Case 17. Usury

Caius, a Catholic moneylender who doubts concerning his manner of transacting business, consults a confessor and says that he asks the same interest as others demand, which, with respect to the poor, who not rarely borrow a few shillings to relieve daily necessities, is fixed by this condition: that they pay one penny for each shilling borrowed per week. But since Caius recently read in a newspaper that this interest is altogether usurious and unjust, he asks the confessor what is to be done. Hence it is asked:

1. What is usury, and by what law is it prohibited?

2. Can any interest justly be demanded for money lent, and how much and by what title?

3. How are the ancient and present practices in this matter to be reconciled?

4. What is to be said of the case?

1. What is usury and by what law is it forbidden?

Usury is forbidden by natural, divine, and ecclesiastical law. The sin was defined by Benedict XIV in his encyclical letter Vix pervenit in these terms: “The sin which is called usury consists in this, that from the loan for consumption (which of its own nature requires that only so much as was received should be returned) the lender desires more to be returned to him than the borrower received, and therefore contends that some gain over and above the principal is due to him merely on account of the loan.” If we accept the theory of many modern theologians and say that in our capitalistic society money is no longer a fungible but an instrument of production, we must say that usury in the strict sense is not committed now by taking interest on money loans, but the name may be used to designate the sin which is committed by exacting excessive interest.

2. May interest be justly exacted for a money loan, how much, and by what title?

Yes; interest may now in our capitalistic society be exacted for a money loan, as money is now virtually an instrument of production and no longer merely a fungible. The amount which may be exacted must be fair and reasonable in the judgment of prudent men.¹

1 Manual of Moral Theology, vol. i, p. 516.

3. How can the old and the modern practice of the Church be reconciled in this matter?

By the economic, industrial, and political changes which make modern society so different from former ages.²

2 The same work, pp. 515 and following.

4. The case. The interest charged by Caius on his loans to the poor is 433.3 per cent per annum. This is altogether excessive and extortionate. There may be considerable labor and trouble involved in collecting such small debts, and especially when the debtors so easily and so frequently change their places of abode. In some cases also there may be great risk of losing the principal. For these reasons, although charity might require that the poor should be helped gratuitously, yet a sin against justice would not be committed by exacting a high interest when circumstances justify it. It might rise to 20, 40, or 60 per cent per annum. But over 433 per cent per annum seems altogether extortionate and unjust.