Usury and the titles to interest

ECONOMIC goods may be divided into those which are meant for immediate consumption and those which are meant to subserve our wants by repeated use. In the first category are articles of food and drink, in the second are commodities which are capable of rendering continued services, such as a saw, a sewing-machine, a house. It is with the first class of goods that we have principally to do in this chapter. They are sometimes called fungibles because any amount is interchangeable with the same quantity and quality of the same commodity (mutua vice funguntur). Thus, if I lend a bushel of wheat, I shall be satisfied if I get back a bushel of the same quality; I do not expect to receive back the same identical grain. The matter of the contract of mutuum is something fungible, which is consumed in the very first use of it.

It is obvious that such commodities may be the matter of many different contracts. They may be the matter of the contract of sale, or gift, or exchange, or loan. The contract which was called mutuum in Roman and canon law was a gratuitous loan of a fungible commodity on condition that after a certain period of time the borrower should restore to the lender an equal quantity of the commodity and of the same quality. Unfortunately, we have no term in English which is the precise equivalent for mutuum. We use the term Joan of lending a horse, which we expect to be restored to us in specie, and of lending a bottle of wine, which we do not expect back but another instead of the same size containing the same quality of wine. As an equivalent for mutuum we may make use of the expression loan for consumption as distinguished from Joan for use.

In all contracts justice requires that values which are given in exchange should be equal. A sin against justice is committed by charging an unreasonable price for a horse. What the reasonable price is depends on the demand, on the available supply, and on a great variety of factors, but it is proximately determined by the common estimation of intelligent men at a fixed time in a certain place. The fair price of a fungible commodity which is consumed in the first use of it is the money equivalent of the value which that use has, The commodity is for consumption, and the only value that it has is the value of that consumption. There is no other use in the commodity which can give it any additional value. The fair price of a bottle of wine is the money equivalent of the value which the wine has for drinking. In other words, the value of the first consumption of the commodity is the value of the commodity.

On the other hand, commodities which are not consumed in the first use of them, but which continue to render repeated services, have a value over and above that of the first use. The value of a house is greater than the value of the lease of it for a year, because the house will continue to render services and be valuable after the year’s lease of it expires. The fair price, then, of a commodity which is not consumed in the first use of it will be greater than the value of that first use.

All this seems evident, yet with a view to the deductions which we shall presently make, it is well to strengthen what has been said by the words of a modern professor of political economy. Dr. G. Cassel writes: “‘ All economic goods may be divided into two categories: those which satisfy our wants in being consumed at once, and those which afford a series of useful services before they are worn out. Food is an instance of the former category, houses of the second. This line of subdivision is one of the most fundamental in economic science. The price paid for an article of immediate consumption is, of course, the same as the price paid for the use of this article. This is not so in the case of an article belonging to the second category. The price paid for the single useful service it affords is one thing; the price paid for the article itself is quite another.”¹

¹ The Nature and Necessity of Interest, p. 86 (1903).

Money considered as a medium of exchange is a fungible; it is a commodity whose use is exhausted for the owner of it when he has paid it in exchange for value received. It is not, under this respect, a commodity which is susceptible of repeated use by the same owner. Money, then, may be the matter of a contract of loan for consumption, and, if a sum of money be thus lent, justice requires that an equal sum be returned at the end of the term, and justice will not allow a greater sum to be exacted in return. For the whole value of the sum of money is the value it has for making exchanges, the value which it has in the first expenditure of it; and if, over and above the sum lent, a further sum were demanded for the use of the money, the same thing would be charged for twice over. An equal sum is due in return for the use of the money; a further sum would be a second payment for the same use. Thus when money is regarded merely as a medium of exchange a sin against justice is committed if an additional sum besides the principal is exacted for a loan; it is called the sin of usury, money unduly exacted for the use of money. This is the reasoning of Aquinas,¹ and it seems as cogent to-day as it was in the thirteenth century. By this argument he defended the doctrine concerning usury which the Fathers and Doctors drew from Holy Scripture and tradition. Benedict XIV sums up the constant teaching of the Church on usury in his celebrated encyclical, Vix pervenit. There the Pope says: “‘ 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. For whoever, when once a sum equal to the debt has been repaid, is not ashamed to exact something more from the borrower on account of the mere loan, which has been repaid by the equal sum, such a one stands convicted of acting against the obligation imposed by a loan for consumption, which requires equality between the sum lent and the satisfaction for it ” (cf. Can. 1543).

This argument is valid when money is regarded as a means of exchange for articles of consumption and a measure of their value. Until modern times this was the chief function of money, but now we find that the above argument does not impress us with convincing force because in modern society money is not only a means of exchange for articles of consumption and a common measure of value, but also the most convenient form of storing capital. Within the last hundred or hundred and fifty years modern society has become capitalistic, and money is the chief form of capital. No wealth-producing object of importance can be undertaken without a supply of money, and money is now readily exchangeable for land, machinery, means of distribution, and other instruments for the production of wealth. Capital is one of the factors necessary for the production of wealth, and it is the chief instrument of its production. Money, then, looked upon as capital, is not a mere fungible; it is not a commodity which is consumed in the first use of it; it is the main instrument necessary for the production of wealth, and it thereby acquires a new function; it becomes virtually productive and puts on the nature of land and machinery, with which it is so readily exchangeable. Indeed, nowadays land can hardly put forth its natural productivity without the aid of capital, and machinery cannot be worked for the production of wealth without it. It follows, then, that nowadays money is not merely a means of exchange; it is also an instrument of production, and just as money may be charged for the use of land, or of a house, so money may be charged for the use of money. Money now has its fair and reasonable price like any other commodity, and the sin of usury is committed not by taking a fair and reasonable interest for a loan, but by exacting excessive interest. What is a fair and reasonable interest is a question whose solution depends upon circumstances, and, proximately, on the common estimation of intelligent men, like the fair and reasonable price of other commodities.

The foregoing seems to be the true solution of the old and much-disputed question of usury. It rests on historical facts and economic truths which are commonly admitted by modern theologians and economists, and it furnishes a satisfactory explanation of the changed attitude towards the taking of interest for money loans which the Church has adopted in modern times. Canon 1543 rests the title for taking moderate interest for money on positive law.

Although the use of money as capital was known in particular places and especially in centres of commerce in former ages, yet this use was exceptional and could: not characterize money in general, The capitalistic function of money was of very gradual growth, and we have to wait till the latter part of the eighteenth, or the first part of the nineteenth, century before the capitalistic era was fully developed even in the most advanced nations of Europe. It may be well to quote one or two passages from economists of standing in proof of this. Dr. Cunningham writes: “ In dealing with the Christendom of earlier ages we have found it unnecessary to take account of capital, for, as we understand the term in modern times, it hardly existed at all. In the fourteenth and fifteenth centuries we may notice it emerging from obscurity, and beginning to occupy one point of vantage after another, until it came to be a great political power in the State, . . It would be still more hopeless to try to treat the intervention of capital as an event which happened at a particular epoch, or a stride which was taken within a given period. It is a tendency which has been spreading with more or less rapidity for centuries, first in one trade and then in another, in progressive countries.. We cannot date such a transformation even in one land; for though we find traces of capitalism so soon as natural economy was ceasing to be dominant in any department of English life, its influence in reorganizing the staple industry of this country was still being strenuously opposed at the beginning of the present century [the nineteenth].’’²

The following is from Professor Cassel’s book, The Nature and Necessity of Interest: ‘‘ Interest paid for the use of capital, not for the use of money. ... The question For what is interest paid ³ was taken up again, a few years afterwards, and treated in the most successful way by the eminent French economist, Turgot. He rejects the old idea of a ‘ price of money,’ and defines interest as the price given for the use of a certain quantity of value during a certain time—a formula never afterwards surpassed in clearness and definiteness. He shows how this price is fixed by demand and supply, and he gives special attention to the causes which govern the demand for capital. What he has to say on this subject is even in our days of the highest value, and should not be neglected by any serious student of the theory of interest. He puts capital— i.e., the use of a certain quantity of value during a certain time— as a factor of production on the same line with the other factors.

Thus historical fact and scientific explanation of the rise of the capitalistic age and the theory of interest on money as capital synchronize with the beginnings of the change in the Church’s teaching on the lawfulness of interest on loans. In the year 1830 the Holy Office gave answer to a question of the Bishop of Rennes that confessors were not to be disturbed who absolved penitents in spite of their taking interest on money lent to merchants. Similar answers followed in quick succession, so that now there is no practical difficulty as to the lawfulness of taking moderate interest for money loans, though the Church has not yet formally settled the general question.

In England the usury laws, dating from Edward the Confessor, were repealed in 1854, owing to the prevalence of the opinion that such laws were economically unsound and practically ineffectual. Experience, however, has shown that the rapacity of usurious moneylenders requires curbing, and the Moneylenders Act, 1900, empowered courts of justice to grant relief from any usurious bargain which, in the opinion of the court, was harsh and unconscionable.

Canon 1543 is as follows: “‘ If a fungible be so given to another that it becomes his and afterwards as much is restored in the same kind, no gain can be received on account of the contract itself; but in the lending of a fungible it is not per se unlawful to make an agreement about the lawful interest, unless it is certain that it is immoderate, or even about a greater interest, if there be a just and proportionate title.”

¹ Summa, 2-2, q. 78, a. I.

² Western Civilization, n. 114.

³ Page 20.

McHugh–Callan, Moral Theology

John A. McHugh, O.P., and Charles J. Callan, O.P. — 1 passage

Vol. II, Pt. II, Q. II, Art. 4. The Vices Opposed …, Usury

n. 2136.

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.

Bucceroni, Institutions of Moral Theology

Gennaro Bucceroni, S.J. — 18 passages

Vol. II, On the Seventh and Tenth P…, X. On Mutuum

n. 1094.

What are Montes pietatis, and are they usurious? - Resp. To the 1st: Montes pietatis are certain treasuries, whether public or private, which were instituted so that the needy might have recourse to them as to a mountain of refuge, to receive money on loan for a pledge, lest they be compelled to receive money from usurers with greater damage to themselves; yet in such a way that they must leave a certain profit to the Monte pietatis, and unless, e.g., within a year they redeem the pledge, it falls into the ownership of the Monte itself.

Resp. To the 2nd: Montes pietatis, duly instituted, are not usurious. This is clear from the authority of Leo X, who in the Lateran Council, sess. 10, by the Bull Cum inter nonnullos, approved such Montes pietatis as licit and free from the stain of usury. But the reason of the response is that the moderate profit which the borrower must leave to similar Montes or public treasuries is not demanded under the title of mutuum, but for paying the salaries of officials and conserving a similar treasury; and accordingly such profit is not usurious. - Duly instituted.

For 1. that profit which is received must be moderate and proportionate to the expenses to be made for the ministers of that Monte, whose labor is truly estimable by price. 2. Sufficient time must be conceded to borrowers so that they can redeem the pledges and not be compelled to abandon them. 3. An equivalent pledge, or one not greatly exceeding the thing lent, should be demanded; for since those pledges, unless, e.g., they are redeemed within a year, fall under the ownership of the Monte, disguised usury would intervene if those pledges were appraised at too cheap a price and then sold for much more, without any refund made to the pledger. L. 765; Benedict XIV, de Syn. 1. 10. c. 5; A. S. S. v. 4. p. 27 ff.; E. M.

n. 1095.

What is the just interest of the lender? - In mutuum, usury is one thing, fenus, just interest or the just interest of the lender, another: for usury properly exists when the lender immediately because of the mutuum demands something beyond the principal; but the just interest of the lender exists when he, from another just extrinsic title, which accidentally occurs in the mutuum, demands something beyond the principal in compensation for such title, or cause estimable by price. For this reason that increase which is demanded is not demanded by force of the contract of mutuum, but by force of another contract annexed to the mutuum. This interest can also be called usury, but less properly and only in a broad signification, insofar as it is beyond the principal. But a contract must intervene; otherwise, although a just title of demanding something is present, nothing can be justly demanded. Thus expressly C. H. 1755, and it is clearly deduced from C. I. 1829, 1830; C. G. 1902, 1903; C. A. 984; C. B. 608. L. 765, 773; E. M.

n. 1096.

Whether it is lawful for a lender to demand his interest because of the title of emergent loss or ceasing profit? Resp. Affirmatively. For in two ways, says the Angelic Doctor 2. 2. q. 62. a. 4, someone can be damaged: in one way, by taking away from him what he actually has, and this is called emergent loss; in another way, by impeding him from acquiring what he was on the way to having, and this is called ceasing profit. Moreover, both because of emergent loss and because of ceasing profit it is lawful for the lender to demand from the borrower what concerns his interest on account of the loan, if the due conditions are present. The same Angelic Doctor gives the reason, 2. 2. q. 78. a. 2 ad 1, teaching that this is not to sell the use of money, but to avoid loss. And certainly equity does not allow that someone lose profit or suffer loss from conferring a benefit: in the Law it is read, No one ought to suffer expense from that from which he seems to have deserved a reward. Add that this is expressly approved by Benedict XIV in the Encyclical Letter on usuries.

If the due conditions are present. The conditions are: 1. That the interest be brought into the pact from the beginning, though not demanded immediately, with the borrower also warned concerning the title of emergent loss and ceasing profit, or another title, if any exists, for which he wishes to demand something beyond the principal; for after the contract the lender can no longer demand anything, even if he had forgotten emergent loss and ceasing profit; for an interpretative or conditional will does not suffice for a contract, but an actual or virtual will is required, or at least one sometime had and not retracted: he ought to have provided for himself, says the Angelic Doctor, q. 3 De Malo a. 4, concerning the lender in such a case, lest he incur detriment; nor ought he who receives the mutuum to incur loss from the foolishness of the lender.

Nevertheless, even if emergent loss was not brought into the contract, if the borrower culpably delays payment beyond the established term, he is bound to repair to the lender whatever damage arises from such delay; for according to Rule 25 in 6: His own delay is harmful to each person. 2. That the lender not demand more than the loss which he suffers, or the profit which he hopes for from another licit contract, according to the estimation of hope and danger, and with expenses deducted; for this is the whole reason for the exaction.

Hence interest cannot be demanded for the whole quantity of profit which the lender could hope for; for this profit, since it can often be impeded, must be estimated at less; indeed the lender would have had to concur toward it through his own labor, the lack of which likewise is estimable by some price. Whence the value of ceasing profit must be estimated according to the judgment of prudent men; and this is well to be observed. - 3.

That the mutuum is actually the cause of the emergent loss or of the ceasing profit. Whence, if someone had no occasion at all of making some profit by business, or even when the occasion was given did not wish to engage in business, he could not demand interest precisely from the title of ceasing profit, although he could from other titles. L. 768, 799; St. Thomas 2. 2. q. 62. a. 4; Gousset 819; Collectan. S. C. de P. F. n. 2133; E. M.

n. 1097.

Whether the lender can demand compensation for emergent loss if he himself freely offers to give the mutuum? Resp. More probably affirmatively. "The reason is that the lender then does not offer the loan absolutely, but under the condition that ceasing profit be compensated to him; and thus the borrower, by accepting the loan, is the true cause of the cessation of profit, and truly impedes the lender from justly making profit from his own money." L. 760, 807; E. M.

n. 1098.

Whether it is lawful for the lender to make an agreement from the beginning about a certain profit to be perceived, if the emergent loss is only probably future? It is common that something can still be demanded above the principal, while nevertheless the proportion between the fear of loss or hope of profit and the increase which would be received in the hypothesis is considered and carefully preserved. The reason is that due equality is already preserved thence; for just as, if the loss does not occur, the lender would profit, so on the contrary, if it does occur, the borrower would profit. Nor does it matter that the foreseen loss does not occur; for the pact concerning the increase is not made for the loss, but for the danger of it, which is actually supposed and is estimable by price. A fisherman who sells the cast of a net does not indeed sell the fish, which perhaps will not be caught at all, but sells the probable hope of them, which actually exists and is estimable by price. L. 770; E. M.

n. 1099.

Whether you can demand something by reason of ceasing profit because of a loan of money, if you keep other idle money? Resp. Affirmatively, "if you had reserved that other money for the use of the family ... because you are not bound by reason of the loan to neglect your own providence." Also probably affirmatively, if without such inconvenience you can substitute other money for the money destined to business. For, with this posited, that you had determined to destine this money alone to business, you can licitly ask ceasing profit; "because the lending is truly the cause that the hoped-for profit from that money ceases for you." L. 771, 772.

n. 1100.

Whether it is licit to demand something above the principal by reason of the danger of losing it? Resp. Affirmatively. The reason is that the lender is not bound to give a loan with danger of losing the principal, and such probable danger is estimable by price; just as the labors perhaps necessarily to be undertaken and expenses to be made for recovering the principal are also estimable by price, if, e.g., it is later necessary to go to the judge. And accordingly, if proportionate interest is demanded because of this danger, such a contract is contrary neither to the virtue of liberality nor to justice. St. Thomas 2. 2. q. 78. a. 2; L. 765. Exception: 1. If the borrower is poor, because then the precept of lending from charity urges. 2. If the borrower secures the principal by pledge, because thus the danger ceases. E. M.; Collectan. S. C. de P. F. n. 2135.

n. 1101.

What conditions must be observed in the aforesaid title? - In order that interest be just from this title, two things must be attended to: 1. The danger of losing the principal must not be precisely possible, but also probably future; either by reason of the borrower, who is not sufficiently known, or is of doubtful faith, or conducts dangerous business; or by reason of the principal, which is to be carried elsewhere with danger to the lender. 2. The quantity of the interest itself must be proportionate to the quantity of the danger. Each is clear from the response of the S. C. de P. F., which in the year 1645, having been questioned by Missionaries from the Chinese Kingdom in a similar doubt, and having been convoked by mandate of Innocent X, responded: "They judged that by reason of mutuum immediately and precisely, nothing is to be accepted beyond the principal sum; but if they accept something by reason of danger probably arising, as in the case, they are not to be disturbed, provided account is taken of the quality of the danger and of its probability, and proportion is preserved between the danger and that which is accepted." La-Croix n. 856; L. 765.

n. 1102.

Whether in a mutuum it is licit to make an agreement about a penalty to be paid by the borrower if he does not return the principal at the defined time? Resp. Affirmatively.

The reason is that in this way provision is made for the firmness of the contract, and at the same time the negligence of the borrower is guarded against. L. 766. Nevertheless it must be observed that this pact is not licit unless 1. the delay of the debtor is notable and culpable; notable, for some delay is intrinsic to mutuum; culpable, for he who has not sinned is not to be punished. 2. The intention of profiting through that attached penalty is absent; and this is presumed to be present if the debtor is burdened with the obligation of restoring the principal at that time at which it is certainly known that he is by no means able to pay. 3. The penalty is moderate and proportionate to the fault; otherwise it would be unjust. But more probably it is owed before the sentence, for it has more the nature of a pact than of a penalty, although it also is a penalty. L. 44 de Usur.; L. 766, 767, 775.

n. 1103.

Whether civil law supplies a just title for demanding something above the principal, even with any other title excluded? - C. I. 1829; C. G. 1905. Resp. Affirmatively. And, when written law is lacking, legitimate existing custom, which has the force of law, supplies. - Proof: 1. For since ordinarily in a mutuum an extrinsic title of just interest is not lacking, by reason of danger to the principal, ceasing profit, and emergent loss, civil authority can well determine by law the increase which can justly be demanded, to impede the unjust extortions of wicked men, to render the contract of mutuum easier for all, and also to impede lawsuits and controversies, not without grave damage to the parties. - 2. Public authority can, by reason of the common good, transfer the ownership of private persons, as is seen in the law of prescription. Therefore the same authority can transfer ownership of an increase above the principal, which in this case is freely and willingly given by all, by reason of the public and private good, to which, as has been discovered by experience itself, facility of lending especially contributes. 3. The same is evinced from the Responses of the Sacred Congregations, namely that those who accept the profit conceded by law, even without any other title, are not to be disturbed. Collect. cit. 2141; E. M. Legal interest or fenus of this kind is in the manner of civil fruits, L. 34 de Usur. et fruct., and can also be called usury, but less properly and in a broad signification. Cf. 1086, 1095. As civil law, so consequently legitimate custom, and as the S. Penitentiary has it, April 18, 1889, the common practice observed by men of fearful conscience in their respective places and times, can determine the just interest to be received from mutuum. E. M.

n. 1104.

What kind is the fenus, or interest, constituted by positive laws?

According to C. I. 1831; C. G. 1907 and the Law of Sept. 3, 1807, one interest is legal, another conventional. Legal interest is five per cent in civil matter, six per cent in commercial matter; or civil usuries are quincunces, mercantile are semisses. Nevertheless by the Law of June 22, 1904 in Italy, and the Law of Apr. 7, 1900 in France, legal interest is four per cent in civil matter and five per cent in commercial matter. Conventional interest according to the cited French Law cannot exceed the aforesaid quantity; according to C. I. it depends on the judgment of the contracting parties; but if it exceeds legal interest, it must be established by a written act; otherwise no interest is owed. Nevertheless the debtor after five years from the contract can always restore the sums accepted with interest to be paid exceeding the legal, notwithstanding any contrary pact, but with written notice given six months before. C. I. 1832. Cf. 1833. According to C. H. 1100, 1109, in civil matter likewise one interest is legal, another conventional. Legal interest is six per cent. In commercial matter one must stand by the Commercial Code. But in it commercial contracts are treated, arts. 50-63. According to C. L. likewise one interest is conventional, another legal, and this is five per cent, art. 1640. According to C. A. 994, 995, one interest is legal, another conventional. The first is four per cent, and among merchants six per cent. The other cannot exceed five per cent in a loan with pledge, and six per cent in a loan without pledge. But by the Law of June 14, 1868, the predefined limits for conventional interest of this kind were abrogated. C. B. 246, 247. Legal interest is four per cent. Conventional interest can exceed this quantity. But if it exceeds six per cent, the debtor can restore the capital after six months, with a prior delay of notice of six months. As regards Roman Law, cf. L. 36. E. M. de Usur. C.

n. 1105.

Whether from positive laws interest also from interest, anatocism, is constituted? - According to Roman law it is prohibited. L. 29 de Usur.; L. 27 de Re iud.; L. 28 de Usur. C. - According to C. I. 1232, 1233; C. G. 1154, 1155, interest from interest is owed after a year, if the creditor juridically seeks it, or by a particular agreement, after the prior interest has already become due. But it can also be demanded from the beginning from revenues of estates, perpetual or life-long. Gousset Cod. comm. on art. 1154. According to C. H. 1109, legal interest from interest is likewise owed after this is owed and the former is juridically sought. According to C. A. 998, only interest which is owed from two or more years can, by means of an agreement, constitute a new capital. Likewise according to C. L. 1642, cf. C. A. 1335, it is required that interest already owed be constituted as capital by a new contract. According to C. B. 248, an agreement made in advance that interest which is owed should be productive of new interest is null. - E. M.

n. 1106.

Whether legal interest is sometimes to be paid even without agreement? Civil law itself, apart from every agreement, establishes legal interest to be paid sometimes by reason of delay and loss; sometimes by reason of fault and injury; sometimes by reason of natural equity. By reason of delay, e.g., of a debtor who does not restore at its time money credited to him, C. I. 1231; C. G. 1153; C. B. 288; by reason of fault and injury, e.g., of a guardian who did not invest the money of a ward, C. I. 291; of a mandatory or depositary who used another's sum, C. H. 1724, 1770; C. B. 698, etc. This interest is in the manner of a penalty, and accordingly before the sentence of the judge it is not owed; after it, it is owed even in the forum of conscience, even if because of only civil fault.

By reason of natural equity, e.g., if a dowry has been constituted in counted money, if the buyer of a house or estate does not pay the price on the established day, and the thing sold and handed over produces fruits, etc. C. I. 1397, 1509; C. G. 1548, 1652. This interest does not need the sentence of a judge in order to be owed. Cf. n. 1114. 2, 3. The cases in which, according to C. I., legal interest is owed by the law itself are: 1. The remaining sum owed by the guardian, once accounts have been rendered, C. I. 308. 2. The dowry owed by those promising from the day of marriage, C. I. 1397. 3. The dowry to be restored from the day of the dissolved marriage, C. I. 1415. - 4.

The sum owed by a partner of a partnership, C. I. 1710. 5. The sum which the surety paid, C. I. 1915; C. H. 1838. 6. Advances made by a mandatory, C. I. 1755. 7. A legacy from the death of the testator, if it is a legacy of a farm, capital, or a fruitful thing, C. I. 865. 8. Whenever a sold thing produces fruits, the price not yet having been paid, C. I. 1509. 9. Whenever an agent of affairs has made expenses for the utility of another, C. I. 1144. 10. Whenever someone in bad faith has received what was not owed, C. I. 1147. 11. Whenever reduction of a donation is juridically sought as regards the excess of the disposable part, C. I. 1094. C. B. 256, 288, 289, 290, 291, 347, 452, 641, 668, 698, 849, 1834; C. H. 1724, 1770.

n. 1107.

Whether a borrower paying interest not owed can reclaim it according to positive laws? - Although in the Law there is generally given a reclaiming of what was not owed, C. I. 1237; C. G. 1235; C. H. 1895, nevertheless here it is not given. C. I. 1830; C. G. 1906; C. H. 1756. Wherefore the borrower who pays interest which was not agreed upon, or beyond what was agreed upon, cannot reclaim it, nor impute it to the principal.

n. 1108.

To whom is it lawful to receive 5 or 6 per 100, by reason of commerce, according to civil laws? It is certainly lawful for merchants lending money to other merchants, because it is altogether a matter of commerce. It is also lawful for merchants with respect to others who are not merchants, because the law intends to favor commerce; but it favors it by permitting merchants to receive a greater rate from lent money. If it concerns others who are not merchants with respect to merchants, it is disputed. More commonly they deny that it is lawful, and report that such is the decision of tribunals. The reason is that the law which intends to favor merchants would rather be harmful to them, if they had to pay greater interest. Nevertheless several, even among jurists, affirm it. Their reason is: 1. Because the words of the law are general: in matter of commerce; nor is it established what the genuine sense of those words is. 2. Because it is expedient for commerce that the law be so understood: for thus merchants much more easily find money with greater utility to themselves and to commerce.

n. 1109.

Whether it is lawful to exceed the legal rate in a mutuum by reason of emergent loss or ceasing profit? - Resp. Negatively, with respect to the poor or others who seek a loan in necessity, and who would be oppressed by a greater increase. Nevertheless you do not seem to be bound, with great inconvenience to yourself, to grant them a loan. Charity does not oblige with grave inconvenience.

If money is handed over for the utility, but not for the necessity, of another, it is disputed, and a twofold opinion is given. The first opinion affirms by reason of indemnity or just compensation. The second opinion denies. The reason is that compensations for losses arising from a pecuniary obligation can be demanded according to the legal rate. This opinion indeed can have place if the lender compels or obliges another to receive a loan from himself; otherwise the reason does not appear why the lender should undergo the detriment of emergent loss for the favor of another. In many places, from the common practice even of the timorous, the legal rate is exceeded; nor for that reason is it believed that sin is committed. For emergent loss, ceasing profit, and the danger of losing the principal must be estimated variously from the various circumstances of places, things, and persons. Hence generally in great cities it is thought to be less than in small towns; and in the former semis usuries, six per cent, and in the latter septunx usuries, seven per cent, are often tolerated. Those which exceed these must be judged from particular circumstances. But those which exceed the decunx, ten per cent, seem immoderate, regularly speaking, and to be rejected. And since Governments themselves rather reduce legal interest, and in titles of public debt in reality pay only three and four per cent and even less, private interest among themselves of a dextans or ten per cent now seems excessive also, speaking per se, at present. Cf. 1087.

n. 1110.

Whether it is lawful to receive the legal increase where it exceeds 5 or 6 per 100? Resp. Affirmatively, if the law, after all circumstances have been weighed, and especially the practice and custom of the timorous, seems just, that is, if equality appears between the profit permitted by law and the value of the use of money or the dangers to the principal, etc. For no absolute rate can be established, but attention must be paid to the various circumstances of places, and also to the dearness of money, from which its price and therefore its use increases, as in Africa, in India, etc.

n. 1111.

What must be said of institutions which are commonly called Savings Banks or Banks of Thrift? Not only are institutions of this kind to be tolerated, but they are also to be praised, since they assist widows, servants, maids, and the poor, while their modest money is accepted by loan and proportionate interest is paid back to them.

Gury-Ballerini, Compendium of Moral Theology (8th ed., 1884)

Jean-Pierre Gury, S.J.; notes by Antonio Ballerini, S.J. — 93 passages

Vol. I, Treatise On Contracts, Second Part. On Contracts …, Sect. I, Ch. VI, Article III. On Titles Excusing from Usury

Five principal ones are enumerated, namely: 1. emerging damage; 2. ceasing profit; 3. danger of the principal; 4. conventional penalty; 5. civil law.

n. ¶2.

The first four are very commonly admitted; concerning the last a dispute is carried on. We shall say a few things concerning each.

n. 856.

I. On Emerging Damage

Emerging damage is the detriment which the lender suffers by occasion of a mutuum furnished to his neighbor ¹.

¹ Take care to note the distinction which custom has introduced between contracts equally gratuitous, namely commodatum and mutuum. For although by occasion of commodatum some account could be had of emerging damage or ceasing profit, either because the thing loaned is worn down by use, or becomes worse in any way whatever, or because the lender loses profit which otherwise he certainly could receive from the use or leasing of the thing loaned; nevertheless titles of this kind, on account of which something would be received from commodatum, are not usually admitted, and are judged repugnant to this contract. We see that the contrary has been done concerning the contract of mutuum. But I said that this was introduced by custom. For that formerly the gratuity of mutuum also excluded compensation for emerging damage, John Duns Scotus stands as witness. In 4, dist. 15, q. 2, art. 3, where he condemns usuries, he proposes to himself this difficulty to be solved: "If it is argued against this, that it is lawful for each one in contracts to preserve himself unharmed, as was said before, that one selling can sell more dearly by attending to his damage in selling; ... therefore in the same way, if he is induced by another to lend to him, it is lawful for him to preserve himself unharmed, which he cannot do except by accepting something above the principal." Moreover he adds this response: "I answer: if he does not wish to be damaged, let him reserve for himself the money necessary to him, because no one compels him to show mercy to his neighbor; but if he wishes to show mercy, he is compelled by divine law not to make it vitiated." And St. Thomas also testifies that this opinion was received in his own age. In De Malo, q. 13, art. 4, ad 14, he objects these things to himself: "Interest is twofold: one from the fact that something is not present, because namely someone did not acquire what he could have acquired; and to this interest no one is obligated. Another interest is from the fact that something is absent, because namely something has been taken away from someone from what he had; and from such interest an obligation arises. But sometimes it happens that from money lent someone is damaged in that which he has; therefore it seems that on account of this interest he can accept something without sin." But behold what he answers: "It must be said that from money lent, he who lends can incur damage of a thing already possessed in two ways. In one way, from the fact that the money is not returned to him at the appointed term; and in such a case he who accepted the mutuum is bound to the interest. In another way, within the appointed time; and then he who accepted the mutuum is not bound to the interest. For he who lent the money ought to have taken care for himself, lest he incur detriment. Nor ought he who accepted in mutuum to incur damage from the foolishness of the lender. And it is also similar in buying. For he who buys some thing justly gives for it as much as it is worth, but not as much as he who sells is damaged by lacking it." But as to ceasing profit, Francis Zech also sincerely admits (Rigor moderatus, etc., dissertation 2, section 27) that the more ancient Doctors "did not wish to acknowledge the title of ceasing profit, nor to permit a pact concerning compensation for it, when neither force in extorting the mutuum nor culpable delay in restoring had been admitted, but the money had been credited most freely." Indeed you see this opinion expressed and admitted most explicitly in the objection which St. Thomas proposed to himself above, although the holy Doctor softened these doctrines somewhat in the Summa Theologica, II-II, q. 78, art. 2. From these things surely much light shines upon this matter. For that emerging damage and a relinquished hope of profit are something appreciable by price, and that therefore a just reason is present from which to exact congruent compensation, not only common sense holds, but also the judgment of the Apostolic See confirms in the letters of Benedict XIV. Therefore, that the old Doctors denied that some compensation was to be sought on account of these things very clearly confirms the doctrine which must never be absent from view in this matter: that the gratuity of these contracts is not to be derived from there being no price of the work which is furnished, but from the nature of a gratuitous contract, by force of which the spontaneous liberality of one, in favor of another, renounces compensation for work which, of itself, as being appreciable by price, would admit compensation without injustice. And since the mode and measure of exercising liberality, with the obligation of charity now omitted which perhaps demands otherwise, is in the free power of each one, therefore according to the judgment of the contracting parties the contract can, without injustice, be more, less, or not at all gratuitous, the nature of the contract being varied according to their judgment. Thus, for example, Titius can transfer the dominion of his vineyard to Caius either by exacting a just price, and thus it will be a sale; or wholly gratis, and thus it will be a donation; or merely by exacting that a dinner be prepared for himself and a few other friends in the same vineyard twice during autumn; and it will be something mixed, which, although it seems to detract something from perfect donation, nevertheless contains no injustice, as depending wholly on the judgment of the contracting parties. But it would be alien to justice if, after a donation plainly offered and accepted gratis, he then exacted those dinners as owed to him from justice.

n. 856.

I. If by reason of the mutuum the lender suffers damage, there is a legitimate title of receiving something above the principal. The reason is that it is not equitable that you bear damage from a mutuum; for no one is bound to provide a benefit with his own damage, except in the necessity of a neighbor. Thus all. St. Lig., n. 768.

n. 856.

II. For this, however, the following conditions are required: 1. that the mutuum be the cause of the damage; 2. that nothing be exacted except compensation ²; 3. that the increase be brought into a pact from the beginning. St. Lig., n. 769.

² If some increase is justly repaid to the lender, because equity does not permit that from this benefit conferred on others he himself should incur damage, therefore the measure of the increase must be taken from the quantity of the damage to be undergone. It can certainly happen that this measure exceeds, indeed sometimes far exceeds, the limits of profit which either the laws or the common custom of places prescribe. Thus, for example, if someone gives in mutuum money with which otherwise at an opportune time he would procure oil, wine, grain, and other things necessary for domestic use, from which it happens that afterward he is compelled to buy those very things even at double price. What, then, will the confessor do with a penitent exacting an increase of this kind in those circumstances? Indeed, unless the circumstances demand an office of charity even with the damage of the lender, and the borrower, all things weighed, has judged the contract burdened with so great a charge to be nonetheless advantageous to himself, he could in no way condemn the penitent as guilty of injustice.

The same, moreover, can also be transferred to the title of ceasing profit; except that, since these profits are wont to be subject to uncertain events, and to be diminished and hindered, therefore the measure of the increase must be measured not from the hoped-for profit, but from the value of a prudent hope. See below, n. 872.

Questions. QUESTION 1. Can a lender exact compensation for emerging damage if he of his own accord offers himself for lending?

I answer affirmatively, more probably, with St. Lig., n. 769, etc. The reason is that even then the borrower, when he accepts the mutuum, is the true cause of the emerging damage. For the lender does not offer absolutely, but conditionally, namely under the condition of obtaining compensation.

QUESTION 2. Is it lawful for the lender from the beginning to agree concerning a certain profit to be received, if the emerging damage is only probably going to occur?

I answer affirmatively, provided proportion is preserved according to the probability of the damage. St. Lig., n. 770. Salmant., c. 3.

While we establish these things concerning emerging damage, we entirely abstract from the title of civil law and from the various contracts by force of which perhaps some profit could be legitimated from money lent to another, as will be clear from the things to be said. This same observation must also hold for the other titles soon to be explained, of ceasing profit, etc.

II. On Ceasing Profit

I. Ceasing profit is that which the lender would have gained, while preserving his thing or his money, if he had employed it in another lawful contract.

Ceasing profit is a legitimate title of exacting something above the principal. The reason is: 1. because then there is truly emerging damage ³; 2. because the hope of profit is extrinsic to the mutuum, and at the same time appreciable by price.

³ You will perhaps compose this answer with difficulty with the second of the conditions set forth above, namely that there ought to have been in the lender an intention of receiving profit from his money in some other way. Besides, if mutuum of itself is the true cause why profit ceases, would it not follow that there is embedded in the very nature of mutuum a cause why profit can always be exacted from mutuum? By what agreement, then, does the nature of this contract stand consistent with itself, which ought to be gratuitous, and rejects all profit of itself, no less than donation rejects price? These and other things of this kind, less coherent with themselves, which not rarely occur among writers, certainly show that it is altogether necessary that the whole matter be recalled to more solid principles, and that, when the discussion is of gratuitous contracts, the relinquishing of profit which otherwise the work furnished, if considered in itself, perhaps admits of itself, be referred back, as we have often already said, to no other cause than to the nature of the gratuitous contract into which the spontaneous liberality of the lender consents. And indeed, if you hope for and exact profit from the mutuum because the mutuum is the true cause of ceasing profit, you will not have the contract of mutuum, which rejects profit, but another contract, concerning the justice of which it will remain to inquire according to other principles.

II. The required conditions are: 1. the same as in the preceding title; 2. the lender must have had the intention of investing his money in business; otherwise the profit would not cease. St. Lig., Hom. apost., n. 149 and following.

QUESTION. Can you exact something by reason of ceasing profit on account of a mutuum of money, if you keep other idle money?

I answer 1. Certainly affirmatively, if you have reserved this for the use of the family, or lest you expose your state to danger, because by reason of the mutuum you are not bound to neglect your own thing. St. Lig., n. 771.

I answer 2. Probably affirmatively also in other cases, because the mutuum is the true cause why the profit ceases ⁴. St. Lig., ibid.

⁴ St. Thomas (De Malo, q. 15, art. 4, objection 4) preserves the distinction between ceasing profit and emerging damage in this way: in the one, someone has not acquired what he could have acquired; in the other, someone is damaged in that which he had.

n. 859.

III. On Danger of the Principal

Danger of the principal is a prudent fear lest the principal cannot be recovered. Danger of the principal, according to the more common and more probable opinion, is a legitimate title of some profit. The reason is, both because if a relinquished hope of profit is appreciable by price, a fortiori the danger of probable damage will be appreciable; and because things placed in safety are valued more highly than things placed in danger; and also because this is clear from the decision of the Sacred Congregation of Propaganda for the Chinese Missionaries, approved by Innocent X in the year 1645 ⁵. See St. Lig., n. 765.

⁵ The declaration which the Sacred Congregation issued with the approval of Innocent X is reported thus by St. Alphonsus: "The Sacred Congregation of Cardinals of the Holy Roman Church judged that by reason of mutuum immediately and precisely nothing is to be exacted beyond the principal sum; but if they receive something by reason of a danger probably imminent, and of the quality of the same, and with proportion preserved between the danger and that which is received, etc., they are not to be disturbed." To these last words the same St. Alphonsus adds this gloss: "These words certainly signify not mere toleration, but positive permission."

n. 859.

Except: 1. if the borrower is poor ⁶, because then the precept of lending urges from charity; 2. if the borrower secures the principal by pledge, because thus the danger ceases. St. Lig., ibid.

⁶ To this pertain the words of Benedict XIV (Const. Vix pervenit, section 5): "For no one can at least be ignorant of this, that in many cases a man is bound to assist another by a simple and naked mutuum."

n. 860.

You will object: Either the principal will perish, or it will not. If the former, the lender will receive nothing, namely neither the principal nor the stipulated increase; if the latter, in fact he will suffer no detriment. Therefore he ought to exact nothing.

n. 860.

I answer 1. Even if the principal is going to perish, it does not necessarily follow that the lender will receive absolutely nothing; for it can happen that the principal does not perish immediately, and then the interest which meanwhile is paid will be had as a certain compensation for the principal.

n. 860.

I answer 2. Although in fact the lender suffers no damage, nevertheless he can receive something above the principal; for he truly undergoes a danger appreciable by price. By wholly equal right, one who agrees with another concerning a price for insuring a ship can certainly exact that price, although in fact the ship has not perished. Therefore by parity, etc.

IV. On Conventional Penalty

A conventional penalty consists in this, that the borrower obliges himself to pay something above the principal if he does not restore it at the prefixed time.

I. A conventional penalty is a legitimate title of accepting, besides the principal, that concerning which agreement has been made. The reason is that thus provision is made for the firmness of the contract, and at the same time the negligence of the borrower is guarded against. St. Lig., n. 766, etc.

II. The required conditions are: 1. that the delay of the debtor be notable and culpable; 2. that the penalty be moderate and proportioned to the fault. St. Lig., n. 766, and others commonly.

See more, if you please, concerning the preceding titles among the authors. We have touched on very few things only, because, when the title of law is added, the others will now occur more rarely in practice ⁷, as will be clear from what is to be said.

⁷ That is, the necessity of seeking these titles urges more rarely.

n. 862.

V. On the Title of Civil Law

Formerly there already existed among various peoples laws by force of which a certain profit could be received from mutuum, especially among the Romans, and more recently among the Germans. See Mastrofini, c. 4, 8, 9. But in our times laws of this kind have been received by general use among most peoples. From these, moreover, it is rather commonly permitted that an annual profit be received from a mutuum of money on this condition: that five for each hundred may be received in civil matter, and six in matter of commerce. In France, moreover, profit is granted whether from money, or grain, or another borrowed thing. But by the law of September 3, 1807, it was decreed that the profit to be received from mutuum should not exceed 5 per 100 in a civil matter, and 6 per 100 in a matter pertaining to commerce. From the same law, if anyone is convicted of having violated the established rate, he is condemned to restore the excess. But if he has done this more often, it is decreed that he is to be punished by a fine. Whether, however, that law creates a legitimate title in the forum of conscience for receiving profit from mutuum is disputed. The affirmative opinion is more probable and more common. Hence the following

n. 862.

Proposition

The title of civil law is more probably a just and honorable reason for receiving some moderate profit from mutuum ⁸, even with any other title whatsoever excluded.

⁸ You already see that some stain of confusion is not lacking in this very thesis of the more recent authors. Namely, it should have been asked beforehand whether by this pact the nature of mutuum is preserved, or whether in truth a change into another contract is made. And indeed, if he who grants his money to the free use of another wishes from this furnishing to acquire profit for himself, and profit, certainly, is wholly distinguished from compensation of damage or danger, and therefore hands over money by this pact, that he may receive at least the rate of profit prefixed by the laws, then indeed he neither does this gratis, nor intends to do it; therefore he does not make a contract of mutuum, which from its essence is gratuitous. This is no different, namely, from anyone who exacts a price for the use of a horse: he does not make a contract of commodatum; and one who exchanges a horse for a mule does not make a contract of donation. The question, therefore, will remain how profit, not indeed received from the contract of mutuum, which can in no way produce profit, but from this furnishing of money, can in some way be reconciled with the law of justice. Moreover, if for the solution of this question it is also pleasing to employ the authority of civil laws, perhaps there will be someone who thinks it must be inquired, not indeed whether legislators wished to transfer the dominion of gratuitous, that is, not deserved, profit from one to another, which there is no indication had come into their mind, since laws of this kind are very ancient, while the notion of such a transfer was devised more recently by only a few writers; but rather whether those laws, which have never been regarded as unjust, indeed have also been defended by theologians, each according to his own measure, as just, suppose that the furnishing of a thing also, as they say, fungible, of itself is not lacking a title on account of which it is appreciable by price, which therefore anyone who does not consent to furnish it from gratuitous liberality can exact without injustice; so that the laws finally merely took up this office for themselves, that they might establish an equitable measure of some profit, otherwise just, to be received from the furnishing of fungible things. And indeed, in favor of this sense of those laws is the fact that the Doctors are accustomed to invoke the sense and practice of pious men for the defense of this profit. See Schmalzgrueber, book 5, title 19, n. 146, and Reiffenstuel, the same title, n. 62. And since not only the more recent authors, as the Author discusses in the following section VI, but also the ancients had seen through such a title, perhaps it will seem superfluous to search out this new, very remote origin of some profit, escaping the eyes, when otherwise we have it inherent and present in the nature of the thing itself.

It is proved, first, from reason. For the title of law removes from the middle that which, with the law excluded, could taste of usury, since for this it suffices that the legislator make the cession of profit from mutuum just and legitimate. But the matter stands thus. It is proved. The legislator makes this cession just and legitimate if he can and wills to transfer the dominion of that profit from one to another. But concerning both it is plainly established ⁹.

⁹ The force of this argument perhaps can be weakened by the fact that civil law somewhere permits the measure of profit to be received from the furnishing of money to the free will of the contracting parties, and compels the payment of whatever finally has been agreed upon. Shall we dare to attribute this also to the supreme civil power, that it wills to transfer the dominion of profit however most unjust?

He can. For by force of high dominion the prince can, when the common good demands it, transfer some goods of subjects from one to another, or to the utility of the republic, as all admit; thus, for example, he justly requires taxes, even sometimes extraordinary ones, or a moderate furnishing of works ¹⁰. Why, therefore, when the common good requires it, should he not be able to establish a law permitting profit from mutuum? For such a disposition is of the highest utility, and indeed of moral necessity in society; since, with the circumstances especially of our times considered, commerce would flourish less, indeed would almost perish, and industry would languish, unless the furnishing of money were fostered. For without doubt all would prefer to keep their money rather than hand it over in mutuum to others without any profit. Besides, by such a law widows, wards, male servants, female servants, and others are helped, who cannot trade, and who otherwise would be compelled to consume their modest monies. Nor is distributive justice injured by such a statute ¹¹, since the law is enacted for the future, and can successively favor all. If today the burden falls upon you, tomorrow the advantage will favor you. Today to me, tomorrow to you. Hence true compensation is given in society considered generally. Therefore there is no injustice in such a law.

¹⁰ Elsewhere we have noted that the imposition of taxes or of works pertains nothing to that which is customarily called high dominion, since an imposition of this kind looks merely to an equitable distribution of those burdens which subjects are bound to undergo for the common good. Add that no one has ever attributed to this power of high dominion even this, that it can knowingly despoil certain citizens conscious of that injustice, so that it may enrich others likewise conscious of the injustice. Add finally that the supreme power, if at any time, with the necessity of the republic and the common good requiring it, it disposes of the goods of subjects, also always takes this care upon itself by due office, that it preserve all unharmed by congruent compensations. On this argument take care to consult Schmalzgrueber, book 5, title 19, nn. 11-15.

¹¹ Distributive justice in reality seems to have nothing to do with this. But what is added, that compensation is had because burden and advantage become common, is chimerical. For even if there are a certain few who are accustomed to grow rich by monies accepted and then given in mutuum, nevertheless their accumulated riches would by no means compensate the detriment of those very many who have no faculty of seeking this profit.

He wills. For that will of transferring the dominion of the profit is manifestly included in the very fact of the law. For the legislator wills whatever depends on his will, and is required for the necessary efficacy and honorableness of the law, if indeed he wishes to establish a law honorable and efficacious ¹². Therefore that will of transferring the dominion of the profit exists implicitly in the law itself; therefore nothing is lacking for the justice and honorableness of the law. Therefore, once the law is posited, profit received from mutuum is no longer received by force of the mutuum, nor immediately from the mutuum, but only mediately; it proceeds from the mere occasion of the mutuum, for the statute of the prince is wholly extrinsic to the mutuum.

¹² We have already said that there is nothing which persuades that legislators ever thought about transferring dominion by their own proper authority. Moreover the argument sought from this, that otherwise they would have enacted an unjust law, limps altogether, when another reason is at hand on account of which the law does not indeed make just the profit received from the furnishing of money, but finds it just.

Indeed, the law can be just and honorable independently of a transfer of dominion. For that law is universally accepted in the community, and brought into practice even by timorous men; therefore it includes a voluntary cession of their right on the part of subjects ¹³. Therefore independently of a transfer of dominion, justice is by no means injured by this law.

¹³ This reason wholly weakens the preceding argument, the whole force of which resides in this, that without the will of the legislator transferring dominion, the law would be neither honorable nor just. Moreover, this cession of one's own right on the part of the subjects also seems to have to be relegated to dreams, no less than that will of the prince transferring dominion. For certainly there will exist no voluntary cession of right unless that right is known. But what, I ask, is that right which all subjects are imagined to have ceded? Is it that others enter into some gratuitous contract with me? Is it that they give me gratis that which can be appreciable by price? Let us conclude that in all these things nothing else appears except a certain heap of ideas coherent neither with themselves nor with common principles.

It is proved, second, from the authority of the Holy See. For the Holy See, having been asked several times in these our times whether absolution should be denied to those who accept profit conceded by law, without any other title, has always replied: They are not to be disturbed, until the Holy See shall have defined something concerning this. Therefore it is lawful to conclude from the aforesaid responses that the opinion consonant with law is at least probable. For how could the Holy See have been able to respond, "They are not to be disturbed" ¹⁴, unless it were truly at least probable that the law is just and honorable? For if it is not probable, they ought to be disturbed. Nevertheless it must be admitted that the Sacred Congregations, by so responding, did not wish to render a definitive judgment concerning so arduous a matter. But true and solid probability suffices, so that the faithful receiving profit from mutuum according to law may be immune from sin and from the burden of restitution.

¹⁴ We have already said elsewhere that St. Alphonsus, concerning this formula, "They are not to be disturbed," and indeed with respect to this very matter, adds this gloss (book 6, n. 765): "These words signify not mere toleration, but positive permission." Moreover, as regards that response of the Apostolic See, it is most worthy of note that entirely the same response was made to the doubts both of the Bishop of Rennes by the Congregation of the Holy Office, August 18, 1830, and of the Bishop of Verona by the Sacred Penitentiary, August 14, 1831, although in the proposed questions not even a word occurred concerning the title of civil law, by force of which profit might lawfully be received. And what is of greater moment, when afterward the Bishop of Viviers proposed new doubts to the Congregation of the Holy Office on this account, namely doubts arising from this: 1. that in the question of the Bishop of Rennes no mention was made of the said title of law; and 2. that the law in France gives no right of receiving usuries, but rather supposes that the lender has a certain right to profit of this kind, and the sole reason why the law said that it was lawful to stipulate interest for mutuum alone was given by the legislators as this, that profit of this kind would be an equitable compensation for the advantage of which he deprives himself who hands over his monies to another for use; the Sacred Congregation on August 31, 1831, replied: "Provision has been made in the decrees of Wednesday, August 18, 1830, and let the decrees be given": namely referring the petitioner to that response rendered to the Bishop of Rennes, which had existed as the cause of this new doubt. From these things it is certainly sufficiently gathered that the reason why the Sacred Congregation decreed that those who receive profit from monies handed over at interest, as they say, are not to be disturbed, is not to be sought from the authority of civil law which makes profit of this kind lawful. And therefore this argument also, which is customarily employed to build up the force of a title sought from civil laws, concludes nothing of itself. See the decrees of the Sacred Congregations here mentioned below, in the note to n. 878.

Hence Bouvier rightly concludes: "The resolutions of the Holy See, although approved by the Supreme Pontiffs Pius VIII and Gregory XVI, and perfectly concordant with one another, do not contain a definitive decision of the Holy See, as is clear from their form, nature, and terms; nevertheless those who know the customary way of acting of the Roman Church ought to have persuaded themselves that the Holy See will never issue contrary decisions.... Led by all these considerations, I firmly have persuaded myself that profit rated by law from a mutuum not owed by charity is not now to be prohibited, and that timorous persons are to be wisely directed, lest from their simplicity and the excessive rigidity of the confessor they suffer detriment." Bouvier, Appendix to the Treatise on Contracts.

Besides Bouvier just cited, more commonly the more recent theologians hold this opinion, with Gousset, n. 823; Rousselot in edit., etc. Already earlier the Wurzburgenses thought thus, De Contr., n. 201; Saettler, De Contr., p. 2, c. 4; Reuter, n. 201; and many others cited by the Wurzburgenses, especially Zech, Ledesma, Tanner, Haunold, Toletus, etc.

Objections. Objection 1. The legislator, by force of high dominion, cannot take away the property of private persons without due compensation; but no compensation is given in the aforesaid law. Therefore, etc.

I answer 1. I distinguish the antecedent. When compensation can be made, conceded; otherwise, denied. How, therefore, is the property of things transferred in a law establishing prescription? What compensation is bestowed in that case?

I answer 2. I deny the minor. True compensation is given in this, that the law is very useful to all, even to those who pay the increase, since they can more easily find the money which they need. Besides, he who today pays interest will in turn be able to receive it tomorrow.

Objection 2. The prince cannot make lawful what is of itself unlawful; but usuries are unlawful by natural and divine right, since they are prohibited by both rights. Therefore....

I answer 1. I distinguish the antecedent. If the prince cannot place a condition which removes the injustice, if there is any, conceded; otherwise, denied. Moreover, that the prince can place such a condition is clear from what has been said.

I answer 2. I distinguish the minor. Usuries are prohibited by natural and divine right if they are usuries properly so called, for example, excessive, or required from the poor, or usuries without title, or proceeding from mutuum by force of the mutuum itself, conceded; otherwise, denied. For if every profit received from mutuum is prohibited by natural and divine right, how does the Holy See not know this, and decree that the faithful using the benefit of the law are not to be disturbed ¹⁵?

¹⁵ The Apostolic See in reality did not decree, as we have already noted in the preceding note, that the faithful are therefore not to be disturbed because they use the benefit of law for receiving profit; much less does it consent that profit received from mutuum is not prohibited by natural and divine right. Namely, the reason why the Apostolic See, through the organ of the Sacred Congregations, several times responded that those faithful are not to be disturbed, it itself did not state. Therefore that one thing seems capable of being gathered with certainty from these responses, which the Author also notes below at n. 869, response 3, that in the proposed cases there is a contract which is not condemned in the constitution of Benedict XIV, Vix pervenit, November 1, 1745. But the reason why this contract is not repugnant to the aforesaid constitution is permitted to be investigated by the schools in such a way that, from the response to the Bishop of Viviers, which you will find below, it shines out sufficiently that it is not necessarily to be sought in the title of civil law.

These things, moreover, are confirmed from the letter which Cardinal De Gregorio, Major Penitentiary, gave on March 7, 1835, to the Bishop of Viviers (see L'Ami de la Religion, vol. 84, pp. 433, 434), in which these things also are found: "Therefore the Sacred Penitentiary by no means wished to define the question debated by theologians concerning that title taken from the law of the prince, but only to propose a norm which confessors might safely follow toward penitents who in good faith accepted moderate profit established by the law of the prince," etc.

…and 53 more passages — all of them are listed on the topic page.

Tanquerey

Adolphe Tanquerey, S.S. — 43 passages

Vol. III, Contracts, and the Obligat…, On the Virtue of Justice (…, Part II — Chapter II: On Contracts in Particular

§ IV. On Onerous Loan, Or On The Contract Of Credit.

State of the question. After the things said concerning the lease of things and of services, it remains to speak of onerous loan, which by certain moderns is called the lease or quasi-lease of money, and by others the contract of credit.

¹ Among the almost countless works written on loan, the principal are: Gibalinus, De usuris, commerciis, Lyons, 1656; Bossuet, Traite de l'usure, 1682; Leotardus, Liber singularis de usuris, Lyons, 1682; Collet, Traite des usures, Paris, 1694; Thomassin, Traite du negoce et de l'usure, Paris, 1697; Broedersen, De usuris licitis et illicitis, Delft, 1743; P. Ballerini, De jure divino et naturali circa usuram, Bologna, 1747; Zech, Rigor moderatus doctrinae Pontificiae circa usuras, 1747 (Migne, Curs. Th., XVI, 763-996); Biner, Dissertatio juridica de usuris, 1766 (ibid., 996-1007); Card. de la Luzerne, Dissertations sur le pret de commerce, Dijon, 1823; Pages, Dissertation sur le pret a interet, Lyon, 1830-1838; Funk, Zins and Wucher, Tubingen, 1868; id., Zur Geschichte des Wucherstreites, Tubingen, 1901; Ashley, An Introduction to English Economic History and Theory, London, 1892; W. Blissard, The Ethic of Usury and Interest, 1892; J. Favre, Le Pret a interet dans l'Anc. France, Paris, 1900; H. Savatier, La theorie moderne du capital et la justice, Paris, 1898; Bohm-Bawerk, Capital und Capitalzins, rendered into French under J. Bernard's care: Histoire critique des theories de l'interet du capital, Paris, 1902-1903.

(A) Loan in general is a contract by which a fungible thing, or a thing consumable by first use (above, n. 121-122), is handed over to another on this condition, that, at the appointed time, a thing of the same species and quality be returned. - It differs therefore from commodatum, in which the same identical leased thing is returned, because it is not consumable by first use, but permanent; and also from lease of things, in which the lessor retains dominion of the leased thing, while in loan the dominion of the money is transferred to another; hence in lease the thing perishes for the owner, while in loan it perishes for the borrower (emprunteur), who is held to return a similar thing to the lender (preteur).

Loan, according to Roman civil law, is a contract of itself gratuitous, and under this respect it is also distinguished from lease, which is of itself an onerous contract (n. 779). But the question is whether loan can be onerous, namely whether the lender can justly receive, beyond the thing lent (which is called the principal), some gain, namely an increase or interest. This was formerly disputed with great heat among theologians and economists, and today also is frequently debated among sociologists.

(B) For understanding this better, certain notions must be set forth. (a) Today money is considered under a twofold respect: as a medium of exchange (moyen d'echange), insofar as by the help of money any thing whatever can be procured; as a medium of production (moyen de production), insofar as it is capital and an instrument by which new things are produced. Now ancient philosophers and theologians generally held money as a medium of exchange and a measure of saleable things; wherefore they called it sterile, because in reality under this respect it bears or produces nothing.¹ - But modern economists teach that money is not only the measure of saleable things, but also and chiefly a medium of production, insofar as it greatly contributes to producing new things; whence they say that it is virtually fruitful, insofar as it can at once be changed into fruitful things of any kind, and therefore is able to beget many things.

¹ Van Roey, De justo auctario ex contractu crediti, Louvain, 1903, p. 150-175; V. Brants, Les Theories economiques aux XIIIe et XIVe siecles, Louvain, 1895, p. 133-138.

(b) Wherefore loan can be industrial or commercial, when it is made for producing or distributing new things, namely when money is handed over to those who give themselves to industry or commerce for this end, that they may make something estimable by price; or a loan of necessity, when money is given on loan to the needy, so that from it they may procure for themselves the necessities of life. - Now in antiquity the loan of necessity mostly flourished, while today commercial loan is very frequently made.

(c) Moreover the increase or interest received from money lent can be moderate, if, with attention to the practice commonly observed by honest men of this place or time, it does not exceed just limits; or immoderate, if, with all things considered, it goes beyond the limits determined by the upright. Moreover in antiquity interest was not rarely immoderate, namely twenty, thirty, and sometimes fifty percent; while today, among cultivated Nations, it does not exceed five or six percent.

Today the word usury generally designates an immoderate increase; formerly it signified whatever was received beyond the principal, and therefore even moderate interest.

All these things indeed must be kept before one's eyes when ancient authors are read and the history of loan is sketched.

Since the matter is very involved, and the principal difficulties arise from history, we shall hand on a historical survey of this question, setting forth: 1. the doctrine of each Testament; 2. the theories of ancient legislators and philosophers; 3. the common doctrine of the Fathers and Councils up to the twelfth century; 4. the opinions of the Scholastics and the decisions of Councils up to the sixteenth century; 5. the principal systems of the moderns; 6. the doctrine of Benedict XIV and practical resolutions of the Congregations; 7. today's theories concerning loan; 8. the solution of the difficulty which seems more consonant with authority and reason at the same time.

I. The Doctrine Of Each Testament Concerning Loan Is Set Forth.

n. 867.

1. Before Christ, under the Mosaic law, usury was prohibited to the Jews among themselves, but was permitted to them with respect to foreigners.

(A) It was prohibited to Jews among themselves, especially toward the poor and in an excessive way: "If thou lend money to my people, poor, who dwells with thee, thou shalt not urge him as an exactor, nor oppress him with usuries";¹ a little below: "Thou shalt not lend to thy brother at usury money, nor fruits, nor any other thing, but to a foreigner. But to thy brother thou shalt lend without usury that which he needs, that the Lord thy God may bless thee in every work of thine in the land into which thou shalt enter to possess it."² That this law was not accurately observed is gathered from the fact that the Prophets reprove usuries, and praise those who do not give their money at usury;³ wherefore, after the captivity, Nehemiah rebuked usurers thus:⁴ "And my heart thought with me, and I rebuked the nobles and magistrates, and said to them: Do you exact usuries, each one from your brethren?... The thing which you do is not good." - Now from the context it is sufficiently evident that, in all these places, the matter concerns a loan made to the needy, but not a commercial loan.

¹ Exod., XXII, 25; cf. Levit., XXV, 35-37.

² Deut., XXIII, 19-20; cf. XV, 7-10. - La Luzerne, op. cit., t. I, p. 211-284, shows at length that these texts do not regard commercial loan.

³ Ps. XIV, 5; Ps. LXXI, 14; Ezek., XVIII, 5-20.

⁴ Nehem., V, 7, 9.

(B) Onerous loan was permitted with respect to foreigners; this is certainly clear from the words related above: "Thou shalt not lend to thy brother at usury... but to a foreigner." This indeed is easily understood, if it is kept before the eyes that, under the Old Law, the Jews did not cultivate charity toward foreigners in the same way and to the same degree as among themselves.

From this, moreover, it can at once be gathered that moderate usury is not absolutely and intrinsically evil; otherwise it could not have been permitted by God even toward strangers. - Some indeed have said that this was permitted by force of the supreme dominion of God, as if, namely, he had given to the Jews the power of despoiling foreigners; but this distorted evasion does not please honest men: so unusual a derogation from natural right cannot be admitted without a solid reason.

n. 868.

1. Christ himself handed down these things concerning onerous loan: (a) in the parable of the talents, the master thus speaks to the servant who had hidden the talent received: "Thou oughtest therefore to have committed my money to the bankers, and on my coming I would certainly have received what is mine with usury."¹ From this some wished to infer that interest from commercial loan is legitimate; but undeservedly; for here the matter concerns a parable, in which Christ sets forth what those who possessed money were accustomed to do in his time, without by that fact wishing to approve their manner of acting; he indeed does not reprove them, but neither does he intend to praise them, since the primary end of the parable is to show that those alone are to be rewarded who have used well the talents received from God.

¹ Matt., XXV, 27.

(b) Elsewhere, speaking of charity, he says: "But love your enemies; do good, and lend, hoping for nothing thereby; and your reward shall be great."² From this it is certainly gathered that one of the works of charity which obtain an eternal reward is gratuitous loan; but whether, and in what cases, it is commanded to lend money is not clearly defined, but must be determined from the rules concerning alms. But, as is clear, nothing is said about money handed on loan to the richer, and destined to produce new things; Christ by no means intended here to discuss industrial matters. - In the same sense he says: "To him that asks of thee, give: and from him who wishes to borrow from thee, turn not away";³ there likewise loan is enumerated among works of charity, and nothing is said about onerous loan, which therefore in the Gospel is neither approved nor condemned.

² Luke, VI, 35. - In the older Latin versions it is read: despairing nothing, that is, do not fear lest your money perish; - in the Syriac version: and do not cut off the hope of anyone, that is, do not cast anyone into despair by denying money to one in need. Cf. Fillion, Les SS. Evangiles, Saint Luc, in this place. - Some Fathers understood these words in this sense, that even the return of the principal itself ought not to be expected. (La Luzerne, t. I, p. 290-329.)

³ Matt., V, 42.

It must be noted that under the New Law no distinction is made between Jews and foreigners, but gratuitous loan is commended with respect to all.

II. The Theories Of Ancient Philosophers Concerning Loan.

n. 869.

Usury prevailed among most pagan peoples, and generally was approved by laws; but commonly it was reproved by the philosophers themselves.

Thus, among the Greeks, immoderate usury flourished: namely borrowers had to pay at least twelve and often thirty percent. Before the times of Solon, debtors who could not furnish interest were reduced to servitude; yet the wise Athenian legislator prohibited this,¹ although he permitted onerous loan.² - But the philosophers, by no means distinguishing between use and abuse, condemned all usury as alien to nature. Plato reproves it as contrary to the equality of citizens: according to him, to avoid seditions, it is necessary that there not be two orders of citizens, one very rich and the other very poor; therefore the means by which riches can easily be procured must be prohibited, especially certain forms of commerce and usuries.³ - Aristotle likewise, averse from every gainful exchange of money, condemns usury especially as contrary to the right of nature; for money of itself is sterile, because coin does not beget coin; nevertheless usurers wish to gain money from money, as if it were fruitful.⁴

¹ Schomann, Antiquites grecques, trans. by Galuski, Paris, 1884, t. I, p. 376-379.

² A. Boxler, Precis des Institutions publiques de la Grece et de Rome, Paris, 1903, p. 72.

³ Plato, de Legibus, V, 742.

⁴ Aristotle, Polit., l. I, c. 3, n. 23.

Among the Romans, by the law of the twelve Tables, unciary interest was permitted, that is, ten percent; from the time of Sulla, centesimal usury began to flourish, that is, twelve percent; not rarely, however, money-lenders demanded double centesimals, or twenty-four percent; when Christian emperors reigned, semisses usuries prevailed, namely six percent.⁵ - Yet Roman philosophers reproved usuries no less strictly than the Greeks; thus Cicero⁶ says that, according to Cato, to lend at interest is the same as to kill: "When he was asked what was most expedient in household property, he responded, to feed well... And when he who had asked said, what about lending at interest? Then Cato said, what about killing a man?" Likewise Seneca:⁷ "For what are these things, what are debt-book and calendar and usury, except names of human cupidity sought outside nature?"

⁵ A. Boxler, op. cit., p. 215.

⁶ De officiis, II, near the end.

⁷ Seneca, De Beneficiis, VII, 10.

These things indeed must be kept before one's eyes when the doctrine of the Fathers is weighed.

III. The Doctrine Of The Fathers And Councils Concerning Usury Up To The Twelfth Century.

n. 870.

1. The Fathers generally held usury as something contrary to Christian charity, since in the Gospel it is commended and commanded to give money on loan to the needy, without any hope of gain; indeed, especially in the fourth and fifth centuries, since immoderate usuries were not rarely extorted from the poor, several Fathers openly denounced this as inhuman and unjust. Yet a few tolerated or permitted some moderate gain to be received from money lent. We shall declare this by setting forth certain places of the Fathers.

n. 871.

(A) In the first three centuries, the Fathers teach only that interest exacted from a needy person is opposed to the precept of charity and mercy.

(a) Thus, among the Greeks, Clement of Alexandria, speaking of the Mosaic law insofar as it is the source of all moral doctrine, commends its humanity from the fact that it prohibits exacting interest from brethren:¹ "But concerning largess and communication, although many things could be said, it suffices to say this, that the law prohibits lending at interest to a brother; naming as brother not only him who was born from the same parents, but also him who has been of the same opinion, and a participant of the same Logos; not judging it fair that we gather usuries from money, but that with open hands and souls we gratify the needy."

¹ Clem. Alex., Stromat., l. II, c. 18, Migne, P. G., VIII, col. 1023.

(b) Among the Latins, St. Cyprian,² in describing the corrupt morals of Christians, severely rebukes very many Bishops, "who ought both to be an exhortation to the rest and an example," and nevertheless, divine care having been contemned, increase interest by multiplying usuries. - But Tertullian,³ proving against Marcion that the New Testament does not contradict the Old, observes that the prohibition of usuries which is found in Ezekiel (l. cit.) prepared the way for the more perfect law which commends that the lender renounce the principal itself; for thus they interpret the words of Luke: hoping nothing thereby.

² St. Cypr., De lapsis, c. 6, Migne, P. L., IV, col. 470-471.

³ Adversus Marcionem, l. IV, c. 17, Migne, P. L., II, 398-399.

n. 872.

(B) In the fourth and fifth centuries, the Fathers inveigh much more strongly against usurers; and deservedly: for in these times usuries were sometimes carried even to fifty percent, and sometimes the children of those who could not pay interest were sold as slaves;¹ it is therefore not wonderful that usuries of this sort were reproved as inhuman and unjust.

¹ Troplong, Contrat de Pret, Preface, p. LXXXII.

(a) Among the Greeks, St. Basil has an entire homily against money-lenders,² in which he declares usury to be reproved by the Sacred Scriptures: "For in reality it is very great inhumanity, that he indeed who lacks necessaries seeks a loan for the support of life, while this one is not content with the principal, but devises revenues for himself from the calamities of the poor, and gathers riches."³ Afterwards he vividly describes the miserable lot of the borrower:⁴ "He who has received silver is at first indeed splendid and cheerful... but, when the monies gradually flow away, and time, advancing, brings interest with it, then nights bring him no rest, the day is not cheerful, the sun not pleasant, but life wearies him. He hates the days hastening toward the appointed time, he fears the months as parents of interest. But if he sleeps, he sees the money-lender in dreams, which is an evil dream over his head, standing by; but if he wakes, he thinks and is anxious about the interest." At the end, he rebukes the usurer thus:⁵ "You make gain from calamities, you gather silver from tears, you strangle the naked, you beat the hungry: nowhere is mercy." From these things it is established that the matter here concerns a loan furnished to those in need.

² In Migne, P. G., XXIX, col. 263-280.

³ Ibid., 266.

⁴ Ibid., 267.

⁵ Ibid., col. 279.

St. Gregory of Nyssa likewise has a whole oration against usurers,⁶ where, besides biblical arguments, he brings another philosophical one drawn from the sterility of money; God alone is so omnipotent that he can produce something from things by no means fertile: "But you, of bronze and gold, things not accustomed to bear, do not seek offspring, nor compel poverty to furnish those things which belong to the rich, nor him who seeks the principal to pay usuries."⁷

⁶ Migne, P. G., XLVI, col. 433-452.

⁷ Ibid., 442.

St. Chrysostom asserts that usuries are prohibited by Christ with respect to all, while in the old Law it was forbidden to exact them from brethren alone; and from this he extols the humanity of Christ: "And see the humanity of the Lord. In these sensible monies he prohibited anyone from receiving usury. Why and for what cause? Because each one is afflicted with great damage. For the debtor indeed is worn away by want, but the creditor, increasing riches, accumulates for himself a multitude of sins."⁸ - Proceeding further, he declares that those who oppress the poor with usuries are guilty of injustice:⁹ "Those who are commanded to open their treasures to the needy grow rich from the poverty of others, devising a specious robbery and a well-colored avarice... this is a bond of injustice... Are there not many just trades? Of fields, flocks, herds, manual labors, and skillful care of the household? Why do you rage madly so that you may reap thorns in vain?" - These words indeed are rather easily explained of immoderate usuries toward the poor.

⁸ In Genesim homil. 56, Migne, P. L., LIII, 377.

⁹ In Matth. homil. 56, Migne, P. L., LVII, col. 556-558.

n. 873.

(b) Among the Latins, St. Ambrose, in the book on Tobit, discusses usury at length,¹ which is a grave sin; for the money-lender hands over to the poor man money which is idle, so that he may receive more than he gave: "He seeks medicine, you offer poison; he begs bread, you extend a sword; he beseeches liberty, you inflict servitude; he prays for release, you tighten the knot of a shapeless snare."² There usury is reprehended as something inhuman.

¹ Migne, P. L., XIV, col. 762-794.

² Ibid., col. 763.

St. Augustine teaches the same, reproving every interest received from any thing whatever:³ "I do not wish you to be money-lenders, and therefore I do not wish it because God does not wish it... And how detestable it is, how hateful, how execrable, I think even the money-lenders themselves know... if you have lent at interest to a man, that is, have given your money on loan, from whom you expect to receive something more than you gave; not money alone, but something more than you gave, whether that is wheat, or wine, or oil, or any other thing; if you expect to receive more than you gave, you are a money-lender, and in this you are to be disapproved, not praised."

³ Enar. in psalm. XXXVI, Migne, P. L., XXXVI, col. 386.

St. Leo the Great calls unjust the manner of acting of those who oppress the poor with usuries: "Unjust and shameless avarice, which says that it furnishes a benefit, when it deceives... The iniquity of interest must be fled altogether: and gain which lacks all humanity must be avoided. Wealth is indeed multiplied by unjust and sorrowful increases, but the substance of the mind wastes away: since the interest of money is the funeral of the soul."⁴

⁴ Sermon XVII, al. XVI, in Migne, P. L., LIV, 181.

From these and other places, in which the same doctrine is contained, it can be gathered: (a) usury received from the needy is something inhuman and opposed to the precept of charity; (b) in certain cases, immoderate usuries exacted from the poor are truly unjust; (c) but nothing certain can be defined with respect to commercial loan, about which the Fathers are silent.

n. 874.

1. At the same time, Councils first prohibited clerics from receiving usuries; then gradually extended this prohibition to laymen themselves; finally they asked from civil legislators that laws permitting usury be changed.

(A) Already among the Canons of the Apostles (fourth century) we read: "A bishop, or presbyter, or deacon exacting usuries from debtors, either let him desist or certainly be condemned."⁵ - The Council of Elvira (Eliberitanum, 305) also prohibits laymen from receiving usuries, although it acts more mildly with them than with clerics: "If any of the clerics shall have been detected receiving usuries, it has pleased that he be degraded and abstained. But if any layman is proved to have received usuries, and, corrected, shall have promised that he will now cease and will exact no further, it has pleased that pardon be granted him. But if he shall have continued in iniquity, he is to be cast out from the Church."¹ - But the general Council of Nicaea (325) treats only of clerics who were exacting centesimals (12 percent):² "The holy and great Synod judged it fair that, if anyone shall have been found after this definition receiving usuries... he be deposed from the clergy." - The provincial Council of Carthage (about 419) brought penalties against usurious clerics, at the same time reprehending usury in laymen; for it says: "What is reprehended in laymen ought much more to be condemned beforehand in clerics."³

⁵ Can. 44, in Mansi, Sacr. Concil. Collectio, Florence, 1759, t. I, p. 56. - Cf. La Luzerne, op. cit., t. III, 1st part, 256-386, where all the canons published concerning this matter are gathered.

¹ Can. 20, in Mansi, t. II, p. 10. - Yet not a few critics hold this last sentence suspect, since it is lacking in Ivo and the Panormia, Migne, P. L., CLXI, 805, 1167.

² Can. 17, in Mansi, t. II, p. 675.

³ In Mansi, t. IV, p. 494.

(B) Already from the eighth century the prohibition of usury becomes common even with respect to laymen; Aachen (Aix-la-Chapelle, 787): "In the law the Lord himself commanded that it be altogether forbidden to all to give anything at usury";⁴ likewise Paris⁵ (829) and Meaux⁶ (845). - Indeed, from the ninth century, certain Councils declare usurers to be subject to restitution: "If those from whom they exacted usuries survive, let them restore to these what they are proved to have taken more abundantly."⁷

⁴ Mansi, t. XIII, p. 825.

⁵ Mansi, t. XIV, p. 470.

⁶ Mansi, t. XIV, p. 831.

⁷ Mansi, t. XIV, p. 937.

At about the same time, namely in the age of Charlemagne, civil law, at the persuasion of the Church, prohibited usuries to all.⁸

⁸ "It is only at capitular legislation that one must arrive to find the abrogation of imperial laws on usuries and the agreement of Church and State for proscribing their use. The capitulary of Aachen of 789 (lib. 1, c. 5) forbids usuries to all without exception: Omnino omnibus interdictum est ad usuram aliquid dare. This prohibition is repeated in another Capitulary of 813 (lib. V, c. 38): Usuram non solum clerici, sed nec laici christiani exigere debent." (Troplong, op. cit., CX-CXI.)

n. 875.

1. Although in these times no explicit distinction was made between immoderate usury and moderate interest, a few facts and testimonies are alleged from which it seems to be established that a moderate increase was tolerated or permitted. Thus Sidonius Apollinaris (430-488), bishop of Clermont, narrates that he went to a creditor named Maximus, to seek delays in favor of a friend burdened with debt; the creditor, who had been made a cleric, benignly granted the delays and forgave the usuries; Sidonius praises this act as a work of piety and mercy, and adds that the creditor had the right to receive the usuries, "since he could exact the whole," that is, the principal and increase, as appears from the context.¹

¹ Sidonius, Epistle 24, Migne, P. L., t. LVIII, col. 528-531.

n. 876.

Likewise St. Gregory the Great (540-604) asks Anthemius to go to a certain creditor, who had handed merchandise to another under the condition of some interest, and ask him to yield from his right, because matters had succeeded badly for the debtor, thus supposing some moderate gain to be legitimate: "Let him not expect gain from another's loss, but, the principal of the price having been received, let him be content, so that whatever he shall have yielded to the poor man, almighty God may compensate to him, as he has promised, by a multiplied restitution."²

² Epist. 38 to Anthemius, Migne, LXXVII, col. 973.

Likewise St. Gregory of Tours (538-593) narrates that Desideratus, bishop of Verdun, asked King Theuderic to lend some money to citizens engaged in business, promising that he would return the money with legitimate usuries: "We shall return your money with legitimate usuries."³ In reality the citizens traded with that money, and indeed with a happy outcome; but the king liberally refused the money offered. - From these things it seems to be established that a certain moderate interest was held as legitimate.

³ Histor. Franc., l. III, n. 4, Migne, P. L., LXXI, col. 267.

n. 877.

1. Nevertheless, from the time of Gratian (1150), usury was universally prohibited: for Gratian, in his Decree, inserted those sentences of the Fathers and those Canons by which usuries are reproved in a general way.⁴ Afterwards Gregory IX, in the Decretals, promulgated an entire title De Usuris,⁵ where suspension is decreed against usurious clerics, and excommunication against laymen.

⁴ Decret. Grat., 2nd p., cause XIV, q. 3-4, p. 734-738, ed. Friedberg.

⁵ Decretal. lib. V, tit. XVIII, p. 811-816, ed. Friedberg.

IV. The Theories Of The Scholastics And The Decrees Of Councils Down To The Sixteenth Century.

n. 878.

For rightly understanding the doctrines of the scholastics concerning loan, it helps to set forth the opinion of St. Thomas, whom nearly all the others followed.⁶

⁶ St. Thom., 2. 2., q. 78; Quodlibet III, art. 19; De Malo, q. 13, art. 4.

Doctrine of St. Thomas. (A) "To receive usury for money lent is, according to itself, unjust."⁷ To prove this, he asserts, after Aristotle, that money was principally invented for making exchanges, and thus the principal use of money is its consumption; he treats therefore of loan destined for consumption, not for commerce. This being posited, he thus proves his thesis: (a) If interest is received for money, that which is not is sold, namely the use of the thing which is not distinguished from the thing itself; or, in other words, a double compensation is demanded for the same thing: one indeed, the restitution of an equal thing; but another, the price of use, which is called usury; this is unjust. For, in consumable things, the use of the thing ought not to be counted separately from the thing itself, but to whomever the use is conceded, by this very fact the thing is conceded; if therefore, besides the principal, some interest is demanded, the use of the thing is unjustly sold, as if it were distinct from the thing itself; just as he would act unjustly who, after he has sold wine at a just price, would wish again to sell the use of the wine separately. (b) Besides, money, which principally is a medium of exchange, is sterile, and therefore nothing can be received for its use.

⁷ St. Thom., 2. 2., q. 78, a. 1.

n. 879.

(B) But by accident some gain can be received from money lent: (a) "If someone conceded coined money for display or for placing in the place of a pledge; and man can licitly sell such a use of money."¹ For then money is not destined for consumption, but for another use, from which gain is legitimately received. (b) "He who gives a loan can without sin draw into an agreement with him who receives the loan the recompense of damage by which something which he ought to have is withdrawn from him; for this is not to sell the use of money, but to avoid damage."² Behold the origin of the extrinsic title which afterward was called emergent damage. (c) "He who commits his money either to a merchant or to a 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 licitly seek a part of the profit proceeding from it, as from his own thing."³ Or, in other words, he who enters a contract of partnership with a merchant and craftsman, lending money so that this man may trade or work with it, licitly receives some gain, because he retains dominion of the money and undergoes the risk of the principal.

¹ St. Thom., 2. 2., q. 78, a. 1, ad 6.

² St. Thom., 2. 2., q. 78, a. 2, ad 1.

³ Ibid., ad 5.

n. 880.

1. Decrees of Councils. These things having been set forth, the Canons of the Councils of this time can be better understood. For since in the Middle Ages industry and commerce did not greatly flourish, money was handed on loan, at least for the most part, not for producing new things, but for consumption, to the needy, and often with the greatest increase (15 and 20 percent):¹ whence it is not wonderful that usury was strictly prohibited. Thus the Third Lateran Council (1179) says that usuries are condemned by the pages of each Testament, and strikes usurers with excommunication.² Lyons II (1274) besides prohibits houses from being leased to foreigners wishing to hire them for exercising usuries.³ But Vienne (1311), after renewing the excommunications formerly laid down, also condemns the error of those who pertinaciously assert that usury is not a sin: "If anyone shall have fallen into that error, that he presume pertinaciously to affirm that to exercise usuries is not a sin, we decree that he is to be punished as a heretic."⁴ It is not there defined whether usury is a sin against justice or against charity, whether against the natural law or against positive law. Nor likewise is it declared what usury is; but afterward, in the Fifth Lateran Council (1515), this notion was handed down, which can be accommodated to the definition of the Council of Vienne: "This is the proper interpretation of usuries, namely when from the use of a thing which does not germinate, with no labor, no expense, or no danger, gain and fruits are studied to be acquired."⁵ Wherefore he does not exercise prohibited usuries who receives gain from a thing which is fruitful, or is exposed to some danger of the principal. - Around the end of the sixteenth century, Sixtus V reproves "the gulf of usuries, hateful to God and men, condemned by the sacred canons, and contrary to Christian charity."⁶

¹ "From the twelfth to the fourteenth century, in France and England, on the part of the Lombards and Jews, the rate of 20 percent is cited. Philip IV of France fixes the maximum interest at 20 percent, and lowers it to 15 percent for the fairs of Champagne." (P. Leroy-Beaulieu, Traite, t. II, p. 148.)

² Mansi, t. XXII, p. 231.

³ Mansi, t. XXIV, p. 99.

⁴ In Denzinger, n. 407.

⁵ In Denzinger, n. 623.

⁶ Bullar., p. 4, t. 4, p. 263.

n. 881.

Many indeed of today's writers turn it into a fault for the Scholastics and Councils that they were ignorant of economic laws and, by the prohibition of usuries, retarded the progress of industry and commerce. - We observe first that the error of which they are accused is not moral, but economic; for they thought that money was sterile, and from this inferred that no interest could be received from money lent according to itself: this principle is true, if money really is altogether sterile. Besides, the error of fact which is attributed to them can easily be excused. For money in itself is truly sterile, and is not made fruitful except when it is turned into fruitful things. Now in the Middle Ages it was very difficult, because of the economic conditions of that time, to turn money into fruitful things: namely, lands could scarcely be procured, because of the system which they call feudal; industries were local and reserved to workers' associations; commerce was exercised only by a few, namely Jews and Lombards; it is therefore not wonderful that money was commonly held as sterile.¹

¹ "With a very narrow market, without powerful equipment and without active industry, when great enterprises were reduced to the construction of churches and feudal fortresses, productive employments of money were lacking. There was scarcely place, at least in the twelfth century and almost still in the thirteenth, except for loans for consumption... The fixity of feudal property and the general immobility of conditions even excluded what we call today employments in immovables." (J. Rambaud, Histoire des doctrines econ., p. 39.) On the state of industry and commerce, and also on the economic doctrines of the Middle Ages, cf. W. J. Ashley, An Introduction to English Economic History and Theory, London, 1892-1893; Ch. Jourdain, Memoires sur les commencements de l'Economie polit. dans les ecoles du Moyen Age (Mem. Acad. Inscr. et B. L., t. 28, 1874); L. Cossa, Di alcuni studii recente sulle teorie economiche nel Medio Evo, Milan, 1876; Espinas, Histoire des doctrines econom., Paris, s. d., p. 72-119; V. Brants, Les Theories economiques aux XIIIe et XIVe siecles, Louvain, 1895.

Besides, if by this prohibition the Church in some way retarded the progress of commerce, she favored agriculture and also small industries, and contributed not a little to the dignity and happiness of workers. Besides, by the contract of partnership and other agreements of this sort, provision was sufficiently made for the evolution of industry, until the invention of machines gave rise to a new state of things, and to a new form of loan which is called the contract of credit.

n. 882.

1. Mitigation of discipline concerning usuries. Already from the fifteenth century a milder discipline gradually began to flourish. (A) First indeed there were instituted Mounts of piety (Monts-de-piete, Funds of piety), in which monies and other fungible things were collected which were handed on loan to the poor, by means of some pledge and moderate increase. Now the Fifth Lateran Council (1515) solemnly declared that these mounts were licit and meritorious, "in which, for their expenses and indemnity, something moderate is received only for the expenses of the ministers and of other things pertaining to their preservation, as stated before, merely for their indemnity, beyond the principal, without the gain of the same Mounts." From this it also happened that wealthy merchants, especially Lombards, obtained from princes the license of receiving moderate gain from loan, as was done in the Mounts of piety. And thus provision was made for the necessities of the poor.

n. 883.

(B) Afterwards, even with respect to the rich, besides the contract of partnership (above, n. 879), there was recognized the contract of census, by force of which there was acquired the right of receiving an annual pension, first indeed from a fruitful thing alienated, then also from money handed over to another. Such a contract did indeed differ from loan, because money was handed over to another in perpetuity, on this condition, that an annual census (rente annuelle) be paid; but, when it was stipulated that the census would be redeemable, in reality that contract was scarcely distinguished from onerous loan. Wherefore it was reproved by Pius V (1569); nevertheless it was held as legitimate by not a few theologians and canonists.¹

¹ Thomassin sketched the history of this contract of census, op. cit., p. 453-471.

n. 884.

(C) Likewise extrinsic titles, from which interest can legitimately be received from money lent, began to be multiplied; namely, not only emergent damage was admitted (above, n. 879), but also ceasing gain, which namely is verified when the lender loses the occasion of gaining, insofar as with his money he wished to buy a census or fruitful field, or to trade licitly; and also danger to the principal, insofar as it is legitimately feared that the money lent may be lost.

(D) Soon by custom and civil law the practice prevailed, in the sixteenth century, of receiving moderate interest (5 percent), as distinct from usury; this indeed Pichler, S.J., acknowledged as legitimate on account of the public good. - Moreover, as opportunities for using money for trading increased, not a few theologians taught that it is permitted to any merchant to demand an increase for a loan, as the price of the obligation of lacking money for a certain time, even if in reality no gain ceased thereby.

n. 885.

(E) Likewise the triple contract was acknowledged by many as licit, so called because a threefold agreement was included in it: a contract of partnership, a contract of insurance of the principal, and a contract of insurance of gain. Namely Peter and John enter a partnership of trading, into which Peter contributes 1000 gold pieces, and John his works: Peter hopes from this to gain 200 gold pieces; behold the contract of partnership. But Peter, who does not wish the principal to be endangered, offers John 50 gold pieces so that he may insure the principal: behold the contract of insurance of the principal. But because he prefers a lesser certain gain to a greater uncertain gain, he sells to John the hope of gaining 200 gold pieces for 100 gold pieces: behold the contract of insurance of gain. When the trading has finished, therefore, Peter will receive 50 gold pieces. Now it is easily understood that by this manner of acting interest of 5 percent is received for money.

But the contract mohatra was deservedly reproved, by which, under the appearance of sale-purchase, immoderate usuries were received.²

² The contract is entered thus: Peter, needing one hundred gold pieces, wishes to borrow them from John; John denies the loan, but offers to Peter goods to be sold on credit at the highest price, e.g., one hundred and ten gold pieces, with the agreement that Peter immediately sell back the same goods to John at the lowest price, e.g., one hundred gold pieces; thus Peter indeed obtains one hundred gold pieces, but, after a year has elapsed, will return one hundred and ten.

V. The Theories Of The Moderns Concerning Loan.

n. 886.

1. The theories of Protestants. The first defenders of onerous loan were Calvin and Molinaeus (Dumoulin), who had not a few followers.

(A) Calvin (1509-1564) taught that not every usury is a sin, but only that which is opposed to charity toward the miserable, or is opposed to justice, as demanding immoderate interest. For the texts of Scripture adduced above regard only Jews; but reason shows that usury is legitimate, because money is not sterile, but is virtually fruitful, insofar as fruitful things can be procured with it.¹ Oecolampadius, Viretus, and Rivetus followed him.

¹ He set forth his doctrines in Comment. ad Ezechielem, and in Epist. ad Oecolampadium; cf. Favre, op. cit., p. 127-129; Bohm-Bawerk, op. cit., t. I, p. 32-34.

(B) Molinaeus (1500-1566), a very celebrated Parisian jurist, asserted that money must indeed be lent to the poor without any interest, but that moderate usury is legitimately received from a loan granted to traders; for the public good requires that traders be able to borrow money; now they will not be able to obtain this unless they pay some increase.²

² Tractatus contractuum et usurarum redituumque pecunia constitutorum, 1546; cf. Favre, op. cit., p. 130-145; Bohm-Bawerk, op. cit., t. I, p. 34-38.

(C) Grotius contended that, by natural right, moderate usury is permitted, but confessed that it is prohibited by divine right.³ - Pufendorf held that it is permitted by both natural and divine right: "For although a coin does not beget another, nevertheless, after eminent price was conferred upon it, by means of the industry of men it is certainly rendered most fruitful, things naturally and civilly fruitful having been procured for it."⁴ - Salmasius (Claude de Saumaise, 1588-1658) judged that money can be leased, or that the use of money is saleable, just as the use of all fruitful things is: for money, like a field, is rendered fertile by human industry.⁵

³ De Jure belli ac pacis, lib. II, cap. XII, § 20-23; Commentar. in Lucam, VI, 35; cf. Favre, p. 158-161.

⁴ De jure naturae et gentium, lib. V, cap. 7, § 10; cf. Favre, p. 161-165.

⁵ Salmasius, De usuris, 1638; De modo usurarum, 1639; Dissertatio de foenore trapezitico, 1640; Diatriba de mutuo, 1640; cf. Favre, p. 148-153; Bohm-Bawerk, I, p. 41-47.

n. 887.

1. The theories of economists. Many writers who gave themselves to political and economic matters generally taught that moderate usury is necessary - and therefore legitimate - for the public good, but especially for commercial affairs.

Thus Montesquieu (1689-1755) handed down that trading would be impossible without onerous loan;¹ Condillac (1715-1780) taught the same,² and Turgot, who besides added that money is fruitful, insofar as it is as it were capital, which greatly serves for producing new things;³ and also Bentham, who contended that the amount of the increase is to be defined not by law, but by the free convention of those making the agreement.⁴

¹ Montesquieu, Esprit des Lois, liv. XXII, ch. 19-22; cf. Favre, p. 216-220.

² Condillac, Le commerce et le gouvernement, ch. 18; cf. Favre, p. 224-226.

³ Turgot, Memoire sur les prets d'argent, presented to the Council of State in 1769.

⁴ Bentham, Defense of Usury, 1787, in French: Lettres sur l'usure, 1787; cf. Favre, p. 232-237.

n. 888.

1. Opinions of certain theologians. Moved by these arguments, some Catholic theologians began to hand down a milder doctrine concerning usury; thus, among others, J. Gibalinus, S.J., who openly defended the liceity of the triple contract;⁵ - Maignan, of the Order of Minims, who acknowledges as licit the contract of committed money, "by which someone, retaining for himself dominion of property in his own money, and therefore the right to seek it back, hands it over for trading, not by his own work, but by another's work and industry hired for this, with an agreement of vindicating for himself one moderate part of the gain, to be determined by the judgment of prudent persons";⁶ - Le Correur, a Parisian priest,⁷ who distinguishes a twofold loan: one, by which a thing is given for consumption, another by which it is given for trading; now gain received from the former, as from a sterile thing, is usurious, but gain accepted from the latter is licit, because the thing is given for a use estimable by price; - Scipio Maffei, who teaches that usury is indeed unjust when gain is demanded beyond the measure determined by laws, or from the poor; but that moderate gain received from the rich, who seek a loan for amplifying fortune, is licit.¹

⁵ Gibalinus, De usuris, commerciis, deque aequitate et usu fori Lugdunensis, Lyons, 1656.

⁶ Maignan, De usu licito pecuniae, Toulouse, 1673, p. 42. P. de Calonia, of the same Order, taught almost the same, Eclaircissement sur le legitime commerce des interets, Lyon, 1676; cf. Carriere, III, n. 1114, note 1.

⁷ Le Correur, Traite de la pratique des billets entre les negociants, Mons, 1684.

¹ Maffei, Dell' impiego del Danero, 1744; in French: De l'emploi de l'argent, by M. le marquis de Maffei, Avignon, 1787. - Maffei had dedicated his book to Benedict XIV, but nothing shows that this dedication pleased the Pontiff; besides, after the Encyclical Vix pervenit had been published, he retracted nothing, but in the second edition declared that the doctrine of the Encyclical was by no means opposed to his theories.

VI. The Doctrine Of Benedict XIV And Of The Roman Congregations Concerning Loan.

n. 889.

1. The Encyclical Vix pervenit. Since minds in the Church, and especially in Italy, were greatly moved by these various opinions and controversies, Benedict XIV instituted a congress of theologians for thoroughly weighing the matter, and promulgated their conclusions in the Encyclical Vix pervenit, Nov. 1, 1745, which he sent to all the bishops of Italy.² In this Letter, as he himself declares, he did not wish to decree anything concerning those contracts "about which Theologians and interpreters of the Canons go off into diverse opinions," but to establish certain doctrine concerning usuries. This doctrine is contained in five propositions, which we briefly contract.³

² There is much dispute about the doctrinal force of this Encyclical; for some hold that it is an infallible definition; but others, a doctrinal judgment of the gravest moment, but not infallible. To the point Vermeersch, S.J., n. 360, p. 458: "Observe, however, that this letter was sent only to the bishops of Italy. Long afterward indeed, July 29, 1836, the Holy Office, with the approval of Gregory XVI, seems to have declared in passing that the letter regards the universal Church. Yet this letter could not for that reason become an infallible definition. Wherefore we judge that there is in it the gravest authority indeed, but not the supreme." Likewise E. Van Roey, op. cit., p. 44, note 1, writes that it "is not an utterance ex cathedra, but rather bears as it were the form of a decree of some Congregation, approved indeed in a special and more solemn manner by the Sovereign Pontiff, and promulgated by his authority."

³ You have the text in Denzinger, n. 1318-1322.

Usury is placed in this, that someone from the loan itself, which by its nature demands that only as much be returned as was received, wishes more to be returned to himself than was received, and therefore contends that, beyond the principal, some gain is owed to himself by force of the loan itself: this is illicit and usurious.

Nor can usury become legitimate from the fact that the gain is moderate, or is demanded from a rich man, or from one who is going to spend the money for amplifying his fortunes, or for buying new estates, or for carrying on gainful business; by force of the loan itself nothing can be received, and if someone has received gain, he will be subject to restitution.
Nevertheless, extrinsic titles can concur with the contract of loan, from which a just cause may arise for demanding something more above the principal. - Likewise money can rightly be placed and spent through other contracts different from loan, whether for acquiring annual revenues for oneself, or also for exercising licit commerce and trading, and receiving honest gains from them.
In these various contracts equality must be preserved; otherwise injustice is committed and an obligation to restore is present; but with equality preserved, there remains a manifold licit way of preserving and frequenting fruitful trading for the public advantage.
It is falsely and rashly asserted that there are always found and everywhere available, together with loan, other legitimate titles, or other just contracts, by which it is permitted to demand a moderate increase beyond the principal. For in many cases a man is held by a simple and naked loan to succor another gratuitously, according to that:¹ "From him who wishes to borrow from thee, turn not away."

¹ Matt., V, 42.

n. 890.

1. Controversies after the Encyclical. This letter did not impose an end on the dispute. Maffei, in a new edition of his work, said that he had taught beforehand whatever the Pontiff handed down, but had not taught whatever was reproved in it; - Fr. Grangier did not cease to defend the triple contract;² - De la Forest, parish priest of Lyons, contended that in a loan of trading usury is not admitted;³ - Beurrey, a priest of La Rochelle, said that money can be leased as a fruitful thing.⁴ At the beginning of the nineteenth century, two men chiefly contended that moderate interest can legitimately be received from commercial loan: Cardinal de la Luzerne, who sets forth that money can be handed on loan to another for a threefold end, for consumption, for conservation, or for increase: in the first case there is loan properly so called, from which usury cannot legitimately be received; in the second and third case, there is the contract of commercial credit, from which moderate interest is legitimately received;⁵ - Mastrofini, who tried to show that the faculty granted to the borrower of gaining something by means of the use of the money lent is estimable by price, and therefore a legitimate title for receiving some increase.¹

² Examen theologique sur la societe du pret a rente, Paris, 1741; this work was refuted by Lecoq, superior general of the Eudists, Dissert. theologique sur l'usure, Rouen, 1767.

³ Traite de l'usure et des interets, Cologne and Paris, 1769, 1776; this was refuted by P. Carpuac, Minor Conventual, Examen et refutation du Tr. de l'Usure, Avignon, 1779.

⁴ La question de l'usure eclaircie, Paris, 1786; this was attacked by Rougane, Les nouveaux patrons de l'usure refutes, 1789.

⁵ Dissertation sur le pret de commerce, Dijon, 1823; this was attacked by Bouyon, canon of Clermont, Examen du systeme de feu Mgr le Card. de la Luzerne sur le Pret de commerce, Clermont, 1826.

¹ Le Usure, Rome, 1831; this was refuted in the following works: Osservazioni pacifiche sopra di un'opera intitolata, Le Usure, Rome, 1834; Reponse au livre de Mastrofini, by Moralet, priest of the diocese of Annecy, Lyon, 1836; cf. Pages, Dissertation sur le Pret a interet, t. II, Lyon, 1838.

n. 891.

1. Responses of the Roman Congregations. (A) Until the year 1830, the Sacred Congregations, when asked about loan, responded, according to the mind of Benedict XIV, that it is not permitted to receive an increase by force of loan, but only by force of an extrinsic title, namely by reason of danger to the principal, ceasing gain, and emergent damage. Thus, for example, in 1645, to the Chinese Missions it was responded: "By reason of loan, immediately and precisely, nothing is to be received beyond the principal principal; but if they receive anything by reason of a probably imminent danger, ... they are not to be disturbed, provided that account be had of the quality of the danger and its probability"; in the same place it is added that something can be received by reason of ceasing gain and emergent damage.²

² In Collectanea S. C. de Propag. Fide, n. 2118; ibid. n. 2119-2143 you will find the principal responses of the Congregations; cf. Bucceroni, Enchiridion, n. 853 sq., 863 sq.

n. 892.

(B) From the year 1830, the Sacred Congregations proceeded further: (a) the Holy Office, asked by the bishop of Rennes whether the manner of acting of confessors could be approved, who did not deny absolution to penitents receiving gain from money given on loan to traders, responded, Aug. 18, 1830, "that they are not to be disturbed"; (b) the Sacred Penitentiary, Sept. 16, 1830, declared that priests are not to be disturbed who contend that it is licit to receive an increase of five percent by force of the law of the Prince alone, without another title; (c) the same Congregation responded, Nov. 11, 1831, that a confessor acts more harshly and severely who denies absolution to penitents who received gain from loan by the sole title of civil law; (d) the Holy Office declared, Jan. 17, 1838, that penitents who received moderate gain from loan by the title of law alone in doubtful or bad faith can be sacramentally absolved, no burden of restitution being imposed. - We here submit the principal part of these documents.

n. 893.

Pius VIII, in the audience of the Assessor of the Holy Office, to the doubts of the Bishop of Rennes: - "The Bishop of Rennes in France sets forth to the Sacred Congregation of the Inquisition that the opinion of the Confessors of his diocese is not the same concerning gain received from money given on loan to traders, so that they may grow rich.

The sense of the encyclical letter Vix pervenit is sharply disputed. On each side reasons are brought forward to defend the opinion each has embraced, favoring such gain, or contrary to it. From this arise complaints, dissensions, denial of the sacraments to very many traders adhering to this manner of growing rich, and countless damages of souls.

So that they may meet damages of souls, some Confessors think they can hold a middle way between each opinion. If anyone consults them concerning gain of this sort, they try to deter him from it. If the penitent perseveres in the plan of giving money on loan to traders, and objects that the opinion favoring such a loan has many patrons, and besides has not been condemned by the holy See, more than once consulted concerning that matter; then these Confessors demand that the penitent promise that he will obey with filial obedience the judgment of the Supreme Pontiff, if it should intervene, whatever it may be: and, this promise having been obtained, they do not deny absolution, although they believe the contrary opinion to such a loan more probable. If the penitent does not confess about gain from money thus given on loan, and seems to be in good faith, these Confessors, even if they otherwise know that such gain has been received by him or is even now being received, absolve him, no questioning having been made about that matter, when they fear lest the penitent, warned, refuse to restore or to abstain from such gain. Therefore the said Bishop of Rennes inquires: I. Whether he can approve the manner of acting of these latter Confessors. II. Whether he can exhort other stricter Confessors approaching him for the sake of counsel, to follow their manner of acting, until the holy See should bring an express judgment on that question. - C. L. Bishop of Rennes.

On Wednesday, the 18th day of August 1830, our Most Holy Lord Pius, by divine providence Pope VIII, in the usual audience granted to the Rev. Lord Assessor of the Holy Office, the report of the above doubts having been heard together with the vote of the most eminent Lords Cardinal General Inquisitors, responded: To I. That they are not to be disturbed. To II. Provision has been made in the first."

n. 894.

The Sacred Penitentiary to the doubts of D. Denavit, Professor of theology in the Seminary of St. Irenaeus at Lyons: - "When doubts concerning the matter of usury are proposed to the Sacred Penitentiary, it always refers to the doctrine of the Supreme Pontiff Benedict XIV, which in reality is sufficiently clear and perspicuous for those who wish to investigate it in good faith.

Nevertheless there are certain Priests who contend that it is licit to receive an increase of five percent by force of the law of the Prince alone, without another title either of emergent damage or ceasing gain: because, they say, the law of the Prince is a legitimate title, since it transfers dominion of the increase just as it transfers dominion in prescription: and thus they utterly annihilate the divine law and ecclesiastical law which prohibits usuries.

Wherefore the undersigned Orator humbly begs that the following doubts be solved: I. Whether in conscience he can deny absolution to the aforesaid priests. II. Whether he ought to. - Lyons, May 25, 1830. Denavit, professor.

The Sacred Penitentiary, the proposed doubts having been diligently and maturely weighed, judged that it should be responded: The Priests of whom the matter concerns are not to be disturbed until the holy See has issued a definitive decision, to which they are prepared to submit themselves; and therefore nothing stands in the way of their absolution in the sacrament of Penance. Given at Rome, in the Penitentiary, on the 16th day of September 1830."

n. 895.

The Sacred Penitentiary to the new questions of D. Denavit, professor: - "To the Sacred Penitentiary the undersigned orator again sets forth: From the response of the sacred Penitentiary directed to the undersigned orator on Sept. 16, 1830, those priests are to be absolved who contend that the law of the Prince is a sufficient and legitimate title for receiving something beyond the principal in loan, without another title commonly admitted by Theologians, until the holy See has issued a definitive decision, to which they are prepared to submit themselves: and to this response I humbly and gladly acquiesce. Nevertheless, saving the aforesaid response of the sacred Penitentiary, approved authors having been consulted, and with attention to the doctrine of almost all the Seminaries of France, and especially of those which are directed by the priests of the Congregation of Saint Sulpice, the opinion which rejects the title of civil law as insufficient seems far more probable, safer, and the only one to be held in practice until the holy See has defined. Wherefore to the faithful who seek counsel from me whether they can receive an increase from loan, and who have no title commonly admitted by Theologians besides the title of civil law, I respond that they cannot demand the aforesaid increase, and I deny sacramental absolution if they demand it. Likewise I deny absolution to those who, having received usuries of this sort, that is by force of the title of law alone, do not wish to restore. It is asked: I. Whether I hold myself more harshly and severely toward the faithful of this sort. II. What manner of acting is to be held in practice toward the faithful, until the holy See has issued a definitive sentence. Lyons, Sept. 24, 1831. Denavit, Professor.

The Sacred Penitentiary, the doubts proposed by the orator having been weighed, responded: To I. Affirmatively: since from the response given by the sacred Penitentiary it is clear that faithful of this sort, who so conduct themselves in good faith, are not to be disturbed. To II. Provision has been made in the first: whence let the orator strive to conform himself in practice to the earlier response of the sacred Penitentiary under the date of Sept. 16, 1830. Given at Rome, in the sacred Penitentiary, on the 11th day of November 1831."

From these and other responses of this sort, the practical question is now solved, and moderate gain can be received in every case, until the Holy See shall judge otherwise, with the offices of charity nevertheless preserved, concerning which below; but the speculative question remains to be weighed.

VII. Today's Theories Concerning Loan.

n. 896.

They are reduced to three principal ones: of Socialists, Economists, and Theologians.

The Socialists, with Proudhon, Lassalle, and K. Marx, contend that no gain can ever be received from money; for since labor is not only the primary, but the unique source of value, the whole value which is produced belongs to the workers themselves; therefore the increase which is attributed to the capitalists is unjustly given to them, since it deprives the worker of a part of the value owed to him.¹ - Certain ones, however, admit that some moderate interest is legitimate so long as private dominion remains.

¹ V. Modeste, Le pret a interet, derniere forme de l'esclavage. Bohm-Bawerk sets forth and refutes this theory, t. II, p. 1-136; cf. G. Rambaud, Hist. des Doctrines economiques, p. 447-466. - Besides socialists, certain persons reject every increase received from money as illicit and contrary to the good of society: thus J. Moret, Du pret a interet ou des causes theologiques du socialisme, Paris, 1873; P. Lafleyre, Le Catholicisme social, Paris, s. d., t. II, p. 125-150.

n. 897.

1. On the contrary, Economists who reject collectivism acknowledge not only the liceity of interest from money lent, but also its advantages and necessity, in the state of today's civilization, and proclaim this with one voice;² yet they greatly disagree concerning the reason why it is permitted to receive an increase.

² P. Leroy-Beaulieu, Traite, II, p. 83-108; Gide, Principes d'Econ., p. 487-490.

(A) Many say that the primary cause, or reason, why an increase can be received from money lent is the fruitfulness or productivity of capital and of money, which participates in the nature of capital when it concurs in producing new things. Namely three things concur for production: nature, or natural powers, - labor, and capital: for by means of money, machines, materials, and other things of this sort can at once be procured or made, from which human powers are multiplied and the productive force is increased a hundredfold. Now if money has no small part in the production of things, it ought to have a part in the gain.³

³ Thus chiefly J. B. Say, Traite d'Econ. Politique, Paris, 1803; Cours complet d'Econ. Pol., Paris, 1828-29; Lauderdale, An Inquiry into the Nature and Origin of Public Wealth, Edinburgh, 1804; Bohm-Bawerk sets forth and critically weighs this theory, t. I, p. 135-243; t. II, p. 248-268.

(B) But others say that by this fruitfulness of money the increase is not sufficiently explained, unless it be added that the increase is the remuneration of the use of money; for money is not productive of itself, but only from human labor; therefore not the money itself, but the use of money confers a right to receive some gain; namely he who uses money lent produces more than he could have produced alone; therefore he who handed money on loan has some right to a part of the things produced.⁴

⁴ Hermann, Staatswirthschaftliche Untersuchungen, 1870; Menger, Grundsatze; cf. Bohm-Bawerk, t. I, p. 244-343; t. II, p. 198-200.

n. 898.

(C) Yet this opinion did not please all; wherefore some devised another theory, namely that some remuneration is owed to capitalists because for some time they deprive themselves of things which they could enjoy, and voluntarily cede them to others so that these may be able to produce new things; and this privation, or abstinence, insofar as it contributes something to production, merits a certain recompense.¹ For he who voluntarily abstains from the enjoyment of some money, and cedes it to another, confers on this man an advantage, namely an opportunity of gaining something, which is estimable by price.

¹ N. W. Senior, Outlines of the Science of Political Economy, London, 1836; Bastiat, Harmonies Economiques, p. 188-211; cf. Bohm-Bawerk, t. I, p. 344-373; t. II, p. 200-230. Lassalle mocked this theory thus, Kapital und Arbeit, Berlin, 1864, p. 110: "The profit of capital is the wage of abstinence! Happy, inestimable word! The European millionaires are ascetics, Indian dervishes, canonized saints! They hold themselves on a column, pale of face, bent of body, arm extended to present the plate in which they gather the wage of their privations!" (In Bohm-Bawerk, I, 352.) These things are certainly witty; nevertheless money, of which capitalists deprive themselves for increasing production, profits others more than if it were uselessly consumed in pleasures.

(D) But others, thinking that the unique source of value is human labor, contend that an increase is nothing other than the price of previous labor; namely money, like capital, is as it were labor inserted into some thing and as it were frozen in it (travail cristallise); when therefore money is handed on loan, by that very fact some labor is furnished to another, which certainly is worthy of some recompense.² - Yet certain German writers propose this theory otherwise; for they say that the capitalist is as it were a minister constituted by society for producing goods, to whom therefore an increase is owed as the recompense of quasi-social labor.³

² J. Mill, Elements of Political Economy, London, 1821; M. Culloh, Principles of Polit. Economy, 1825; Courcelle-Seneuil, Traite d'Econ., Paris, 1858; cf. Bohm-Bawerk, I, 374-384.

³ Schaffle, Das gesellschaftliche System, der menschlichen Wirthschaft, 1873; Wagner, Allgemeine oder theoretische Volkswirthschaftslehre, 1879, I p.; Stolzmann, Die Sociale Kategorie in der Volkswirthschaftslehre, Berlin, 1896; - cf. Bohm-Bawerk, I, 384-394; II, 230-248.

(E) Some reject these theories as insufficient, and propose a new one, by force of which increase becomes legitimate from the difference which exists between present goods and future goods; namely present goods are worth more, other things being equal, than future goods; thus, for example, one hundred coins possessed here and now are deservedly estimated as worth more than one hundred coins which will be possessed only after a year has elapsed; wherefore he who here and now hands one hundred coins to another, on this condition, that they be returned to him after a year, in reality loses something if, after the year has elapsed, he receives only one hundred; therefore he has the right to obtain something more: otherwise equality is not preserved.¹

¹ Thus Bohm-Bawerk, t. p. 332: "Loan is a true exchange of actual goods for future goods... Actual goods possess a value superior to that of future goods of the same kind taken in equal quantity. Consequently and as a general rule, a determined quantity of actual goods can be acquired only with the help of a more considerable sum of future goods."

n. 899.

(F) Finally certain eclectics compose several of these titles together, so that they may more easily demonstrate the legitimacy of the increase. Thus P. Leroy-Beaulieu thinks that the principal foundation of a legitimate increase is indeed the productivity of money, but that at the same time the difference between present and future goods, and also the privation which the creditor suffers and the danger to the principal, and the advantage enjoyed by the debtor, contribute to this.²

² P. Leroy-Beaulieu, Traite, II, p. 83-94; cf. Bohm-Bawerk, II, p. 137-159.

From these things it can be gathered that the matter is sufficiently tangled, and therefore that ancient theologians cannot be censured without injustice because they were ignorant of the principles of today's economic science: they could not foresee the evolution of industry and commerce; besides, from the things said, the dispute is still under the judge.

n. 900.

Today's theologians, before the Code, held various opinions:

(a) Some, adhering to the footsteps of Benedict XIV, said that every gain received from loan itself by force of loan is unjust, but that moderate gain can very often be received by force of an extrinsic title, e.g., on account of a special danger to the principal, emergent damage, ceasing gain, or a conventional penalty.

(b) Certain ones, with Ballerini (n. 707-735), contended that an increase cannot be received from loan properly so called, but from the lease of money.

(c) Many also, after Lehmkuhl, thought that loan taken in the proper sense excludes the right to usury (1296), but today generally passes into the lease of a quasi-fruitful thing (1314).

Today, however, in practice one must stand by the solution which the Code exhibits, c. 1543, concerning which we must now speak.

VIII. Doctrine To Be Held And Practical Conclusions.³

³ F. Cavallera, in Semaine sociale, 1921, p. 71-76.

We shall speak: 1. on loan in general; 2. on pecuniary loan.

n. 901.

1. On Loan in general the Code hands down these things (c. 1543): "If a fungible thing is given to someone in such a way that it becomes his, and afterward as much is to be restored in the same kind, no gain, by reason of the contract itself, can be received. But in the furnishing of a fungible thing it is not of itself illicit to agree concerning legal gain, unless it is established that this is immoderate, or even concerning a greater gain, if a just and proportioned title supports it."

It is explained and proved by parts.

(a) The matter concerns a contract by force of which a fungible thing, and one consumable by first use, either physically or morally, e.g., a cask of wine, is given into someone's dominion on this condition, that a thing of the same kind be restored in the same quantity, whatever name may be imposed upon this contract.

Now, by force of such a contract, no gain can be received.

It is established from natural right. For it is not permitted to someone to sell what is not his own. But the use of a fungible thing given to another so that it may become his and afterward be returned in the same quality and quantity does not pertain to the giver. Therefore the giver cannot receive gain from that use.

But the minor is proved thus. In a fungible thing, use is not distinguished from dominion; but dominion pertains to him to whom the thing has been given; therefore also the use. Cf. above n. 878.

It is established from ecclesiastical right, namely from the various documents which have already been adduced, especially from the Encyclical of Benedict XIV, Vix pervenit.

(b) Nevertheless, in the furnishing of a fungible thing it is not of itself illicit to agree concerning moderate legal gain.

It was indeed sharply disputed whether civil law, other titles failing, could render usury licit. Before the Code, the affirmative opinion seemed more probable and could be held in practice, especially from the response of the Sacred Congregation de Propaganda Fide, 1873: "Other titles of whatever sort failing... the one title of civil law also can be held as sufficient in practice."¹

¹ Collect. de Propaganda Fide, n. 2140.

But the Code declares as of itself licit an agreement concerning legal price, which is presumed just, unless it is established that the gain is immoderate; but it abstains from a formal explanation of this liceity.

Yet the reason seems to be the following, according to many. Civil authority can validly transfer the dominion of material goods from one to another by reason of the common good; but when some gain is determined by law on the occasion of the contract of which the matter concerns, it is presumed that a transfer of dominion from one to another is required for the common good, and this now becomes licit.

(c) Indeed, in the furnishing of a fungible thing, it is not of itself illicit to agree concerning greater gain, if a just and proportioned title supports it.

But what can be a just and proportioned title is gathered from the doctrine already commonly admitted, and confirmed by the Sacred Congregation de Propaganda Fide, in the year 1873, in these words: "Other titles of whatever sort failing, of which kind are ceasing gain, emergent damage, and the danger of losing the principal or of undertaking unusual labors for the recovery of the principal." Namely the matter concerns the privation of gain which the lender would have had if he had not given the loan, the detriment which the lender suffers in his own things by reason of the loan, the special danger of losing the principal or of undertaking extraordinary labors for the recovery of the principal. To these titles there is also added the title of conventional penalty, by which the borrower obliges himself to pay something by way of penalty, if he shall not have returned the principal at the appointed time.

Now, when these extrinsic titles are present, according to common estimation, the lender has a right to some compensation estimable by price, provided that it does not exceed just proportion.

On pecuniary loan.

The question concerning pecuniary loan is solved theoretically from the principles already set forth. But it can be asked whether today in practice a just title is always present for receiving gain. Now these things seem to us to be established.

n. 902.

(A) Today, on account of the peculiar economic conditions of society, money is virtually and truly fruitful.¹

¹ Antoine, ed. du Passage, p. 602-606.

The matter therefore concerns today's times, but not past or future ones, in which economic conditions can be plainly diverse. Nor do we contend that all money has been fertile at every time, but that today, because of special circumstances, it is virtually productive. For money of itself is sterile, because coins do not generate coins; but it can be called virtually fruitful, because today it can at once, and without any difficulty, be converted into fruitful things or fruitful uses. This aptitude for gainful uses does not depend on the special industry of the individuals using it, but inheres in money itself, as it is now generally considered. For it is very easily converted into fertile fields, houses from which a legitimate census is received, machines and instruments from which the productive force of labor is greatly increased. But if some persons do not wish to use their own money in this way, everywhere there are agricultural, industrial, and commercial societies which vehemently desire to render this money fruitful, for a moderate increase; nor are States, Cities, and Municipalities lacking, which earnestly solicit capitalists to be willing to commit monies to them, for moderate interest, for promoting the public good.

Nor should it be said that money entrusted is only the occasion, but not the cause of gain, which in reality is acquired from human labor alone.

It is indeed true that coins, without man's industry, remain idle and produce nothing of themselves, just as generally a field does not bear fruits without cultivation, nor does an instrument work anything without the hand of the craftsman. But the farmer who wisely uses money for cultivating lands better, the craftsman who with money lent obtains more perfect instruments, legitimately make a much greater profit, and indeed from those things which they have obtained by the help of money; therefore money is not only the occasion, but truly an efficient instrumental cause, at least partial, of this increase, and consequently can vindicate some right to a part of the profit.

n. 903.

(B) Since today money is virtually fruitful, it is permitted to receive from it moderate interest, provided that the matter does not concern a charitable loan (n. 905).

For he who hands money over to another to be used deprives himself, for a determined time, of the opportunity of making some gain, and confers an advantage on another, insofar as he furnishes to him the faculty of gaining something; or, in other words, on the part of the creditor there is ceasing gain, while on the part of the debtor there is an opportunity of increasing his revenues. Moreover these two things are something estimable by price, which merits some recompense. Formerly the title of ceasing gain occurred rather rarely; but today, given the virtual fruitfulness of money, it has become universal.

…and 3 more passages — all of them are listed on the topic page.

Koch–Preuss

Antony Koch; adapted and edited by Arthur Preuss — 18 passages

Vol. V, Pt. I, Ch. V, Section 5: The So-Called Onerous Contracts

n. ¶70.

Loaning money at interest is generally done by means of a contract in which a definite sum (census, interesse) is agreed upon as a recompense for the temporary use of the amount loaned.³⁹ The permissibility of taking interest can be demonstrated from Holy Scripture and ecclesiastical tradition. a) In some passages of the Old Testament the taking of interest is strictly forbidden,⁴⁰ whereas in others it is forbidden only on loans made to brothers or the poor,⁴¹ and in still others it is expressly permitted when the lenders were foreigners, i. e., non-Israelites.⁴² Since Holy Scripture, therefore, makes a distinction between Israelites and non-Israelites, and permits interest to be taken from the latter, it follows that interest cannot be per se forbidden by the moral law of nature, for if it were, God could no more have permitted the Jews to practice it than He could have permitted them to rob or murder foreigners.⁴³ Hence it is certain that the Old Testament prohibition of interest-taking was purely a matter of civil law. The economic system of the Jews under Moses was such as to limit loans among themselves to cases of urgent necessity, whereas the gentiles borrowed Jewish capital for purposes of speculation and production. In view of this fact Moses allowed his people to take interest from strangers, but not from fellow-Hebrews. Thus we find the key for the correct solution of this much-debated problem in the Mosaic law.

³⁹ See the bibliography at the end of this Section, p. 314.

⁴⁰ Cfr. Ps. XIV, 5; LIV, 12. J. Hejel, Das alttestamentliche Zinsverbot, Freiburg i. B. 1907, pp. 62 sqq.; Benzinger, Hebräische Archäologie, 2nd ed., pp. 292 sq.

⁴¹ Cfr. Ex. XXII, 25; Lev. XXV, 35 sqq.; Ez. XVIII, 8, 13; Ps. LXXI, 14.

⁴² Deut. XXIII, 19 sq.: “Thou shalt not lend to thy brother money to usury [i. e., on interest], nor corn, nor any other thing: but to the stranger. To thy brother thou shalt lend that which he wanteth without usury [i. e., interest].”—Cfr. Lev. XXV, 36; 2 Esdr. V, 7; Ehrlich, Randglossen zur hebr. Bibel, II, 95.—Cfr. P. Cleary, The Church and Usury, Dublin 1914, Ch. I, “Usury among the Hebrews,” pp. 1–18.

⁴³ Cfr. K. J. Hefele, Beiträge zur Kirchengeschichte, Vol. I, p. 36.

n. ¶71.

The New Testament contains but one text that is commonly referred to interest-taking. It is Luke VI, 34 sq., where Christ is quoted as saying: “And if you lend to them of whom you hope to receive, what thanks are to you? for sinners also lend to sinners, for to receive as much (τὰ ἴσα). But love your enemies, do good and lend, hoping for nothing thereby (δανείζετε μηδὲν ἀπελπίζοντες).” This text, however, throws no light on the problem of interest-taking, for in it Christ does not advise His hearers to refrain from taking interest, but to give away the capital itself.⁴⁴

⁴⁴ Luke VI, 34 sq.—Cfr. D’Annibale, Summula Theol. Mor., Vol. II, 5th ed., p. 449: “That Luke’s words [vi, 34] do not pertain here is now known almost even to the bleary-eyed and barbers.”—A. Vermeersch, S.J., Quaest. de Iustit., 2nd ed., p. 452: “As regards the New Testament, it contains nothing, not even in appearance.”—P. Cleary, The Church and Usury, pp. 32 sqq.

n. ¶72.

Hence it may be safely held that the Bible does not prohibit interest-taking. b) The Fathers of the Church and the early councils, on the other hand, sternly condemned the practice, mainly for reasons drawn from the Old and New Testaments and under the influence of the Greek and Roman philosophers of antiquity, who seem to have opposed the taking of interest.⁴⁵ Some of the Fathers expressly refer to Aristotle’s well-known teaching that money is an unproductive thing. A good deal of the feeling displayed against interest-taking in the early Church was no doubt a result of the shameless way in which usury was practiced at that time. Most of the early ecclesiastical writers use “interest” and “usury” as synonymous terms. Beginning with the fourth century, however, the law against loaning money on interest was enforced only against clerics, whilst the laity were left free to do as they pleased.

⁴⁵ Matth. V, 42; VI, 12; XVIII, 23–35; cfr. Luke VI, 34 sq.; the teaching of the ancient philosophers is discussed by Cleary, The Church and Usury, pp. 19 sqq., 26 sqq.

n. ¶73.

The teaching of the Fathers on the subject of interest, says Dr. Funk, “was not without its defects, and the early Church seems to have made allowance for this fact when she employed her penal power in this matter against clerics only, and left the laity unmolested.”⁴⁶

⁴⁶ F. X. Funk, Geschichte des kirchlichen Zinsverbotes, p. 7.—Cfr. P. Cleary, The Church and Usury, pp. 37 sqq.

n. ¶74.

c) During the Catholic Middle Ages the prohibition of interest-taking was adhered to, at least in principle.

n. ¶75.

d) After the thirteenth century the question began to be dealt with in a more scientific way by the Scholastics, who, not content with the authority of Sacred Scripture and the Fathers, searched for arguments against interest-taking in reason and the natural law. One of the principal arguments they evolved was based on the nature of money. They held that money is a commodity which is consumed in the first use and has no other use which can give it an additional value, and that, consequently, in the business of exchange, its substance (res) cannot be separated from its use (usus rei), nor can it be separately valued without an offence against distributive justice. Thus a man who would sell to one buyer the substance of a bottle of wine (vinum), and to another the right to drink it (usus vini), would violate justice because he would sell the same commodity twice, or sell something which had no real existence. In other words, the fair price for a bottle of wine is the money equivalent of the value which the wine has for drinking, because the value of the first consumption of a commodity is the value of the commodity. Money, considered as a medium of exchange, they argued further, is a commodity whose value is identical with the value of the first consumption of it, and, therefore, it is per se unlawful to charge a compensation (usura) for its use (usus). Hence the Schoolmen regarded all gain or profit derived from the use of an unproductive or unfruitful commodity, or from a loan as such (lucrum ex mutuo ratione mutui), as unjust and usurious.

n. ¶76.

St. Thomas puts it thus: “To take usury [interest] for money lent is unjust in itself, because this is to sell what does not exist, and this evidently leads to inequality, which is contrary to justice. In order to make this evident, we must observe that there are certain things, the use of which consists in their consumption: thus we consume the wine when we use it for drink, and we consume wheat when we use it for food. Wherefore in such like things the use of the thing must not be reckoned apart from the thing itself, and whoever is granted the use of the thing, is granted the thing itself; and for this reason, to lend things of this kind is to transfer the ownership. Accordingly, if a man wanted to sell wine separately from the use of the wine, he would be selling the same thing twice, or he would be selling what does not exist, wherefore he would evidently commit a sin of injustice. In like manner he commits an injustice who lends wine or wheat, and asks for double payment, viz.: one, the return of the thing in equal measure, the other, the price of the use, which is called usury. On the other hand there are things, the use of which does not consist in their consumption: thus to use a house is to dwell in it, not to destroy it. Therefore in such things both may be granted: for instance, one may hand over to another the ownership of his house while reserving to himself the use of it for a time, or, vice versa, he may grant the use of the house whilst retaining its ownership. For this reason a man may lawfully make a charge for the use of his house, and, besides, reclaim the house from the person to whom he has granted its use, as happens in renting and letting it. Now money, according to the Philosopher, was invented chiefly for the purpose of exchange, and consequently the proper and principal use of money is its consumption or alienation, whereby it is sunk in exchange. Hence it is by its very nature unlawful to take payment for the use of money lent, which payment is known as usury; and just as a man is bound to restore other ill-gotten goods, so is he bound to restore the money which he has taken in usury.”⁴⁷

⁴⁷ St. Thomas, Summa Theol., 2a 2ae, qu. 78, art. 1. “To take usury for money lent is unjust in itself, because what does not exist is sold. By this an inequality is manifestly established, which is contrary to justice. To make this evident, it must be known that there are certain things whose use is the consumption of the things themselves, just as we consume wine by using it for drink and wheat by using it for food. Hence, in such things, the use of the thing ought not to be reckoned separately from the thing itself, but to whomever the use is granted, by this very fact the thing is granted, and for this reason ownership is transferred in such things by a loan. Therefore, if someone wished to sell the wine separately and wished to sell the use of the wine separately, he would sell the same thing twice, or would sell what does not exist; hence he would manifestly sin through injustice. And for a similar reason he commits an injustice who lends wine or wheat, asking that two recompenses be given him: one, indeed, the restitution of an equal thing, and the other the price of its use, which is called usury. But there are certain things whose use is not the consumption of the thing itself, just as the use of a house is habitation, not its destruction. And therefore in such things either may be granted separately; for example, when someone hands over to another the ownership of a house, reserving its use to himself for some time, or conversely when someone grants another the use of a house while reserving its ownership to himself. And for this reason a man may lawfully receive a price for the use of a house and, besides this, demand the house lent for use, as is evident in the hiring and letting of a house. Money, however, according to the Philosopher [Ethic., l. V, c. 5; Polit., l. I, cc. 5–6], was principally invented for making exchanges; and thus the proper and principal use of money is its consumption or alienation, according as it is expended in exchanges. And for this reason it is in itself unlawful to receive a price for the use of money lent, which is called usury; and just as a man is bound to restore other things unjustly acquired, so he is bound to restore the money which he received through usury.” On the teaching of St. Thomas and the Scholastics generally see Cleary, The Church and Usury, pp. 78 sqq.

n. ¶77.

β) All through the Middle Ages canonists and theologians were unanimous in condemning the taking of interest on loans made for consumption only (mutua), as distinguished from loans for use, reckoning money as an article of consumption. When, however, some external reason seemed to justify the taking of interest, it was not regarded as usury. Such a reason was called titulus mutuo extrinsecus. The principal “titles” held to justify interest were: (1) damnum emergens, i. e., a loss or damage arising to the lender from the loan; (2) lucrum cessans, i. e., profit lost to the owner by not having the money in his control; (3) periculum sortis amittendae, i. e., the danger of losing the capital lent; and (4) poena conventionalis, i. e., a penalty agreed upon between the contracting parties for remissness in repaying the money loaned. Where one of these “titles” could be alleged, it was permissible to demand and receive a moderate charge over and above the capital lent. This charge was not paid for the use of the money loaned, but for the danger incurred by the lender, or to indemnify him for the loss he had sustained and which he was not bound to take upon himself gratuitously.⁴⁸

⁴⁸ P. Cleary, The Church and Usury, “Extrinsic Titles,” pp. 91–105.—Gury, Comp. Theol. Mor., I, n. 818: “Emerging loss is a detriment which the lender suffers on the occasion of a loan made to his neighbor. If the lender suffers loss because of the loan, it is a legitimate title for receiving something above the principal or the thing lent. The reason is that it is not equitable that you should bear loss from the loan; for no one is bound to confer a benefit at his own loss except in the neighbor’s necessity.”—Ibid., n. 819: “Ceasing gain is that which the lender would have gained from his property or money, had he retained it, if he had employed it in another lawful contract. Ceasing gain is a legitimate title for demanding something above the principal. The reason is: 1. Because then there truly is an emerging loss; 2. Because the hope of gain is extrinsic to the loan and therefore capable of valuation in money.”—Ibid., n. 820: “Risk to the principal is a well-founded fear that the principal may not be recovered. There is a twofold risk: 1. Common, intrinsic to every loan, e. g., the fear that all the borrower’s goods may perish in a fire, etc.; 2. Extraordinary, e. g., if a loan is given to a prodigal or to a man of doubtful credit or to one going by sea, or if great expenses in recovering the principal are feared.”—Ibid., n. 821: “Nothing can be demanded for the common risk. The reason is that such a risk is entirely intrinsic to the loan and therefore cannot be separated from it. Extraordinary risk is a legitimate title according to the more common and more probable opinion. The reason: 1. Because, if the hope of gain is capable of valuation, much more so is the danger of probable loss; 2. Because things placed in safety are valued more highly than things placed in danger; 3. It is established by a decision of the S. C. de Propaganda Fide for the Chinese missionaries, approved by Innocent X (cf. S. Alph., l. III, n. 765 [ed. Gaudé, II, 211]). Except: 1. If the borrower is poor, because then the precept of lending is urgent; 2. If the borrower secures the principal by a pledge, because in that case the risk ceases.”—Ibid., n. 822: “A contractual penalty consists in this, that the borrower binds himself to pay something above the principal if he does not repay it at the appointed time. A contractual penalty is a legitimate title for receiving, besides the principal, that which was agreed upon. The reason is that in this way provision is made for the firmness of the contract and at the same time the borrower’s negligence is forestalled. The required conditions are: 1. That the debtor’s delay be notable and culpable; 2. That the penalty be moderate and proportionate to the fault; 3. That a usurious intention be absent, that is, that the lender not desire the other party’s culpable delay.”—Funk, Zins und Wucher, pp. 119 sqq.; Ratzinger, Die Volkswirtschaft, 2nd ed., pp. 278 sqq.; Göpfert, II, 172 sqq.

n. ¶78.

Other and more practical exceptions from the law prohibiting interest were made in favor of those who purchased rentes (supra, pp. 293 sqq.) and in favor of State loans or charitable institutions (montes pietatis).⁴⁹ Thus it came about that, towards the end of the Middle Ages, the law against interest was more often violated than respected, for while Church and State still insisted that it was forbidden to take interest on loans made purely for consumption (ratione mutui), in matter of fact interest was quite generally demanded and taken on the strength of various “extrinsic titles,” which practically neutralized the prohibition.

⁴⁹ Denzinger-Bannwart, n. 739.—Funk, Zins und Wucher, pp. 62 sqq., 80 sqq.—IDEM, Geschichte des kirchl. Zinsverbotes, pp. 42 sqq.—H. Holzapfel, O. F. M., Die Anfänge der Montes Pietatis, Munich, 1903.

n. ¶79.

d) In modern times the ancient definition of usury was still adhered to, not only by Catholic theologians,⁵⁰ but also by Luther and Zwingli, who forbade their followers to take interest on loans.⁵¹

⁵⁰ H. Busembaum, Theol. Mor., l. III, tr. 5, c. 3, dub. 7: “Usury is gain arising immediately from a loan, so that the lender gains, above the principal (i. e., the capital sum), something which can be valued in money, in such a way that such gain is intended precisely by reason of the loan. This is plainly unjust and a grave sin against human and divine law, since the lender acquires gain from a thing which is no longer his, because the thing lent has already passed into the ownership of the borrower, as is evident from the definition. And the general rule is: Every act or burden or charge added to a loan beyond that which is proper and intrinsic to it renders the contract usurious.”—Cfr. St. Alphonsus, Theol. Mor., l. III, nn. 758–759 (ed. Gaudé, II, 203 sqq.); Gury, I, nn. 815–817.

⁵¹ P. Cleary, The Church and Usury, pp. 147 sqq.; Walther, Thesen über den Wucher, St. Louis, 1876.

n. ¶80.

But in spite of many synodal decrees, the capitalistic function of money led to a change in ideas and practice. Of particular importance in the process of evolution was the practice of selling rentes and the recognition of the so-called contractus trinus,⁵² i. e., a combination of three different contracts, one social and the other two insurance. In evolving this new form of contract, the Scholastics, in Funk’s opinion, did a great thing: “Though they had not succeeded in storming the fortress of the anti-interest law, they had surrounded it from two sides and laid a double breach for modern Capitalism. The capitalist through this teaching was enabled to invest his money profitably by means of a contractus trinus, which was always feasible when there was a question of lending capital for productive purposes. Or he could buy rentes, since this species of contract was now no longer hedged in with the former limitations, but the contracting parties were left free to make whatever agreement they chose. The seller could pay his indebtedness at any time, and the buyer was free to demand his capital back whenever he wished. The only precaution that had to be observed was to avoid the terms ‘loan’ and ‘interest,’ for paying interest on loans was still regarded as usury and forbidden under pain of mortal sin.”⁵³

⁵² See infra, pp. 329 sq.; Cleary, The Church and Usury, pp. 126 sqq.

⁵³ Funk, Geschichte des kirchl. Zinsverbotes, pp. 57 sqq., 60,— IDEM, Zins und Wucher, pp. 84 sqq.

n. ¶81.

Soon the civil governments revoked the laws forbidding interest-taking and confined themselves to punishing usury in the modern sense, and the Church and her theologians acknowledged the titulus legis civilis as an additional reason justifying interest. The last important papal decision on the subject is the encyclical letter of Benedict XIV, “Vix pervenit,” issued November 1, 1745. It condemns taking interest on a loan merely for the sake of the loan (omne lucrum ex mutuo ratione mutui), but recognizes the extrinsic titles enumerated above.⁵⁴

⁵⁴ The text of the encyclical in Migne, Theol. Cursus Compl., XVI, 1059; cfr. Busembaum, Theol. Mor., II, 59 sqq.; St. Alphonsus, Theol. Mor., ed. M. Haringer, Vol. III, Ratisbon 1846, pp. 356 sqq.; Denzinger-Bannwart, nn. 1609–1612; Cleary, The Church and Usury, pp. 160 sqq.

n. ¶82.

A substantial mitigation of ecclesiastical discipline was initiated by the Apostolic See in the early part of the XIXth century, when it repeatedly declared, in response to inquiries, that those who took interest at a moderate rate should not be disturbed in their peace of mind, provided they were ready to submit to such decisions as the Church might see fit to make on the subject in future.⁵⁵ At first these declarations were limited by the clause that interest might be taken to the extent permitted by the civil laws of the respective country (titulo legis civilis), but this clause, too, was soon omitted, and the permission to take interest was extended to clerics, monasteries, and ecclesiastical foundations.⁵⁶

⁵⁵ “They are not to be disturbed, provided they are prepared to abide by the mandates of the Holy See.”—Cfr. Cleary, The Church and Usury, pp. 168 sqq., 174 sqq.

⁵⁶ S. C. Offic., decree of Feb. 28, 1872 (Collectio Lacensis, VI, 690); cfr. Gury, Comp. Theol. Mor., Vol. I, n. 823 sqq.

n. ¶83.

The New Code expressly says: “If a fungible thing is given to someone in such a way that it becomes his and afterward an equal amount is restored to him in the same kind, no gain may be received by reason of the contract itself; but in the furnishing of a fungible thing it is not in itself unlawful to stipulate for lawful gain, unless it is clear that it is immoderate, or even for greater gain, if a just and proportionate title supports it,”⁵⁷—that is to say, in loaning goods to be consumed by the borrower, when return is made in the same kind, no interest may be charged by reason of the contract itself; but in loaning fungible goods, a reasonable interest may be charged if there is a just and proportionate title. “The quintessence of this canon, according to Father Augustine, O. S. B., is “that interest on loans is permitted according to the usual and legal rate, not precisely by reason of the contract, but by reason of the risk incurred and other circumstances.”⁵⁸

⁵⁷ C. I. C., can. 1543.

⁵⁸ A Commentary on the New Code of Canon Law, Vol. VI, p. 609. Fr. Augustine refers to Benedict XIV’s encyclical “Vix pervenit” and to the instructions of the S. C. of the Propaganda of 1873 (Coll. S. C. P. F., n. 1303), where, he says, “the documents referring to these subjects are given and the question is treated ex professo.”

n. ¶84.

The changed attitude of the Church on interest-taking is perfectly justified in view of the fact that money is no longer, as it was before the dawn of the industrial era, a mere means of exchange for articles of consumption and a measure of their value, but the chief form of capital. Today “no wealth-producing object of importance can be undertaken without a supply of money,” says Fr. Slater, “and money is now readily exchangeable for land, machinery, means of distribution, and other instruments for the production of wealth. Capital is one of the factors necessary for the production of wealth, and it is the chief instrument of its production. Money, then, looked upon as capital, is not a mere fungible; it is not a commodity which is consumed in the first use of it; it is the main instrument necessary for the production of wealth, and it thereby acquires a new function: it becomes virtually productive and puts on the nature of land and machinery, with which it is so readily exchangeable. Indeed now-a-days land can hardly put forth its natural productivity without the aid of capital, and machinery cannot be worked for the production of wealth without it. It follows then that now-a-days money is not merely a means of exchange, it is also an instrument of production, and just as money may be charged for the use of land, or of a house, so money may be charged for the use of money. Money now has its fair and reasonable price like any other commodity, and the sin of usury is committed not by taking a fair and reasonable interest for a loan, but by exacting excessive interest.”⁵⁹

⁵⁹ Slater, A Manual of Moral Theol., I, 515 sq.

n. ¶85.

“If,” says Father H. Pesch, S. J., by way of a demonstratio ad absurdum, “moderate interest were objectively and per se forbidden by the moral law of nature, the Church would not only have mitigated her demands in favor of a generation living under Capitalism, but she would be tolerating, positively and for all classes of human society, a most atrocious crime, namely, usury, which is admittedly opposed to the natural law and, in consequence, intrinsically and essentially evil.”⁶⁰

⁶⁰ H. Pesch, “Zinsgrund und Zinsgrenze,” in the Zeitschrift für kath. Theologie, Innsbruck, 1888, p. 37; cfr. P. Cleary, The Church and Usury, pp. 200 sqq.—The whole problem is admittedly a thorny one, and though many solutions of it have been proposed, none has found general acceptance. One of the latest writers on the subject, Fr. J. B. McLaughlin, O. S. B., thinks the dispute arose from ambiguity about the term mutuum. Benedict XIV, who, by the way, in his encyclical letter spoke with authority as teacher of the universal Church (“lest the purity of Catholic doctrine, the deposit of which was entrusted to us by Christ, be defiled by this stain of error”), used the term mutuum in its precise technical sense, in contradistinction to investments. His meaning was that “if the money passed so that they might become rich, then it is not mutuum, but of a nature altogether different from the nature of a mutuum. If it is mutuum, then it is not so that they might become rich; the purpose for which the money is to be used does not enter into a mutuum contract, which necessarily turns upon equality between what is given and what is returned, and in nothing else. . . . The root difference seems to be this. There is such a thing as enriching yourself by impoverishing your neighbors. And there is such a thing as enriching yourself by enriching your neighbors. The first is usury, the second is the investing of capital. My neighbor needs a loan; I shall have to help him; I will take the opportunity to annex some of his belongings. That is usury. I have not added to the wealth of the country; I have merely transferred some of it from his pocket to mine. On the other hand, is the fact expressed in such sayings as, ‘I could make my business a success if I had more capital’; ‘This country only needs capital to make it prosperous’; ‘If these islanders had a steamboat to take their fish to a market; if a bridge were built here, a railway there, a creamery opened, a pit sunk, the whole district would become prosperous.’ It is in this way that countries have become rich, and that their standard of living has been raised. Money employed in these ways is employed for the enriching of others; and you who so employed your money have a right to your share of the new riches. Not simply to a return of your money; but to a share in the increased wealth that is flowing in to us each year. Further; in a highly ‘developed’ country, the existing machinery of production must be kept efficient merely to maintain the present standard of living, apart from any question of improving it. Therefore there is a continuous demand for new capital, for the purposes of upkeep and replacement; and you who provide this capital are saving the country from impoverishment, and can claim a share in the wealth you are helping to produce. A ‘legal rate’ of interest, mentioned in the Canon Law, would seem to be an attempt to estimate what your fair share should be. This seems to have been in St. Thomas’s mind when he wrote of the man who takes up a business for the public utility, that the country may have what it needs for its life; and seeks a profit, not as his final purpose, but as his reward for what he has done. Similarly Benedict XIV says, ‘It cannot be doubted that in these contracts we have a manifold lawful method and system for preserving and improving human intercourse and profitable trade, to the public good.’ (“Vix pervenit,” § 3, 4; Denzinger-Bannwart, n. 1478). Whereas usury causes poverty: ‘Far be it from Christian minds to suppose that profitable commerce can flourish through usuries or similar injuries to others.’ (ibid.). The natural way to help a man in a difficulty is to give him the money he needs and let him make the best he can of it, binding him to return you the same amount later on. Whereas the natural way to help to develop the country is to lend your money for that purpose to some one who can use it for that purpose. The giving in the one case and lending in the other do not at first glance seem to be essentially tied up with the two contrasted purposes; but St. Thomas and Benedict XIV and the Codex unanimously put this distinction at the very root of the matter. In the Codex we read, ‘Si res ita alicui detur ut eius fiat,’ in contradistinction to ‘sed in praestatione rei’; and St. Thomas and Benedict XIV are equally explicit. Unfortunately, besides the two processes I have mentioned, enriching yourself by impoverishing others, and enriching yourself by enriching others, there is a third—enriching yourself by enslaving others. You can use your capital, not to enable me to develop my business, but to buy up my business and make me pay you revenue if I want to continue it. It is this process of gaining control of all the means of livelihood, and taking toll of the fruits of all men’s industry, that seems to many to be the main occupation of the capitalist at present. After the war, a cotton-mill valued by its owners at three and a half millions was bought by a syndicate for five millions. Those who work that mill in future have to pay interest on the extra million and a half. One reads of an American millionaire keeping a staff of experts to advise him on one point, the new businesses in which his yearly revenues are to be invested and which are to pay him tribute for the future. Leo XIII speaks of ‘the concentration of so many branches of trade in the hands of a few individuals; so that a small number of very rich men have been able to lay upon the teeming masses of the poor a yoke little better than that of slavery itself.’ This party holds in its grasp the whole of labor and trade; manipulates for its own benefit and its own purposes all the sources of supply.’ His remedy is ‘to induce as many as possible of the humbler classes to become owners.’ (The Pope and the People, pp. 179, 208).”

n. ¶86.

e) So much from the point of view of justice. Charity, of course, imposes additional duties. With a hard pressed debtor the creditor should not only have patience, but is bound ex caritate, in proportion to his own ability and the degree of his creditor’s necessity, to aid him by giving alms or renouncing his legitimate compensation for damage sustained or profit lost. A loan without interest made to a person in need is a true act of charity, and to demand interest in such a case would be to enrich oneself unjustly at the expense of a needy fellowman. For the distinguishing mark of usury may be owing to the economic condition of the borrower.

n. ¶87.

The lawful rate of interest, like the fair and reasonable price of other commodities, depends upon circumstances and, proximately, upon the common consent of intelligent men.⁶¹ For the farmer who earns no more than three or four per cent. on his capital, says Ratzinger, five or six per cent. on loans would be a usurious rate of interest, whereas the merchant who makes a profit of ten per cent., can pay from four to six, and the manufacturer or trader who cleans up a net gain of from thirty to forty per cent., can be charged from twelve to twenty per cent. for short term loans without usury.⁶² Of course, in de- ciding this question, the civil laws of each country have to be taken into consideration.⁶³

⁶¹ Slater, I, 515.

⁶² Ratzinger, Die Volkswirtschaft, 2nd ed., p. 261 sq.—Cfr. Seneca, De Benefic., l. VI, c. 13: “I am not so unjust that I owe him nothing, who, while being useful to me, was also useful to himself. For I do not demand that he consult my interest without regard for his own; indeed I even desire that the benefit given to me should have profited the giver more, provided that he who gave, having both of us in view, gave and divided it between himself and me. Although he himself possess the greater part of it, if only he admitted me into partnership, if he considered both of us, I am ungrateful, and not merely unjust, unless I rejoice that what profited me also profited him. It is the height of malice not to call anything a benefit unless it has affected the giver with some inconvenience.” (Opera Omnia, I, ed. I. Lipsius, Amsterdam 1672, p. 794).

⁶³ A. Vermeersch, S. J., s. v. “Usury” in the Catholic Encyclopedia, Vol. XV, pp. 235 sqq.; Maingie, La Théorie de l’Intérêt et ses Applications, Brussels, 1911; H. Parkinson, A Primer of Social Science, p. 157; P. Cleary, The Church and Usury, Dublin 1914.

Marc, Institutiones Morales

Clement Marc, C.SS.R. — 7 passages

Vol. I, Pt. II, Sect. II, Tr. VII, Diss. IV, Ch. II, Art. VII, § 3, OR ON INTEREST TO BE PERCEIVED FROM A LOAN FOR CONSUMPTION

Vol. I, TREATISE ON CONTRACTS, SECOND PART: ON CONTRACTS …, Ch. VI, ARTICLE III: ON TITLES EXCUSING FROM USURY · Vol. I, TREATISE ON CONTRACTS, SECOND PART: ON CONTRACTS …, LITTLE APPENDIX: ON MOUNTS…, PUBLIC TABLES OF BANKERS, AND SHARES GENERALLY

TITLE, as it is taken here, is a certain circumstance extrinsic to the loan for consumption, with regard to which it is licit to exact something beyond the principal. Several titles are commonly admitted by theologians, namely: 1. damage emerging; - 2. profit ceasing; - 3. peril of the principal; - 4. conventional penalty. To these today the title of civil law has acceded.

n. ¶1107.

PRINCIPLES. I. Damage emerging and profit ceasing are legitimate titles of perceiving something beyond the principal. For no one is held, at least from justice, to undergo some detriment for the favor of another, without due compensation. If damage emerging or profit ceasing is not certain, but only probable, something beyond the principal can still be exacted, according to the estimation of the peril of damage or of the hope of gain (III, 768, 770).

Hence, it is probably licit to exact something beyond the principal if the loan for consumption is made for a long time, for example for three years. For it is morally impossible that the lender, on account of prolonged waiting, should not suffer some peril, damage, or inconvenience, or at least that he should not be impeded from exercising some act of liberality or of another becoming operation.

Note. To exact interest of this kind, three things are required: a) that the loan for consumption truly be the cause of damage or of profit ceasing; b) that no more be exacted than is the gain which is hoped for from another licit contract, according to the estimation of hope and peril, and after expenses have been deducted; c) that the interest be drawn into pact from the beginning (III, 760, 769; H. Ap., X, 149 ff.).

n. ¶1108.

II. Extraordinary peril of losing the principal is a just title of exacting something beyond the principal. The reason is that to expose oneself to such peril is truly estimable by price. Whence St. Thomas says thus (opusc. 73, c. 6, fin.): "Things which are possessed outside peril are valued more than the same things existing in peril." It is confirmed from the words of the Fifth Lateran Council already cited: "Usury is the profit which one endeavors to acquire by no labor, no expense, no peril"; and from the declaration of the Sacred Congregation de Propaganda Fide, of the year 1645, where peril of the principal is numbered among the titles excusing from usury (Bull. S. Congr. de Prop. Fide, I, 124, 131).

But it is required: a) that the peril be extraordinary, and this by reason of the loan alone: for example, if the borrower is of slight fortune, a prodigal, etc.; for nothing can be exacted on account of common peril, for example of fire, to which any sublunary thing is exposed; b) that it not stand by the lender why the principal is not secured, for example through pledge or suretyship (III, 765).

n. ¶1109.

- III. Conventional penalty is similarly a just title of exacting something beyond the principal. Reason: an accessory pact is licit, by which provision is made for the firmness of the contract, and the negligence of the other party is averted. But conventional penalty consists in this, that the borrower obligates himself to paying something beyond the principal if he does not restore within the predefined time.

Now it is required: a) that the delay of the debtor be notable and culpable; - b) that the mind of gaining through the appended penalty be absent; which mind is presumed if the time is constituted at which the debtor is known not to be able to pay; c) that the penalty be moderate and proportionate to the fault. But the penalty is to be paid before the sentence of a judge, because it is a pact rather than a mere penalty (III, 766, 767).

n. ¶1110.

- On the title of civil law, or of custom.

I. EXISTENCE OF THE TITLE. Today's laws, through a formal disposition, commonly attribute to lenders the right of accepting some increment from a loan for consumption; and where such law is lacking, CUSTOM, everywhere, concedes the same faculty. Nor nevertheless is the disposition of the law everywhere the same. For in some places, a legal rate has been established, beyond which nothing can be exacted; while in other places, the stipulations of the parties are circumscribed by no limits. But a certain vulgar increment is observed almost everywhere, not otherwise than as a price for other wares. For determining this, what is transacted in the mercantile forum (bourse; stock exchange), which is published daily in public sheets, especially makes.

In France,⁰¹ the legal rate is five percent in civil matter, and this cannot be exceeded; only in commercial matter is a conventional rate admitted.

In BELGIUM the French law has been abrogated; liberty of perceiving whatever increment is conceded.

In AUSTRIA,⁰² a rate of five percent can be constituted if in the contract the increment was stipulated without determination, or if interest is owed by force of law.

In SPAIN,⁰³ a conventional rate is admitted, in defect of which nothing can be exacted. Yet by reason of culpable delay, the legal rate of six percent is in force.

In GERMANY,⁰⁴ the legal rate, in defect of a conventional one, is four percent. A conventional rate is also admitted, which, if it exceeds six percent, the borrower can free himself after six months by restoring the principal, nor can any pact take away this right.

In ITALY, besides the legal rate which, in defect of agreement, can be exacted, that is, five percent in civil matter, six percent in commercial, a conventional rate is admitted, which civil law indeed (art. 1831) leaves free to each one to define; but natural law always forbids an immoderate or usurious rate.

n. ¶1111.

II. LEGITIMACY OF THE TITLE. Whether civil law, or prevailing custom, is a just title of perceiving something beyond the principal?

The mind of theologians. On this question, theologians go into diverse ways. There are those who deny it; because civil law can never permit what divine and natural law forbids.⁰⁵ There are those who more rightly affirm it; but the patrons of this opinion by no means agree in alleging reasons.

Some explain the matter from the end of lending, which on the part of the lender can be either gratuitous or gainful.⁰⁶ - Others say that the furnishing of consumptible things, such as is had in loan for consumption, can become the matter of an onerous contract, if this is pleasing to the contracting parties; whence, when the nature of the contract has been changed, nothing now stands in the way of perceiving a price from such furnishing, that is, from the leasing of money.⁰⁷ Others opine that to the supreme legislator, by force of high ownership, or by reason of the public good, belongs the right of transferring ownership of the increment from the borrower to the lender, the more so because subjects spontaneously consent, on account of the benefit coming thence to the whole society. For the nerve of commerce, they say, is loan for consumption, under its multiple form, by which it comes in a purchase-sale made, money not having been counted out. Therefore, once the aforesaid right of the legislator is admitted, the conclusion is now in the open: namely, that by force of civil law what is conceded beyond the principal can licitly be perceived.⁰⁸

Others flee to the triple contract, which they contend is in loan for consumption, at least when the borrower enters upon it for making gain.⁰⁹ Cf. n. 1159, note.

Finally, others, with whom we agree, teach that the present-day title of civil law or custom is not diverse from the other titles commonly received from ancient times, but rests altogether on them and exhibits their index and summary, attending especially to profit ceasing and to peril of the principal. And indeed, in our times, the conditions either of the state or of the economic value of money are altogether changed, insofar as money today is valued from the hope of fruitful consumption and the trust which it wins. From this it has happened that lenders not only generally intend that they make gain for themselves in whatever licit mode, but also require compensation for this hope, or profit ceasing, through interest. Add that in the handing over of a loan, peril of the principal is by no means fictitious, as is demonstrated from daily experience. Therefore the law, or custom, furnishes only one thing: namely, it indicates the value of money, according to common estimation, determines the interest which today corresponds to this value and can licitly be perceived.

Nor does it stand in the way that in some particular case no title is present from the commonly received titles; for that defect is compensated abundantly by a greater good, that is, by the common good, which, by the observation of some universal norm, is more efficaciously promoted, the more so because through it oppressive usuries are eliminated. Whence, the law remains just, although, not otherwise than was said about prescription, the presumption on which it rests fails in a particular case.

n. ¶1112.

1. The mind of the Holy See. What the Church taught in ancient times, "that nothing can be perceived by the lender by force of the loan for consumption," this it firmly holds even now. Yet by reason of circumstances, especially from the fact that those titles which formerly were annexed to this contract only rarely are universally connected with loan for consumption, the Holy See today generally permits moderate interest to be stipulated and perceived. But in the decrees there is added the most weighty clause: "(It is permitted to perceive an increment) until the Holy See has issued a definitive decision."

Here is the sum of the Responses which have been published up to now:

a) The faithful who in good faith perceive interest according to the legal rate without another title are not to be troubled (Sacred Penitentiary, 16 Sept. 1830). - Similarly, those are not to be troubled who follow the practice introduced of accepting eight percent of annual gain from moneys given in loan (Holy Office, 18 Dec. 1872). The Bishop in individual cases, when it is a question of an increment surpassing the legal rate, is to decide the matter according to the practice of the timorous (Sacred Penitentiary, 18 Apr. 1889). But those who in bad or doubtful faith used the benefit of the law sinned, acting against conscience, but they are not held to restitution (Sacred Penitentiary, 17 Jan. 1838).

b) Priests are not to be troubled who contend that the law of the prince is a sufficient title of perceiving something beyond the principal, without another title (Sacred Penitentiary, 16 Sept. 1830). Priests conduct themselves more harshly and severely toward the faithful if they deny absolution to those who perceive an increment according to the norm of the law (Sacred Penitentiary, 11 Nov. 1831). Cf., with respect to the aforesaid Responses: Lehmkuhl, I, 1316, note; Gaude, ed. op. mor. St. Alph., II, p. 221 ff.; Schindler, II, p. 636; Bucceroni, Enchir. mor., n. 858; Crolly, II, 458.

From the things said you will resolve: 1. It is licit to perceive the legal increment, unless this is evidently unjust; for presumption stands for it. When the legal rate is lacking, one must stand by the vulgar: for the prevailing custom of upright persons has the force of law, and

common estimation is a sufficient argument of justice in the affairs of this age (Crolly, II, n. 465 ff.).

It is licit, in a loan for consumption, to exceed the legal or vulgar rate, if this is less than that which would be permitted to be perceived on account of common titles. Justice of itself does not seem to prohibit this, provided titles for the excess of increment are evidently present, and the borrower is forewarned. For such excess is not perceived except by title of compensation for the inconvenience by which the lender is burdened. But compensation of itself can be made to equality (Crolly, II, 465).

It is said: a) justice ... does not seem to prohibit this; for often charity forbids it, namely if the borrower is easily oppressed by such an increment and cast into misery; b) of itself; for by accident this can be prohibited, even by reason of justice, for example when the sentence of a judge accedes reducing the increment to the legal rate; c) provided titles are evidently present; for the danger of hallucination is very great, since greed of possessing easily invents for itself titles which are plainly lacking; - d) provided the borrower is forewarned; otherwise he does not seem to consent to the excess.

BEFORE THE FACT, therefore, it must with the greatest difficulty be indulged that someone exceed the legal or vulgar increment. AFTER THE FACT, this doctrine must be used prudently, lest restitution be imposed to which the lender is not held.

Note. On the conventional rate, D'Annibale, II, 535, writes these things: "I would say that interest of seven percent is not immoderate; above ten percent, immoderate; but what stands between these must be judged from peculiar adjuncts, but cautiously and soberly."

Anatocism is licit, that is, the perception of interest from interest itself not yet paid. This is permitted from civil law,⁰¹ but not in Germany, unless it is a question of savings banks, credit banks, and banks.⁰² And more probably it also has force for the forum of conscience, provided the new interest is liquid. For that which has not been paid obtains the aspect of principal. Yet for this it is required that either a pact concerning interest of this kind has preceded, or damage comes to the creditor from delay of payment, or it is decreed by law as a penalty against borrowers culpably in delay (Gousset, in French Civil Code, art. 1154).

Konings, Theologia Moralis

Anthony Konings, C.SS.R. — 29 passages

Vol. I, TREATISE ON CONTRACTS, SECOND PART: ON CONTRACTS …, Ch. VI, ARTICLE III: ON TITLES EXCUSING FROM USURY

Four principal ones are numbered, namely 1st emergent damage; 2nd ceasing profit; 3rd peril of principal; 4th conventional penalty.

n. ¶2.

I. On Emergent Damage.

n. ¶935.

- Emergent damage is the detriment which the one lending suffers on occasion of the loan furnished to his neighbor.

I. If by reason of the loan the lender suffers damage, it is a legitimate title of accepting something beyond the principal. The reason is that it is not equitable that you bear damage from the loan; for no one is bound to furnish a benefit with his own damage except in the necessity of a neighbor. - Thus all.¹

II. For this, however, the following conditions are required: 1° that the loan be the cause of the damage; 2° that equality between the damage and its compensation be preserved; 3° that the increase be brought into pact from the beginning.² The reason for the first and second condition is clear of itself; but the reason for the third condition is this: that, since the contract of loan for consumption by its nature is gratuitous, when an express or tacit pact is lacking, nothing beyond that which was given by loan can be exacted. But an express pact is not required if it is a question only of a legal increase or, this lacking, a common increase; for concerning this increase today there is always present a tacit pact, since from a usage common today, known and accepted by all and permitted by the Church, the legal or common increase on occasion of loan is judged to be owed. See Kenrick.³

n. ¶936.

Questions. - Query 1° Can the lender exact compensation of emergent damage if he himself voluntarily offers himself for lending?

Resp. More probably affirmatively, with St. Alphonsus,⁴ etc. The reason is that even then the borrower, when he accepts the loan, is the true cause of the emergent damage. For the lender does not offer absolutely, but conditionally, namely under the condition of compensation to be obtained.

Query 2° Is it licit for the lender from the beginning to contract concerning a certain profit to be perceived if emergent damage is only probably going to occur?

Resp. Affirmatively, provided proportion according to the probability of the damage is observed.¹

While we establish these things concerning emergent damage, we altogether prescind from the various contracts by force of which perhaps some profit from money lent to another could be legitimated, as will be clear from what is to be said. This same observation ought also to be valid for the other titles soon to be explained, of ceasing profit, etc.

n. ¶3.

II. On Ceasing Profit.

n. ¶937.

- I. Ceasing profit is that which the one lending would have gained by preserving his thing or money, if he had used it in another licit contract.

Ceasing profit is a legitimate title of exacting something beyond the principal. The reason is 1° because then truly emergent damage is had; 2° because the hope of profit is extrinsic to the loan, and at the same time estimable by price.

II. Required conditions: 1° they are the same as in the preceding title; 2° the lender ought to have had the mind of expending his money in business; for otherwise the profit would not cease.²

Query. Can you exact ceasing profit on account of the loan of money which you destined for business, if you preserve other idle money?

Resp. 1° Certainly affirmatively, if you had reserved this for the use of the family, or lest you expose your state to danger, because by reason of the loan you are not bound to neglect your own thing.³

Resp. 2° Probably affirmatively also in the other cases, provided that when you give the loan you truly have the intention of not exposing that other money to business, because the loan is the true cause why profit ceases.⁴

n. ¶4.

III. On Peril of Principal.

n. ¶938.

- Peril of principal is prudent fear lest the principal cannot be recovered. Peril of principal, provided it is true and extraordinary, according to the more common and more probable opinion is a legitimate title of some profit. The reason is both because, if abdicated hope of profit is estimable by price, a peril of probable damage will be estimable a fortiori; and because things placed in safety are valued more than things placed in peril; and also because it is established from the decision of the Sacred Congregation de Propaganda for the Chinese Missionaries approved by Innocent X in the year 1645. - See St. Alphonsus.²

Except 1° If the borrower is poor, because then the precept of loan from charity urges; 2° if the borrower guards against the peril of the principal by a pledge, etc.³

I have said: provided ... the peril is extraordinary. For the common peril, for example, fear lest all the goods of the borrower perish by fire, etc., is intrinsic to the loan, and therefore cannot be separated from it. But it would be extraordinary, for example, if a loan were given to a prodigal, or to a man of doubtful faith, or to one sailing, or if great expenses in recovering the principal were feared.

n. ¶939.

- You will object: Either the principal will perish, or not; if the former, the lender will accept nothing, namely neither the principal nor the stipulated increase; if the latter, he will in fact suffer no detriment: therefore he ought to exact nothing.

Resp. 1° Even if the principal is going to perish, it does not necessarily follow that the lender will receive absolutely nothing; for it can happen that the principal does not perish at once, and then the interest which meanwhile is paid will be held as a certain compensation for the principal.

Resp. 2° Although the lender suffers no damage in fact, nevertheless he can perceive something beyond the principal; for he truly undergoes a peril estimable by price. Certainly by equal right, one who agrees with another concerning the price for insuring a ship can indeed exact it, although in fact the ship has not perished. Therefore by parity, etc.⁴

n. ¶5.

IV. On Conventional Penalty.

n. ¶940.

- Conventional penalty consists in this, that the borrower obligates himself to paying something beyond the principal, if he does not restore it at the prefixed time.

I. Conventional penalty is a legitimate title of accepting, besides the principal, that concerning which agreement was made. The reason is that thus provision is made for the firmness of the contract, and at the same time the negligence of the borrower is guarded against.⁵

II. The required conditions are: 1° that the delay of the debtor be notable and culpable; 2° that the penalty be moderate and proportioned to the fault; 3° that the mind of profiting through the penalty be absent, for example, by burdening the debtor to return at a time at which he is foreknown to be unequal.⁵

n. ¶941.

Questions. - Query 1° What today concerning those who, caring nothing whether one of the aforesaid four titles is present or not, perceive from money given by loan the profit rated by civil law, or, this lacking, by the custom of the timorous?

Resp. From various responses of the Holy See (see p. LI sq.) it is clear that they are not to be disturbed, i.e. that this is positively permitted to them, provided it is a question of a loan not owed from charity, and they are prepared to obey the Holy See, which hitherto has put forth no definition concerning that matter.

Theologians have labored much to compose this declaration of the Holy See with natural right. 1. Some say that today scarcely not always one of the extrinsic titles thus far set forth is present, especially of ceasing profit, since scarcely anyone keeps money idle at his place. 2. Others, distinguishing between a loan of a fungible thing (consumptive loan) and a loan of a thing fruitful in any way whatever (productive loan), teach that, on occasion of the former loan, no profit can be exacted unless one of the titles set forth is present; but from the latter it can; but that money, if it is lent so that from it things destined to sustain life may be compared, must be numbered among fungible things; but among fruitful things if it is sought by loan for gain. Thus, they say, St. Alphonsus is to be understood, who, although in L. IV. n. 759 he denies that money is fruitful, nevertheless in n. 904 of the same Book by no means corrects Busembaum writing: "to some things suitable for gaining, or fruitful, as money, etc." 3. There are not lacking those who think that the Republic, on account of the common good which is promoted through the easy furnishing of money, is not lacking the power of permitting by law that the borrower pay something to the lender beyond the principal: among these, some hand down this doctrine crudely; others with the addition that borrowers willingly accept this law as profitable to themselves. 4. Finally others have recourse to the triple contract, as probably licit and similar to the pact concerning increase (n. 1015).

n. ¶942.

- Query 2° Is it licit to exceed the legal or common rate by reason of greater emergent damage or ceasing profit?

Resp. 1° Negatively with respect to the poor or others who seek a loan in necessity, and who would be oppressed by a greater increase, as is established from what has been said. Yet you are not bound to concede a loan to them if the detriment which you ought to undergo on account of ceasing profit or emergent damage is not light; because charity alone then obligates you, but charity does not obligate with grave inconvenience.

Resp. 2° If money is handed over for the utility, but not the necessity, of another, it is controverted, and a twofold opinion is brought. The 1st Opinion affirms by reason of indemnity or just compensation. Thus among others Kenrick¹ and Pages of Lyons, although in the matter of usury he has become known by a most noted reputation for severity. - The 2nd Opinion denies. The reason is that compensations of damages arising from a monetary obligation can be exacted only according to the legal rate. This opinion indeed can have place if the lender compels or obligates another to accept a loan from him; otherwise the reason does not appear why the lender ought to undergo the detriment of emergent damage for the favor of another.

n. ¶943.

- Query 3° Is it licit to subtract the increase from the beginning from money given by loan?

Resp. Of itself negatively, because the borrower, if the increase is subtracted from the beginning, pays it for a sum greater than that which he truly accepted.² "Yet," says Kenrick³ (and therefore I have said: of itself), "the custom has been received in money-tables that the increase is thus deducted from the beginning; and since it is approved by the common consent and usage of all, perhaps it can be excused on this account. The same is done whenever money is given by private persons for a promissory note."

n. ¶944.

- Query 4° Is it licit to perceive INTEREST from INTEREST itself (interest upon interest or compound interest)?

Resp. 1° Affirmatively by civil law. But it is required, that the agreement be made after interest has become due; an original agreement, though not void, would prevent the party from recovering the interest either at law or in equity.⁴

Resp. 2° It also seems it must be affirmed for the internal forum: 1° if an agreement preceded, whether explicit or implicit; because revenue, after the term has elapsed, is added to the capital sum: for it is altogether the same thing that I leave to the debtor my money, which he already has from loan, or hand over other money to him; 2° if from delay of payment damage comes to the creditor.

n. ¶945.

- Query 5° What must be said concerning institutions which are commonly called SAVINGS BANKS (savings banks)?

Resp. Such institutions are not only to be tolerated, but also to be praised, since they assist widows, male servants, maidservants, and the poor, while their modest money is accepted in a certain way by loan, and interest is repaid to them. It is confirmed from the Response of the Sacred Penitentiary, 17 Dec. 1832, in Kenrick.¹

n. ¶946.

Resolutions. - 1° Those who do not exceed the legal or common rate by reason of profit perceived from loan can be absolved, indeed are to be absolved; since it is by no means established that they are guilty of injustice, and therefore they cannot be obligated to making any restitution.

2° Although therefore anyone can defend the opposite opinion concerning profit arising from loan as speculatively more probable, nevertheless he cannot condemn the adverse opinion as contrary to Catholic doctrine, nor exact restitution, absolution being otherwise denied. Indeed, one who would urge a penitent to restitution would himself have to be forced to repair the damage of the penitent; since, from commonly received doctrine, a confessor rashly prescribing undue restitution is bound to repair damage inflicted.

3° Nor are those penitents to be obligated to restitution who accepted profit according to law with bad faith, that is, thinking that they could not perceive such profit; because from the fact that they sinned by acting against conscience, it does not follow that they were guilty of injustice.

4° Penitents from the clause added in most responses of the Sacred Congregation ought always to be prepared to submit themselves to the judgment of the Holy See; but they are not necessarily to be questioned by the confessor concerning such a disposition: 1° because this is not exacted in the aforesaid responses; 2° because the confessor ought to presume that the penitent, as a good Catholic, is placed in such a disposition, unless the contrary is established. Indeed, says Kenrick,² the Holy See has already become accustomed to omit this condition.

n. ¶947.

- 5° The profit perceived from money lent even to a poor man who does not suffer grave necessity, and who does not rashly hope that with the help of that money he will become so rich that he can easily restore the principal with a moderate increase, is not to be condemned as unjust. For the precept of lending gratuitously then does not urge, and money even then retains utility and its own price.

6° If no profit ought to be perceived from money lent to a poor man for sustenance, this happens because the lender by force of the precept of charity is bound to will that the money lent by him be applied to the sustenance alone of the poor man.

7° Profit exceeding the legal or common rate is illicit and unjust, and therefore liable to restitution. Except unless the reason of greater emergent damage or ceasing profit persuades otherwise, according to what was said and the limitation, n. 942.

n. ¶948.

- 8° Likewise, he who accepts money by loan according to the rate of law, for example at 5%, cannot for this reason exact 10% by lending the same money again to another, because the title for accepting the five superfluous is lacking; but it does not seem against civil or natural law of itself that someone accept money by loan for 3 or 4, and lend the same again for 5 in 100.

9° An increase exceeding the legal or common rate can be accepted from a borrower who, with regard to a greater profit, and with no necessity of household affairs compelling, offers it with a glad mind; for consent heals the defect of title. Thus Kenrick.¹

10° "In money-tables money is commonly given as a loan to be paid after sixty days: but if someone seeks a delay of six months, it is sometimes conceded with a greater increase accepted; but, lest the law seem to be violated, shares are sold at a greater price, which the buyer is going to pay after six months; or bank-notes of another, which are worth less, are given. This manner of acting plainly smacks of usury." Thus the same Kenrick.²

11° A title for accepting a greater increase can sometimes be taken from the uncertain condition of things, "by which it happens" that the credit of almost no one, even the richest, "is established," since by the fall of others he "can" become unequal to paying, or, with the help of laws, weave delays.... Hence "it happens" that on account of the narrowness of things money is "sought" as a loan, with an increase of two offered each month for one hundred; ... but since this is wont to happen "not by the fraud of one or another or from necessity by which" a few are pressed, "I do not dare to condemn those who, while such is the condition of things, give" money as loans, with the increase accepted which "then" is given; "although I confess that the matter is not lacking in the appearance of evil, and that the very condition of things is far removed from a right rule of trading." Thus again Kenrick.²

12° Absolutely nothing can be exacted from the poor seeking a loan from necessity, notwithstanding the title of civil law; and therefore, if any profit has been perceived, it must be restored; since civil law, which cannot destroy an obligation of natural right, is not judged to comprehend this case, and therefore neither to transfer dominion of the profit into the lender.

Vol. I, TREATISE ON CONTRACTS, SECOND PART: ON CONTRACTS …, LITTLE APPENDIX: ON MOUNTS…, PUBLIC TABLES OF BANKERS, AND SHARES GENERALLY

I. On Mounts of Piety.

n. ¶949.

- A mount of piety is called an accumulation of money or other lendable things collected for this, that the poor, a pledge having been given, may be able to receive from it by loan those things which are necessary to themselves.

I. Its conditions are these: 1° whatever is given by loan from it ought to be given for a certain time, for example for a year, but nothing for an indeterminate time; 2° it is licit to give a loan from a Mount of Piety to the poor only, unless it is so abundant that, without damage to the poor, satisfaction can also be made to others; 3° the borrower ought to give something beyond the principal on account of expenses necessary for the wages of the ministers and the administration of the house; 4° he ought also to hand over a pledge equivalent to the thing lent, which, unless he returns what was accepted at the stated time, must be sold. - Thus commonly.²

II. Mounts instituted under these conditions are licit, nor are they usurious in any way, independently of any other title whatever for profit. The reason is that, even independently of any other title, they savor of no stain of usury, since satisfaction must be made for the expenses of the Mount and to the ministers, whose labor and care is truly estimable by price.¹

n. ¶950.

- Query. Can Mounts of Piety be instituted by private persons?

Resp. More probably affirmatively with Lessius. The reason is that it matters little for the notion of usury whether the institution is public or private, provided the private person accepts no more than that which has been established by law or legitimate custom. Among us, however, private persons alone have, or imitate, not to say simulate, Mounts of Piety, and they are called Pawn-brokers. But when pledges happen to be sold on account of the loan not returned, the excess of the price will have to be returned to the owners, or, if these do not appear within the time established by law, custom, or in defect of these by agreement, it will have to be applied to pious causes.² But the sale of a pledge by our laws, outside the case of contrary agreement between the parties, is rescindible unless it is made after the debtor (pawnor) has been warned beforehand concerning the time and mode of sale, or in Louisiana after sentence of the judge.³

n. ¶2.

II. On Public Tables of Bankers (Banks).

n. ¶951.

- Public tables of bankers exist by force of a contract of society entered among several persons contributing money, which they cannot seek back, but from which they expect an uncertain annual interest, namely that part of the fruits of the money which the directors of the bank (the directors of the bank) shall have adjudged at the stated times. The part of the money contributed by individuals is called a share (action or share). Individuals can indeed alienate this, for example by sale, but the society is not therefore taken away, nor the peril of damage; for he to whom the share has been transferred occupies the place in the society of him who withdraws. - Once here, and still elsewhere, there was a power of tables to emit promissory notes (bank-notes). - The ends of tables are: 1) that the money of merchants and others can be deposited with some for the sake of security, with others also for the sake of a modest increase, to be withdrawn at will if it has been deposited for the sake of security, but only after a defined time if for the sake of increase; 2) that money can be accepted from them as a loan at legal interest; 3) that exchanges be moderated.

n. ¶952.

Resolutions. - The directors of tables sin, and those cooperating with them:^*^

1° If they continue to accept deposits after they know that they are unequal to paying; for they deceive the trust of depositors with grave damage to these.

2° If they emit promissory notes beyond the limits designated in the Charter of incorporation: for thus they seek profit from promissory notes emitted without legitimate authority, and make these become cheap.

3° If they exact excessive increase, or profit from bills of exchange (checks, drafts) greater than that which the general consent of money-changers bears.

4° It sometimes happens that promissory notes of foreign banks are brought to a public table, either in payment of debt, or in the place of a deposit. If these are offered by someone from the common people, they are either not accepted, or are held for less than they are commonly worth; but if they are offered by a friend of the chief banker, or by someone from the directors of the table, they will be accepted, and indeed at the value at which they are commonly accepted, or even at the value of gold or silver, because the banker will have abundance, by managing affairs skillfully, of receiving the whole value. In that manner of acting there is manifest injustice, unless a special cause is present for making a discrimination of this kind. Perhaps this special cause could be present in benefits conferred on the table, for example in very much money deposited by someone with it, from which he perceives no increase.

5° If they use money deposited to promote their own utilities, whether because from it they buy shares in a foreign table, or because they use it in any other mode against the laws of the table: for they abuse the trust of the creditors or partners of the table, who will that deposits be expended for increasing the common matter with their own profit, and perhaps cast away the money into danger.

n. ¶3.

III. On Shares Generally.

n. ¶953.

- Shares are distinguished as 1) of tables, concerning which it was said in n. 951; 2) of societies for constructing railways, for digging canals, for publishing newspapers, for erecting industrial factories, and for almost every kind of thing; 3) of Governments, or also of municipalities (bonds). If those shares are emitted for a licit end, they are licitly compared, and profit from them is licitly perceived. It can indeed affix a cross to someone, that very many things are done by the directors or officials of tables or societies which cannot seem just; but since the very institution of those tables and societies is joined with great utility for all, and very many reasons of honorable profit from those shares are available, partners can safely permit to the consciences and judgment of the directors and officials what is licit or not in each matter.

***** "He who helps a usurer only in counting money, writing accounts, ... can be excused from the sin" of cooperation "by the sole reason of service." L. II. 78. "But I would not excuse one exacting" unjust usuries "from the sin of cooperation by the reason of service alone." L. IV. 789.

Notes to nn. 949-953 - printed sequence 1.

2 L. IV. 765. in fine.

n. ¶4.

SECTION II.

n. ¶5.

ON ONEROUS CONTRACTS.

Namely 1° concerning sale and purchase; 2° concerning society and the triple contract; 3° concerning lease and hire; 4° concerning exchange; 5° concerning census; 6° concerning suretyship, pledge, and hypothec; 7° concerning insurance, wagering, drawing of lots or lottery, and game.

Merkelbach, Summa Theologiae Moralis

Benedict Henry Merkelbach, O.P. — 78 passages

Vol. II, Special Moral Theology: On…, Treatise: On the Cardinal …, Third Part: Concerning Com…, Sect. C, Ch. IV, Question One: On the Contr…, Article II: On Mutuum

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:

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;

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

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:

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."

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.

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.

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).

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.

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.

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.

Diss. IV, Chapter IV — On the danger of losing the principal. Certain lax opinions are refuted. The chapter *Naviganti* is set forth in its true sense, the comments of the younger authors being rejected · Diss. IV, Chapter V — On emerging loss · Diss. IV, Chapter VI — On ceasing gain, and its conditions

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.

n. 581.

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.

n. 581.

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.

n. 581.

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.

…and 38 more passages — all of them are listed on the topic page.

Concina, Compendium

Daniele Concina, O.P. — 42 passages

Diss. IV, Chapter IV — On the danger of losing the principal. Certain lax opinions are refuted. The chapter Naviganti is set forth in its true sense, the comments of the younger authors being rejected

I. QUESTION I. What is the danger of the principal, and of how many kinds is it? ANSWER. It is the uncertain outcome of losing or recovering the principal. It is twofold: of fact and of right. Now of the first, afterwards of the second. By reason of the danger of fact, not a few of the younger probabilists defend that gain can be exacted in a loan without the stain of usury. For they assert that this danger is always inherent in every loan. One for many I allege, Fr. Claude La Croix, who in Book III, part 2, On Usury, no. 854, writes these things: Sylvius, Serra, and others in Mendo, In the Balance, disputation 6, no. 58, have taught that there is ALWAYS a danger to the principal when a loan is given: and therefore that by reason of the danger something can ALWAYS be exacted. Neither Calvin, nor Salmasius, nor the rest of the patrons of usuries maintain so lax a doctrine. For they teach that when money is delivered on loan to a poor man, or to a rich man pressed by necessity, nothing can be exacted, and they defend only trading usury. Therefore they cry out that the Catholic casuists in words disapprove usury in the abstract, but in fact uphold it more laxly than the rest. If danger is always inherent in a loan, gain is always lawful. Where then in the world is usury? This error Benedict XIV routed in his Encyclical against usury, no. 3, in these words: But this is diligently to be observed, that anyone would falsely, and not without rashness, persuade himself that there are ALWAYS to be found, and everywhere at hand, together with a loan, other lawful titles, or and so forth. Read our commentary upon the aforesaid Encyclical.

II. Others of the younger authors, to cover this error with some paint, distinguish danger into ordinary and extraordinary. By reason of the second, not of the first, they defend that gain can be exacted from a loan. Extraordinary danger is, they say, when you deliver moneys on loan to borrowers of doubtful faith, to prodigals, to bankrupts, to men given to gaming, and so forth. But these are chimerical paradoxes devised for encrusting usury. What prudent man will give his moneys on loan to prodigals, bankrupts, gamesters, litigious men, and men known to be of doubtful faith? Other younger probabilists, dismissing this extraordinary danger, assert that a price can be exacted in a loan when this danger of fact is true and not feigned.

n. III.

III. My proposition is this. Gain from a loan on account of the danger of losing the principal, whether ordinary or extraordinary, is usurious. Where, I ask, in all holy Scripture, where in the Fathers, is there mention of that danger? But the danger which is with the creditor is to be distinguished from the danger which is with the debtor: which two dangers the younger authors commonly confound. Of the first danger I shall now discourse. This is inherent in every loan: for by this very fact, that a man lends for some time, there is always present a true danger of losing. Therefore if by reason of this danger gain can be exacted from a loan, there will be no gratuitous loan, no usury among Christians. The danger which is with the creditor can have its rise from this, that the affairs of the borrower are desperate, or will be, or can be. In the first case the danger is evident and certain. But no lender will deliver his money to such a borrower, unless, burning with charity, he wish to succour him with the loss of principal and gain. Similarly in the second case, namely when the future ruin of the borrower is foreseen, no prudent man will entrust his moneys to him. The whole difficulty therefore is reduced to the third case, namely to possible danger. This danger is, but is not certain, inherent in every loan. For any man, even a rich one, can be reduced to misery on account of various circumstances: for money is always safer, absolutely speaking, in the hand of the lender than of the borrower. If therefore on account of this possible danger gain be lawful, there will be no usury among men.

n. IV.

IV. Diana and Tamburini answer that it is false that the danger of losing the principal is inherent in every loan. Since, they say, a loan is without danger if the borrower deliver a pledge or a surety. Excellently! But the acute probabilists have thrust themselves into snares. By force of a pledge or of an assurance the danger can be separated from the loan. Therefore, the pledge or assurance being removed, the danger is always inherent in a loan. Therefore always from a loan without a pledge or suretyship gain can be exacted. But this doctrine is anti-evangelical, because it makes all usuries lawful.

n. V.

V. By another reason I prove the falsity of the opinion recounted. That a lender may be able to exact the said gain by reason of danger, he ought to take upon himself the danger of the principal. But the lender does not take upon himself the danger of losing the principal. Therefore the gain perceived is usurious. That the lender does not take upon himself that danger is a truth of fact. For if the principal delivered on loan be snatched away by theft, or perish by shipwreck or in trade, the borrower, if he be solvent, ought to restore the principal. The danger therefore is with the debtor, not with the creditor: therefore the debtor is unjustly burdened while he is obliged to pay a price for a danger to which not the creditor but the debtor himself is liable. They insist: It can happen that the debtor be not solvent and become bankrupt; and in this case the creditor loses the principal: therefore this danger is always with the creditor. The evasion is vain. For this danger is only possible and most remote. For all lenders, before they entrust their moneys to borrowers, severely weigh their state, their substance, and all the rest: and while they foresee a probable danger of losing the principal, they abstain from the loan. Therefore that danger is most remote, and inherent in any loan whatsoever. If it were a just title of demanding a price, there would be no usury in the world. It is confirmed. A thief commits a theft, and let the thief restore in penitence: he is compelled to pay nothing for the danger, as all confess: and yet the danger of money plundered is greater than of money lent. The thief is not bound, they say, to pay the price of the danger, because no convention preceded between the thief and the lord. An inept evasion. For now the discourse is whether that danger be a just title of a price to be paid. What do you answer? Do you deny it? It is therefore usury to exact a price for it. Do you affirm it? Therefore the thief is bound to pay by a stronger right than the borrower. A convention supposes a title, without which the convention is unjust. When a true title is present, even without a convention the price ought to be paid. Because emerging loss is a true title, a thief is bound to compensate this loss, even if no convention preceded. Besides, imagine someone compelled by force and fraud to lend. What ought the violent borrower to restore? The principal, and all the losses which the compelled lender has suffered, although no agreement preceded concerning these losses to be made good. What ought he to pay for the danger of losing the principal? Nothing at all, as all confess. Therefore that danger is not a title of a price to be paid.

n. VI.

VI. QUESTION II. What is to be said of the title which de Lugo and Tamburini devised? ANSWER. Cardinal de Lugo, disputation 25, section 6, no. 81, and after him Tamburini, Book VIII, tract 3, chapter 8, § 4, no. 1, devised a most witty title of exacting something above the principal. And this is the trouble, disturbance of mind, and anguish of soul which the lender suffers in putting away and counting out his money, if the lender be timorous. Behold the words of de Lugo: “If therefore you could exact beyond the principal when the future loan would be to you a cause of headache, you will be able also to exact when the future loan would be to you a cause of grief and internal fear on account of the danger of losing the principal: because that grief and fear, as contradistinguished from the principal itself, is something which can be brought into an agreement for a price.” More clearly in the same place, no. 83, de Lugo confirms this doctrine of his: “Because if I, because I am lame for example, must undergo a peculiar trouble in bringing the money from my house to lend to you, which trouble others would not undergo, I could well” (N.B.) “exact a peculiar price for that trouble to be undergone by me. If therefore likewise, because I am timorous and fearful, I cannot lend to you without great anguish and fear of losing the principal, it seems that I may exact something for this trouble and burden, without which I cannot lend to you. This nevertheless I leave to the judgment of others.”

n. VII.

VII. This doctrine being admitted, horrid absurdities follow. All lame men will be free from usury, because they will be able to demand a price from a loan on account of the greater labour in bringing the money from the chest. Those who labour under dullness of the eyes must use spectacles in counting the coins, and on account of this trouble can demand a price. What of women, what of nobles fearful and timorous, who the more avaricious they are, the more fearful they are? And shall the price be increased for greater fear and anguish? The doctrine alleged therefore is false, and altogether to be repudiated.

n. VIII.

On the celebrated chapter Naviganti

VIII. At the outset a twofold danger is distinct. The one of fact, which is with the debtor, inasmuch as the debtor out of all his goods is bound in any event, even of the principal lost, to restore just as much. The other of right, which the creditor takes upon himself, entering upon a new contract by which he assures the principal, so that if the principal by any chance without fraud or fault of the borrower perish, it perishes to the creditor himself. This danger of right is extrinsic to the loan itself, because it is undertaken by the creditor through a new contract of assurance. And yet this danger also is rejected by Gregory IX in the Decretal directed to St. Raymond O.P. in the year 1236, in which these things are had: One lending a quantity of money to a man sailing or going to the fairs, on the ground that he takes the danger upon himself, being about to receive something beyond the principal, is to be reckoned a usurer. If not even then, when the lender takes the danger upon himself, is it lawful to exact a price, how much less will it be lawful when the whole danger is with the borrower?

n. IX.

IX. Many of the younger authors play the critic in this cause. They say that the pontifical text is corrupt, in which the particle Non is wanting, omitted by the carelessness of copyists. But that evasion is inept, vain, and fictitious, as I have made plain at length in dissertation 1, chapter 5, § 2, On the Triple Contract of Usury. Not only do all the codices lack the particle Non, but — which is decisive — St. Raymond, to whom, as I have said, the Decretal was directed, reports the pontifical text without the aforesaid particle. They insist. In the same Decretal a second case is added, whose beginning is He also who gives, and so forth, ought not on this account to be reputed a usurer. What grammarian, says a certain most recent writer, does not observe that that particle also signifies uniformity with what was said before? But theologians read in the praised Decretal two contracts diverse in species: of loan in the first case; of selling and buying in the second. What uniformity, I ask, is there between these two contracts? To the authority of St. Raymond is added the authority of Lancellotti, who in Book IV of the Institutes, title 7, § 10, On Usuries, sets forth the case of the Decretal in these words: But it is another matter of right, if one lend a certain quantity of money to a man sailing or going to the fairs, and, on the ground that the lender takes the danger upon himself, agrees to receive something beyond the principal: for here he is to be reputed a usurer. What more? The Gloss itself sets forth the case in this manner also: Someone lent a certain quantity of money to a man sailing or going to the fairs, and, on the ground that the lender takes upon himself the danger of the principal, receives something beyond the principal: it is asked whether he be a usurer? The Pontiff answers that he is.

n. X.

X. This opinion St. Thomas defends, or the author of opusculum 73, chapter 6, saying: If anyone should commit money on loan to one sailing, on account of the hope of some gain, although he should also have received upon himself the danger of the principal, nevertheless he is judged a usurer, even if he lose the whole. St. Raymond in his Summa, title On Usuries, § 7, where he sets forth the Decretal Naviganti given to himself, writes thus: Such men always make such a loan on account of the hope of monetary gain, which is not lawful. These authors were contemporaries of Gregory IX. And if they condemn gain on account of a danger of right, which is otherwise appraisable at a price, as is plain in a third assurer, how much more do they condemn gain on account of a mere danger of fact, inherent in every loan?

n. XI.

XI. Graver theologians also subscribe to St. Thomas and St. Raymond: Navarrus, Soto, Báñez, Gutiérrez, Rebello, Toletus, Tapia, Conrad, López, Genet, Ballerini, Gennaro, the theologians of Louvain and of Paris. The canonists also commonly accede. Honoratus Leotardus, On Usuries, question 18, observes that formerly maritime interest was permitted by civil law on account of the danger undertaken. But now, he says, this maritime usury is altogether condemned, and the civil laws permitting maritime interest have been abrogated by the constitution of Gregory IX, chapter Naviganti, On Usuries. But after he has demonstrated that gain on account of a danger of right undertaken by the creditor is usurious, at no. 13 he disapproves by a stronger right, as usurious, gain perceived on account of the danger of fact to which the creditor exposes himself: although, he says, Leonard Lessius and very many theologians indeed hold that this is lawful … but our opinion is the safer, and received among jurists. Wherefore Fr. Nicholas Gennaro exclaims, part 1, page 56, in these words: So think the Doctors. O the confusion of theologians! And, O good God, into what opinions do so many heads go off! To what end? To justify maritime interest. They sweat that they may favour human cupidity and thirsty avarice.

n. XII.

XII. And what shows me more clearly that that danger is a pure and mere mask devised for covering interest is this: that those younger authors never prescribe to those lenders that they abstain from the loan, when they refuse to deliver it without gain. Wherefore I thus reduce them to a stand. Either they repute that danger true, or false. If false, let the question cease. If true, let them enter upon a contract of partnership, in which according to all there is present a true danger and a true title of gaining. Do they refuse? Therefore they do not want the true danger. And yet this is a certain and safe title of gaining, approved by the consent of all the Doctors. Why do they not want this safe gain? Let them give the reason. Assuredly they will give no other, save that they want the gain and do not want the danger, unless it be fictitious. But if they do not want the dangers of a partnership, let them abstain from the loan. Abstain from the loan? The evangelical law prescribes the loan. True; but a gratuitous loan, and it forbids a usurious loan. The evangelical loan is a fruit of charity without any hope of gain. This gratuitous loan you refuse, unless you obtain usurious gain. With Christ's Gospel therefore I declare to you, either that you deliver a gratuitous loan, if you are able, and if your brother is in need; or, if you cannot, or if the other is not in need, abstain from giving a loan. If at last you intend to make your money fruitful, enter upon lawful contracts either of partnership or of another trade.

n. XIII.

XIII. The objections of our adversaries are almost these. They object the decree of the Sacred Congregation of Propaganda Fide given in the year 1645 to the Chinese missionaries, in which these things are had: “In the aforesaid kingdom it is established by law that in a loan thirty per hundred be accepted without regard to ceasing gain or emerging loss: it is asked whether it be lawful for the Chinese, for the loan of their moneys, although there intervene no ceasing gain or emerging loss, to accept the aforesaid quantity of thirty per hundred fixed by the law of the kingdom: the cause of doubting is, because in recovering the money there is some danger, namely that he who receives the loan may flee, or may be tardy in paying, or that it may be necessary to sue before a judge, or on account of other things of this kind.” The resolution of the Sacred Congregation to that query is of the following tenor: “They judged that by reason of the loan immediately and precisely nothing is to be accepted beyond the principal; but if they accept by reason of a danger probably imminent, as in the case, that they are not to be disquieted, provided account be had of the quality of the danger and of the probability of the same, and proportion being preserved between the danger and that which is accepted.”

n. XIV.

XIV. To Henry of St. Ignatius alleging this decree in a public disputation it was answered: first, as he himself narrates, Book I, part 1, no. 377, that it is not sufficiently established; second, that the resolution is not approving, but tolerating. Against the first answer he produces Fr. Thomas Hurtado C.M., who produces an authentic copy. But that author obtrudes other pontifical decrees as authentic which are altogether apocryphal. I say therefore that the praised response is either of no credit, or merely permissive and tolerating. Is not this clause found at the end of the boasted decree? Until His Holiness or the Apostolic See shall have ordained otherwise. Further, the Apostolic See in the year 1679, thirty-four years after the response was given, condemned the opinion of the theologians saying: Since money counted down is more precious, and so forth. What of this, that the Apostolic See had for many ages already defined in the chapter Naviganti that he commits usury who, having undertaken the danger of the principal, should receive anything from a loan? This is a pontifical constitution inserted into the code of the sacred Canons, and it suffers no exception.

n. XV.

XV. Finally, the very law of the Chinese kingdom proposed to the Sacred Congregation is most iniquitous. For by that law the quantity of thirty in the hundred is fixed, to be paid yearly on account of the flight of debtors and other dangers. But such a law lays open its own injustice. The Romans reputed the centesima a biting usury. But the Chinese law imposes not twelve but thirty to be paid. Who does not perceive that law to be most iniquitous and most full of savagery?

n. XVI.

XVI. They object, secondly: St. Thomas, II-II, q. 77, art. 4, reply 2, teaches that the price can be increased on account of the danger to which a merchant exposes himself in transferring a thing from place to place. Therefore on account of the danger of the principal. A most inept argumentation. Hear the whole text of the Angelic. Not everyone who sells a thing more dearly than he bought it trades, but only he who buys for this, that he may sell more dearly. But if he bought a thing not that he might sell it but that he might keep it, and afterwards on account of some cause wishes to sell it, it is not trade, although he sell it more dearly. For he can lawfully do this, either because he has in some way improved the thing, or because the price of the thing has changed according to the diversity of place or of time, or on account of the danger to which he exposes himself in transferring the thing from place to place, or in causing it to be carried. And according to this neither the buying nor the selling is unjust.

n. XVII.

XVII. What of it? In a contract of selling and buying the price can be increased, as the Angelic teaches: therefore also in a loan? Is borrowed money therefore a ware subject to a greater and lesser price, like other wares, on account of danger? Is there therefore no usury in the world? A merchant in transferring wares from place to place sustains many labours and dangers. If the wares be filched by robbers or by pirates, they perish to the merchant himself. On the contrary, if borrowed money, or wares bought with that same money, perish, they perish not to the lender but to the borrower. Therefore there is no parity.

n. XVIII.

XVIII. They object, thirdly: The danger of the principal is extrinsic to the loan, joined to it by accident, because it arises from the qualities of the borrower — a prodigal, a gamester, a deceiver, and the like. But this danger is appraisable at a price, since a third party can receive a price for assuring it. ANSWER. When Christ commanded, Lend, hoping for nothing thereby, was he ignorant that men are deceivers, prodigals, gamesters? This little distinction being admitted, there is no usury in the world. I yield. Who, unless a fool, delivers his moneys on loan to prodigals, bankrupts, gamesters? What law commands that a loan be delivered to these men? If dangers are here imminent, why do they not abstain from the loan? Give an answer. A loan is commanded that succour may be brought to needy brethren, not that the vices and crimes of prodigals, bankrupts, and gamesters may be fostered. They want the loan, because they desire to gain from the loan. For prudent men would never expose a hundred to a true danger for the hope of gaining five. But because they know that the dangers are commonly chimerical, and they want a certain gain, therefore they lend and refuse to enter upon other contracts liable to true dangers.

n. XIX.

XIX. They object, fourthly: The exaction of gain is lawful on account of the danger of emerging loss: therefore also on account of the danger of losing the principal. ANSWER. Each proposition in the sense produced by our adversaries is false. Contracting parties can indeed agree concerning the paying of a loss which threatens the lender, if it in fact come about. But if the loss does not in truth emerge, nothing can be accepted, as I shall make plain below. And the consequence drawn hence is vain. The distinction of intrinsic and extrinsic danger is commonly chimerical. All men can be deceivers. Hence an intrinsic danger arises, as our adversaries confess, by force of which no one can gain. But they call the danger extrinsic when money is lent to borrowers known to be prodigals, gamesters, and bankrupts. Let all lenders be questioned: if they will speak candidly, scarcely one in a hundred will be found who delivers a loan to the men described. Every lender will say that he uses all diligence that he may entrust his money to the safer and more faithful borrowers. Therefore the distinction of intrinsic and extrinsic danger is vain and chimerical. That lenders sometimes entrust their money to such borrowers proceeds from an impotent cupidity of gain and a burning avarice. Similarly, that honest and trusty borrowers sometimes become bankrupt is by accident. What is by accident and rarely happens cannot establish a rule concerning extrinsic and intrinsic danger. A loan is to be given to the poor and needy according to the evangelical law. In respect of them the danger is greater than if it be delivered to the rich. Therefore more gain could be exacted from the poor by reason of the greater danger than from the rich. This is the necessary consequence from the doctrine of the younger authors. But this anti-evangelical doctrine even the heretics themselves detest — Calvin, Salmasius, Heineccius, and other patrons of usuries.

n. XX.

XX. QUESTION III. Is it lawful to exact something above the principal by reason of the labour in counting out the money? ANSWER. Fr. Thomas Tamburini, Book IX, tract 1, chapter 5, § 1, no. 1, teaches that it is lawful to exact something for the preparing of moneys in a great quantity, for the measuring of wheat, and so forth; and he cites for this opinion Molina, Medina, and Navarrus. This opinion is false: for the counting of money is inherent in the loan.

n. XXI.

XXI. QUESTION IV. Is it lawful to exact something on account of the obligation of lending, or of not demanding back the loan within a predetermined time? ANSWER. The affirmative opinion Alexander VII condemned, no. 42: It is lawful for a lender to exact something above the principal, if he bind himself not to demand back the principal until a certain time. Fr. Tamburini, Book VIII On the Decalogue, chapter 8, § 5, no. 18, in this manner: I have already said that under this title of a promise not to demand back money lent, five per hundred may be exacted for any year in this money-getting age of ours. So Caramuel. Our money-getting age? In this money-getting age lived Alexander VII, who in the year 1666 condemned the aforesaid doctrine. But Tamburini died in 1675. And therefore I report the lax and proscribed opinions of the casuists, that readers may beware. Let them recall that proscribed opinions are principles whence many other erroneous consequences flow.

Diss. IV, Chapter V — On emerging loss

I. QUESTION I. What is emerging loss? ANSWER. It is that detriment which a lender suffers by cause of the loan alone. You have moneys ready for the repairing of ruinous buildings, or for the tilling of fields, or for the buying of wheat for the whole year. Kindled with charity, you deliver these moneys on loan to a needy brother. If hence your house fall down, or your fields remain untilled, the loss which you sustain is by right to be compensated. This is emerging loss, which can be brought into an agreement. Who is there who would wish to undergo such a loss in order to succour a needy brother by a loan? They are very rare; and yet nothing is more frequent in the mouths of some than emerging loss.

II. Wherefore many conditions are necessary for a true title of emerging loss. First, that the loss be true, certain, and real. Second, that it emerge by reason of the loan alone. Third, that the loan be the cause of such a loss per se and not by accident. Fourth, that this loss be manifested to the borrower. Fifth, that the loss brought into an agreement be not compensated before it emerges. Sixth, that equality be preserved between the loss and the compensation.

n. III.

III. Hence evidently false is the opinion teaching that it is not usury if from a loan of 100 gold pieces you are certainly about to receive a detriment of ten gold pieces, even if, the borrower not being warned of this loss, you bargain that 110 be rendered you. This opinion is against the fourth condition indicated. It is manifest injustice that a borrower should undergo a burden and pay it without his own consent.

n. IV.

IV. QUESTION II. Is the danger of a loss about to emerge a true title by force of which a convention can be made of paying something above the principal? ANSWER. It has already been said above that danger is an uncertain outcome of a thing. Concerning the danger of losing the principal enough also has been said: concerning the danger of a loss which can come about by cause of the principal lent, it is now to be spoken. Some of the younger authors affirm it, whose opinion is to me false. Since the title which renders an accession above the principal lawful is a loss true, real, and certainly future, and which is not compensated save after the event. For if the loss does not come about, recompense can have no place. If nevertheless a lender should probably foresee a determinate future loss, he could bargain with the borrower concerning a future compensation in the case in which that loss should come about by cause of the loan. I said determinate, that I might exclude indeterminate losses coming from elsewhere. The lender therefore ought clearly to declare such a loss in the individual, which he fears will be future, so that, the condition of the event being posited, the borrower may be bound to compensate it.

n. V.

V. Hence gather that it is never lawful to exact anything beyond the principal on account of a merely probable, or even most probable, danger of a loss about to emerge, unless it in fact emerge. Some of the probabilists affirm this, nay even some who are not probabilists. But this opinion is evidently false, and opens the way to all usuries.

n. VI.

VI. QUESTION III. Whether it be lawful at the beginning of a contract to make an agreement of a conventional penalty if the debtor be in delay? ANSWER. A debtor is in delay, and is called tardy, when at the appointed time he does not pay the debt, and when he can pay and omits it. Delay is twofold: one from the thing, which of itself warns the debtor to pay; the other from the person, when the debtor, warned by the creditor to pay, neglects payment. The aforesaid agreement of a conventional penalty, confirmed by mutual consent, many of the younger authors defend: Henry of St. Ignatius and Fr. Billuart call this opinion common.

n. VII.

VII. The more probable opinion to me is this. A conventional penalty, unless there intervene that which is the creditor's interest, that is, unless it be imposed for the quantity of the emerging loss, is usurious. I prove it. The agreement of a conventional penalty concerning an accession above the principal in a loan is therefore called lawful, because by this agreement the lender keeps himself indemnified. But that agreement is inept for keeping the lender indemnified, unless it be imposed for the quantity of the emerging loss. Therefore it is usurious. The first proposition is plain. A lender adds an agreement of a penalty to be paid either because he fears that the principal is in danger after the appointed time, or because he foresees evils threatening himself if at the appointed time the principal be not rendered, or finally because he judges that this agreement is a spur for urging the debtor to pay. The first reason is a manifest cloak of usury. For he who fears that the principal — say a hundred — will not be restored, ought the more to fear that 105 will not be rendered. But to exact gain on account of the danger of losing the principal is usury, as I have shown above. Therefore in the case of which we treat, the conventional penalty is a cloak of usury. If our adversaries allege the second, they agree with us. But they expressly assert that gain imposed by an agreement of conventional penalty is lawful, the titles of emerging loss and ceasing gain being excluded. For that a penalty can here be imposed for the compensating of emerging loss all confess. The third consideration is empty. For if a lender should foresee that the borrower would be faithless and contumacious in deferring the restitution of the principal, he would never entrust his money to him, or would demand a pledge or a surety.

n. VIII.

VIII. Lawful therefore is an agreement of conventional penalty when there truly occurs that which is the lender's interest, namely emerging loss and ceasing gain, to be explained below. Indeed many laws approve a conventional penalty, no regard being had to that which is the creditor's interest; but, as Honoratus Leotardus the celebrated jurisconsult observes, On Usuries, question 81, these laws are abrogated, just as those which granted moderate usuries. I explain the matter more clearly. I deliver to you on loan a hundred to be paid within a year: the year having elapsed, a convention is made between me and you that in penalty of delay, if you do not restore, you must pay ten. If I am truly about to suffer a loss of ten in the case of the payment deferred not from impotence but from malice, then I shall justly receive ten, supposing that I have suffered such a loss; if I have suffered a lesser loss, I ought to receive less; if no loss come to me, I cannot exact anything, because I should receive something from the loan, which is usury; if finally I have suffered a greater loss, I can exact more, that there may be equality between the loss and the compensation. A conventional penalty is not appraisable at a price: it is imposed for terror and appearance. Therefore when the creditor suffers no evil, he can exact nothing by force of the conventional penalty. If you desire more concerning this penalty, read Vol. VII, Book 3, dissertation 3, chapter 14, § 1 and § 4.

Diss. IV, Chapter VI — On ceasing gain, and its conditions

I. There is among all the Fathers a deep silence concerning this title, as Dominic Soto also observes, Book 6, question 1, article 1. St. Thomas expressly disapproves this title, whatever some may cavil. Durandus, Scotus, Innocent upon the chapter Naviganti, the most learned Fr. Ignatius de Camargo, and others rightly reject this title. The first who maintained the title of ceasing gain, with fear and trembling, was Conrad Summenhart, hedged about with many conditions. After him Sylvester, Cajetan, and Adrian, who confess that this doctrine is a novelty.

II. QUESTION I. What does St. Thomas hold concerning this ceasing gain? ANSWER. He openly denies that anything can be exacted above the principal by reason of ceasing gain, absolutely speaking. For thus, question 78, article 2, reply 1: It must be said that he who gives a loan can without sin bring into an agreement with him who receives the loan a recompense of the loss by which is withdrawn from him something which he ought to have. For this is not to sell the use of money, but to avoid loss. And it can be that he who receives the loan avoids a greater loss than he who gives incurs. Whence he who receives the loan makes good another's loss with his own advantage. But a recompense of the loss which is considered in this, that he does not gain from the money, he cannot bring into an agreement: because he ought not to sell that which he does not yet have, and which can be hindered in many ways from being had.

n. III.

III. Sylvius, after other Thomists, objects from 2-2, question 62, article 4, this text of St. Thomas: It must be said that whosoever damnifies another seems to take from him that in which he damnifies him. For loss is so called from this, that a man has less than he ought to have … and therefore a man is bound to restitution in that in which he damnified another. But a man is damnified in two ways. In one way, because there is taken from him that which he had in act: such a loss is always to be restored according to an equal recompense: as if a man damnify another by pulling down his house, he is bound to as much as the house is worth. In another way, if a man damnify another by hindering him from obtaining that which he was in the way of having: such a loss need not be recompensed on an equal footing: because to have something virtually is less than to have it in act; but he who is in the way of obtaining something has it only according to virtue or power, and therefore, if it be made that he should not have it, restitution is made in this in a lesser degree … which is not of necessity of restitution. He is nevertheless bound to make some compensation according to the condition of persons and of affairs.

n. IV.

IV. It is familiar to all those who strive to entangle and obscure the doctrine of the saints to catch at something said altogether outside the controversy, that they may cast a mist over the clearest testimonies. In the place cited by me St. Thomas expressly and of set purpose speaks of ceasing gain; and so openly and plainly does he deny that anything can be perceived above the principal from it, that they can bring forward nothing solid against it. Therefore for another question they appeal to a cause altogether foreign. But so far is it from favouring them, that there also he overthrows their doctrine. For it is manifest that there the holy Doctor speaks of a true loss which a creditor unwillingly suffers, inflicted by a tardy debtor. And this is the more evidently established from the second argument which he there objects to himself, saying: He who holds a creditor's money beyond the fixed time seems to damnify him in this, that he hinders him from gaining what he could have gained; and yet he himself takes nothing from him. Therefore it seems that a man is not bound to restore what he did not take away. To which objection he thus answers: He who has money does not yet have gain in act, but only in virtue; and it can be hindered in many ways. A tardy debtor therefore, of whom he here certainly speaks, is not bound to compensate the whole loss which the creditor suffers from the want of money, because the gain of money can be hindered in many ways. A lender is to be distinguished, says the Angelic, who spontaneously deprives himself of the gain of his money, from a tardy debtor who does violence to the lender when at the predetermined time he does not restore the money. In the first case the title of ceasing gain cannot be alleged, since the lender spontaneously and freely renounces this title when he freely gives a loan. Otherwise let him abstain from the loan, if he wishes to gain from his money. In the second case gain is lawful, because the lender unwillingly sustains the violence done him by the debtor. He ought nevertheless, says the Angelic, not to recompense the whole loss, because the gain of money can be hindered in many ways. That this is the mind of St. Thomas Cajetan himself confesses, who in the pursuing of the Angelic's mind far excels Sylvius and the other interpreters. There is added an extrinsic reason. In the time of St. Thomas no one of the theologians maintained the title of ceasing gain. Further, St. Thomas never departed from the common doctrine of the theologians of his time. Futile and inept is what is wont to be obtruded, that the Angelic contradicts himself unless it be admitted that a voluntary lender can exact gain by reason of ceasing gain. For in the place alleged by us he speaks of a voluntary lender, but in the place objected by our adversaries he speaks of a tardy debtor. Where then is even a shadow of contradiction? And moreover sound doctrine stands.

n. V.

V. QUESTION II. Whether a voluntary lender can exact something by reason of ceasing gain? ANSWER. Those very theologians who defend the title of ceasing gain demand, among other things, two conditions: first, that the money to be delivered on loan be truly and in fact destined to trade; second, that the lender should prefer to gain from trade rather than from a loan. Therefore they must necessarily confess that a voluntary lender cannot bargain concerning ceasing gain. Wherefore false is the doctrine of Bonacina, who On Contracts, disputation 3, question 3, point 4, no. 11, says: And this holds good even if the lender offer himself to lend, as many of the Doctors say against Conrad, question 30, in Emmanuel Sa.

n. VI.

VI. QUESTION III. What conditions do the defenders of ceasing gain assign, that it may be brought into an agreement? ANSWER. Conrad Summenhart, who according to Soto was the first who reputed ceasing gain a title sufficient for exacting something above the principal, requires eight conditions. First, that this gain truly and not feignedly cease. Second, the accession exacted above the principal ought not to exceed that gain. Third, it is necessary that the lender prefer gain from trade to gain from the loan. Fourth, the gain ought to cease precisely by reason of the loan. Fifth, when the loan falls under the precept of charity, no gain can be exacted, but only when it is of mere counsel. Sixth, scandal both active and passive ought to be absent. Seventh, the exaction of gain cannot be made before, but only after the time at which the lender would have obtained the gain. Eighth, the whole gain cannot be exacted, but is to be diminished according to the expenses, dangers, labours, and other things which were necessary for the obtaining of the gain.

n. VII.

VII. Later authors have reduced these conditions to four. First, that the loan be truly an impediment to the ceasing gain. Second, that the lender have no other idle money. Third, that the gain from trade be probably future. Fourth, that the lender warn the borrower before the contract, and bargain with him.

n. VIII.

VIII. As soon as some opinion favouring cupidity has been brought in, it becomes laxer with the passage of time. Summenhart requires that the gain truly and in fact cease; the most recent of the younger authors require only that the gain be probably future. But that gain ought to be morally certainly future at least in general, and doubtful only as to the greater or lesser quantity. For that which is only probably future is at the same time probably not future, that is, it is indifferent to being future and not being future. But this indifference cannot be sold.

n. IX.

IX. With a full pen in Vol. VII, Book 3, dissertation 3, chapter 15, I explained these conditions in several sections, and combated the lax opinions of many, especially of Bonacina, Lessius, Tamburini, and others. To that place, that I be not long, I refer the reader. Here in few words I will touch upon my opinion, which I explained there from the foundations.

Section, the Only One — The author's counsel

I. First consideration. I entreat you, reader, that, casuistical comments being for a little while dismissed, you recall to mind the evangelical law. Meditate seriously, I pray, upon that: It is easier for a camel, and so forth. And again that other: Woe to you that are rich, and so forth. And again that: They that will become rich fall into temptation, and into the snare of the devil, and so forth. According to this law, not according to the opinings of the casuists, will you be judged. Of emerging loss the ancient Fathers speak; concerning ceasing gain there is among them a profound silence. Avaricious men today have found nothing for the disguising of usuries which was not opposed by the ancient avaricious to Basil, Gregory, Ambrose, Jerome, and Augustine. They saw the necessity of commerce and of trade; nor did they boil less than the younger theologians with a desire for the eternal salvation of men. But they did not therefore soften the severity of the evangelical law, nor did they approve the title of ceasing gain; but the more acute men were in devising cloaks and masks for usury, the more vehemently did they themselves inveigh against interest. To what end would they have condemned usuries so ardently, if by one word or another, a colour being added, usuries would fall to nothing?

Tr. II, Disputation V: On Buying a…, Question VIII: Whether the contracts called stocolia and barocolia in Italian, and mohatra in Spanish, are lawful · Tr. II, Disputation V: On Buying a…, Question XIII: Whether a sale with a pact of repurchase is lawful · Tr. II, Disputation VI: On the Loa…, Question I: What a loan and usury are, and why usury is a sin

II. Second consideration. If the opinions which the younger moralists have devised were established — of which I have indicated some, and recounted very many in Vol. VII, in the place cited — almost all usury would go into exile from the world. Only those usurers would stand who were ignorant of such opinions. Calvin, Molinaeus, Salmasius, Budé, and the rest of the younger heretics, departing in this from Luther himself, maintain moderate trading usuries exacted from the rich, but not from the poor and needy. Certain moralists, otherwise honest and learned Catholics, who condemn all usuries, hold as heretics those who defend them, whether biting or moderate or small; and yet they have devised so many titles for making honourable the gain from a loan, that as regards practice they have taken almost all interest out of the midst; and to the Lutherans themselves the doctrine of certain of our moralists concerning usury to be exacted from anyone by reason of some title, feigned by themselves, seems laxer than their own opinion concerning moderate trading usury to be demanded from the rich alone. Wherefore Franciscus Budaeus the Lutheran in his Institutions of Moral Theology, part 1, chapter 5, section 3, § 17, barking against the Catholics, thus rages: But here the moralists of the papists basely traduce themselves, who, while they keenly contend that all usuries are unlawful, so that it be a heresy if interest be said to be able to lack sin, nevertheless by most witty comments and by other things, names being imposed, in the highest degree grant room to the most iniquitous usury. The Lutheran does an injury when he traduces the papist moralists indiscriminately, because some of them went astray and, deceived by a pious intention, disguised usuries. Their opinions the Catholic Church has for the most part condemned; others she tolerates but does not approve. Nay, the graver theologians of the Catholic Church refute and overthrow their lax opinions. But these things being dismissed, I come to the point.

…and 2 more passages — all of them are listed on the topic page.

Bontempi, Palladium Theologicum V

Gaudentius Bontempi of Brescia, O.F.M. Cap. — 149 passages

Tr. II, Disputation V: On Buying a…, Question VIII: Whether the contracts called stocolia and barocolia in Italian, and mohatra in Spanish, are lawful

This contract is of such a kind: Titius asks 100 gold pieces on loan from the merchant Claudius, who does not wish to give money, but exhibits goods to the value of the summit price of 100 gold pieces, that he may sell them for money counted out and satisfy his need; but the buyer Titius immediately offers those very goods to the merchant Claudius himself, who buys the same goods at the middle, or lowest price.

HERE at first sight flabby usury is evident. Therefore by the laws of Castile and Portugal they are interdicted under grave penalties; accordingly they assert it to be usury: Rebell. 2. p. l. 9. quaest. 7. num. 7. Medina l. 1. Summae, cap. 14. §. 23. D. Antonin. p. 3. tit. 8. cap. 4. §. 4.

n. 3.

OTHERS, however, with conditions appended attempt to redeem it from usury. The first is, that one stand within the just price. Another, that all scandal be removed, by explaining that in such a contract there is no iniquity, since it always stands within the limits of the just price. So Nauar. cap. 23. num. 91. Petrus e Navar. l. 3. cap. 2. num. 170. Homobon. in Exam. p. 2. tract. 9. cap. 10. Regius in suis resol. casu 14. and 34. Summa Corona, p. 2. cap. 7. Less. l. 2. cap. 21. dub. 16. num. 130.

n. 4.

NOR does it avail to object that there is deceit, since the seller and the buyer are the same, because if another can buy at that price, why not also the merchant? Indeed the seller is freed from the care of selling through the Broker. Yet he cannot compel this, nor have a pact about it, as Graff. p. 1. l. 1. cap. 209. Bonac. de contract. disp. 3. quaest. 3. p. 3. num. 20. Baffaeus num. 4. notes.

n. 5.

Some ADD another condition, that this sale not be made with the intention of buying back at a cheaper price. So Molina T. 2. disp. 310. Angel. v. usura, n. 60. Lopes l. 1. de contract. cap. 34. Vegha in Summa, T. 2. cap. 131. cas. 62. Azor. p. 3. l. 8. cap. 11. and Fagundez l. 5. cap. 34. num. 2. seems to approve.

BUT Salas de empt. disp. 37. and Diana p. 1. Tract. 8. resolut. 58. reject this third condition, because where nothing beyond the capital is drawn into the pact, nor hoped for as a premium, or a debt of justice for the loan, there is no usury, if an increase is intended, as Molina wishes, T. 2. disput. 305. Valentia disp. 5. quaest. 21. p. 1. Nauar. de restit. lib. 3. cap. 1. dub. 2. num. 19. and the same Salas tract. de usuris, disput. 5. numero 5.

I confess this contract stinks to me, because no foundation of this gain is present except usury, and the very thing which does not belong to the one gaining, and it is usury in hope, as the holy Doctor argues in speculo animae, cap. 2. §. the third fruit is principally of injustice. Just as usury is manifest when the promise intervenes by pact, as the holy Doctor notes.

Nor do many Casuists defend it soundly, pretending with empty subtleties that there is nothing evil if the merchant sells his own goods, if he buys them from another, and the prior seller buys them back; since he is not here in a worse condition than the other merchant, who can buy them. I say, they do not soundly urge these things, since moral matters are not to be handled so that the individual circumstances are examined separately; for even to touch another's goods with the hand is harmless; and to handle them with a closed hand, and finally to leave the house, has no fault; but join these, and it is theft. Similarly, to sell, to buy, and to resell are innocent; but if they are done so that the seller gives a horse to the Young man for 100 gold pieces, with some time agreed for payment, and the Young man gives the horse back to the seller for 60, in money counted out: who will be able to vindicate such a contract from usury, at least in hope?

n. 9.

Avarice has devised other similar contracts, which see in Fagund. 2 cap. 34. Molina disp. 362. Rebellio l. 9. quaest. 7. num. 7. Bassaeo loc. cit.

n. 10.

I set out one that is frequent. Certain rich men give flocks of sheep, or herds of cattle, to some shepherds or herdsmen, that they may pasture them, demanding the wool in part, but leaving the milk, cheese, and lambs, yet so that they perish for the shepherds, meanwhile perishing.

n. 11.

Others buy, e.g., a hundred sheep at the common price with money counted out. But with a pact that they be kept unharmed until the month of June; meanwhile demanding all the fruits of milk, wool, etc.

n. 12.

I say with D. Bonav. in speculo animae, cap. 2. loc. cit. that it is tacit usury, when someone has something in common with another, whatever it may be, and the danger, or loss, is not in common; Fagundez lib. 5. cap. 34. num. 15. Molina T. 1. disp. 362. subscribe.

n. 13.

The reason of D. Bonau. is clear, because the thing, just as it bears fruit for the Lord, so also perishes for him.

Tr. II, Disputation V: On Buying a…, Question XIII: Whether a sale with a pact of repurchase is lawful

I SAY first, that a sale with a pact of buying back is licit, even in favor of the seller alone. This is the common opinion. So Molina t. 2, disp. 375; Tanner. disp. 4, question 7, n. 51; Less. book 1 de Iust., book 5, chap. 21, dub. 14, n. 113; Fagundez book 5, chap. 43; and others as gathered in these authors, and Bassaeus n. 3; provided, however, first, that there be an intention of selling. Secondly, that the price of the thing be just. Thirdly, that the fruits belong to the buyer, as I shall say.

It is proved, because such a pact is nowhere found forbidden, nor is it prejudicial to anyone. Nor does C. ad nostram stand in the way, because there other bad conditions are brought forward.

n. 3.

Also, the thing sold with such a pact is worth less than if it were sold without it, nor is it to be increased in the redemption. So the Doctors commonly, as gathered by Fagundez n. 5; Tanner. n. 51. The reason is, because it is sold with a burden. Some indeed want it to be worth a third part less; others remit this to the judgment of a prudent man.

n. 4.

You ask first, To whom do the fruits belong that hang during that time?

n. 5.

They answer, They belong to the buyer, provided the sale is not usurious. See Fagund. and Bassaeus.

You ask secondly, When in the sale no term is set for buying back, what term is prescribed: Some say it is one of 30 years. Others say it can always be redeemed. See Fagundez n. 19; it is founded on l. si ita stipulatus, ff. de fid. instrum. And l. hac conditio, and l. 2, ff. de condition. et demonstrat., and Barthol. teaches there.

You ask first, In what the sale to the body differs from the sale to the measure.

A sale to the body takes place when the thing is sold by a designation and expression of the quantity in a confused way, as if I sell you such a farm contained within such boundaries, however many acres it may have; not designating that it has so many acres, as in Fagund. book 5, chap. 44.

n. 9.

A sale to the measure is when so many measures are designated, e. g. ten modia of wheat; or ten amphorae of wine, according to Fagund. chap. 44.

n. 10.

Therefore, when the form of the words of the contract begins from the measure, the sale is deemed to be to the measure. But when it begins from the body, it is said to be made to the body. See Fagundez chap. 44. Thus, therefore, if I sell you this whole cask of wine, however many pitchers it may contain, it will be a sale to the body. So chap. 44, n. 3 and 4 asserts. But chap. 47, n. 12 says it is a sale to the measure, as I said in question 11.

n. 11.

It helps, moreover, to know this distinction; for if the sale is made to the body, not only the risk of the thing, as well as the advantage, belongs at once to the buyer, but the whole thing also, at least by force of the contract, will be deemed sold for the price alone agreed at the beginning, whether it is found greater or smaller afterwards.

n. 12.

But if it was made to the measure, the whole thing is not deemed sold, but only the quantity expressed. See Fagundez chap. 44.

n. 13.

You ask secondly, What is the pact of the lex commissoria?

n. 14.

It is answered, That it is that by which the thing is sold under the condition that, if the price is not paid within such a time, the thing shall be as if not bought. So Molina t. 2, disp. 324 and 378; Fagundez chap. 45.

n. 15.

You ask thirdly: Whether the fruits of the thing sold, so long as it is not paid for, belong to the seller.

n. 16.

It is answered, That the fruits which hang on the thing sold at the time of the purchase belong, as to their value which they then have, to the buyer, unless it is otherwise agreed. This is the common opinion.

n. 17.

I say secondly, that as soon as the buyer has given the price to the seller, all the fruits which arise after the sale has been made, and their increments, belong to the buyer.

n. 18.

Note, That from contracts, especially from sale, there very often results a certain obligation which is called eviction, which is the loss of the just title by which one possessed a thing; as if I sold you a horse as my own which was in truth Peter's, and Peter takes it from you through a judge, and so evicts it; I, the seller, am bound by this eviction; for I am obliged to make good that horse to you, nor to leave you without indemnity for that eviction; and there belongs also to you, the buyer, against me the seller, not only an action for the price at which the horse was valued at the time of the eviction, but an action for interest and the damages that followed, l. si eum quaestio, Cod. de eviction., and leg. evicta re, ff. on the same title; and the Doctors, as gathered by Fagund. de contract. book 1, chap. 4, n. 19; Bassaeus, v. Venditio; Bonac. disp. 3, question 2, p. ult.

n. 19.

Truly, in all onerous contracts the party transferring dominion to the other is bound on both sides for the eviction of the thing, l. Libera, C. de sent: et interloc., and L. praedium, C. de evict.

Tr. II, Disputation VI: On the Loa…, Question I: What a loan and usury are, and why usury is a sin

Mutuum is said from this, that what is mine becomes yours, l. Mutuum, ff. si certum petatur. And thus it is defined: A loan (mutuum) is the transfer of a thing as to dominion, whereby it at once becomes the recipient's, with the obligation of returning at a future time another thing of the same kind.

It is gathered from D. Bonaventure in 6 Luke at those words: Et si mutuum dederitis. It is given by Caspens. tract. 19, disp. 3; Bassaeus v. mutuum; and the others ex l. 1, 2, ff. si certum petatur.

n. 3.

But it differs from the Commodatum: for in the latter only the use of the thing lent is transferred, not dominion, as is found in the Institutes, Quibus modis re contrahitur obligatio. Hence if the thing borrowed perishes, it perishes to the borrower; but the thing lent for use, if it perishes without the fault of the one who borrowed it, perishes to the lender.

n. 4.

Next, in the commodatum the same thing is returned, say the same horse, etc. But in the mutuum another is returned, say other wheat, etc., of the same price, the same kind, and quality. By which means it differs from sale, exchange, and other contracts, in which there is not returned a thing of the same quality and kind, but a thing altogether different, as money for wheat. This difference is to be noted gravely, because where there is no mutuum, Usury cannot subsist.

n. 5.

Usura is said from usu aeris, as the holy Doctor says in speculo animae, chap. 2, §. the third of the principal fruit of injustice, etc.; for there are certain things whose use is the consumption of the thing, and whose dominion is transferred to the recipient, as money, and grain, and wine. Whence he who sells the use of such things is called a usurer, and has the character of mortal sin against justice, because he sells to others what is not his own, the dominion having been transferred.

Thus usury is defined by the holy Doctor in the Explanation of the Terms of Theology: It is avarice acquiring something from a loan beyond the principal. This definition is followed commonly, as is seen in Valencia disp. 5, question 21, puncto 1. But this word is taken by Theologians and Jurists for the action itself which is called the sin of Usury.

But the word Usury is also accustomed to be taken for the proper object of the usurious transaction itself, and thus usury is nothing other than that gain which one receives above the principal in the use, namely for the use of the money which he gives in loan. This gain is also called Foenus from foetura (bringing forth), because, as Aristotle says, in the first Politics, chap. 7, in usury money begets money, and in this sense usury is wont to be said to be restorable. See Valencia above; Molina tract. 2, disput. 303.

Therefore Usury is gain proceeding from a contract which is called mutuum, not from elsewhere, nor under another title, but as the cause of the loan. But he who gives the loan is called the Mutuans; he who receives it, the Mutuatary; the thing given in loan is called Sors (principal), in which sense it is taken in 14. quaest. 3, cap. Plerique, and often elsewhere in Canonical law; which name is derived from the contract of Partnership, in which each of the partners casts in his sors, or share, and draws it out at the time of partition, and then receives the part of the gain which beyond the sors pertains to him. The sors is also wont to be called Capitale or Principale; but the gain or access above the sors is called Usura, if it accrues by force of the mutuum, as Caspensis notes tract. 19, disput. 3, sect. 1, n. 4; Bassaeus V. Usura.

…and 109 more passages — all of them are listed on the topic page.

Slater, Cases I

Thomas Slater, S.J. — 4 passages

Slater, Cases I, Contracts, Case 17. Usury

n. ¶8.

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

n. ¶9.

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.

n. ¶10.

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

n. ¶11.

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.

Rickaby, Moral Philosophy

Joseph Rickaby, S.J. — 8 passages

Pt. III, Ch. V, Section V. Of Usury

Leo X. in the Fifth Council of Lateran, 1515, ruled that—"usury is properly interpreted to be the attempt to draw profit and increment, without labour, without cost, and without risk, out of the use of a thing that does not fructify." In 1745 Benedict XIV. wrote in the same sense to the Bishops of Italy: "That kind of sin which is called usury, and which has its proper seat and place in the contract of mutuum, consists in turning that contract, which of its own nature requires the amount returned exactly to balance the amount received, into a ground for demanding a return in excess of the amount received." Mutuum, be it observed, is a loan for a definite period, of some article, the use of which lies in its consumption, as matches, fuel, food, and, in one respect, money. We shall prove this to be properly a gratuitous contract. (s. iv., n. 4, p. 254.)

Usury then is no mere taking of exorbitant interest. There is no question of more or less, but it is usury to take any interest at all upon the loan of a piece of property, which

(a) is of no use except to be used up, spent, consumed:

(b) is not wanted for the lender's own consumption within the period of the loan:

(d) is so lent that the lender foregoes no occasion of lawful gain by lending it.