nevertheless, as experience proves, they can also produce no small inconveniences and losses. Since it happens not rarely that a priest, especially if he is a pastor, must administer money or that his counsel is sought in monetary affairs, it will be very useful if he endeavors to know the different kinds of banks. According to modern practice all persons, even priests, can place money in these banks and purchase both "shares" and "bonds,"122 provided scandal, cooperation in evil, and speculation on the stock exchange properly so called are avoided. Whether money belonging to churches and other pious causes can be placed in savings banks or banks depends both upon the condition of those institutions and upon particular ecclesiastical statutes.
120 Session 10 (Denz. n. 240).
121 Session 24, c. 8ff., De reform.
122 Cf. Holy Office, April 15, 1885.
290. Scholion 2. On the contract of census. A census (Rente) is a right of receiving an annual pension from a thing or person. This annual pension was called a canon or revenue. There was distinguished a reservative census, arising from the delivery of an immovable thing; a consignative census, or census simply so called, purchased by delivery of some "capital," e.g., I deliver 10,000 francs to you on the condition that until death I receive 800 francs annually; a real census, which is, as it were, a servitude imposed upon some thing and is almost the same as emphyteusis,123 e.g., I deliver these fields to you so that you and your heirs may pay me 100 francs annually from their fruits. There are still other divisions, such as personal, pecuniary, and fructuary census, redeemable and irredeemable census, etc.124 Whatever may be true of the old laws, today a census is lawful, provided there is a just proportion between the census and the price. For a census is after the manner of interest. But today interest or a loan for consumption is lawful, provided it is moderate.
123 Hereditary lease (Erbpacht).
124 Cf. Billuart, De contract. diss. 5, a. 1.