Usury Coda

April 5, 2010 § 12 Comments

So, after the last year or so of looking into the matter I think I understand what the moral species usury is.

Contrary to my expectations I find myself largely in agreement with St. Thomas Aquinas on the subject, assuming I understand him correctly. I fully expected to disagree with Aquinas when I first started reading about usury during the financial crisis of 2008; but that has turned out not to be the case. I think Aquinas was right: that to at least some extent the folks who think they disagree with him, who think that history has gone against his view, are disagreeing with a caricature. The one place where my view may differ slightly from his is in my understanding of altruistic lending, and just titles to actual costs which may arise in the case of altruistic lending. But even so that distinction makes no difference whatsoever in evaluating present-day commercial activities, since commercial activities by definition are not altruistic. (Curiously the distinction between a credit union and a commercial bank may make all the difference between Heaven and Hell).

I do not view changes in circumstances or changes in the nature of money as at all pertinent to the question. I view Belloc’s summary as substantially correct but incomplete.

Usury consists in lending money to a person, with recourse to the person for return of principal and profitable interest on the loan. It is always and without exception morally wrong to do this.

Non-usurious lending for profit consists in lending money to a person or organization, with recourse to specified assets and only those specified assets for return of principal, charging rent for the use of the portion of those assets represented by the loan, where the borrower has the option to pay off the principal and be quit of all obligation to pay interest. Non-usurious lending for profit, in short, involves mutual ownership of some specific asset or assets, where one party pays the other for the use of the other’s share of those assets, not for the use of money: in a case of default the lender can recover his principal from the assets only, not the borrower. There isn’t anything morally wrong with non-usurious lending for profit, and most business lending falls into this category.

Non-usurious altruistic lending consists of lending money to a person, with recourse to the person for return of principal and possibly also some actual costs incurred by the lender, provided that no profit motive is involved in making the loan. If there is any profit motive involved in making this kind of loan, it is usury. Therefore by definition it is not a business which can be justly entered into for profit.

I think we (or at least I) now have enough of an understanding to be able to look at the terms of many or most specific loans and say definitely whether those loans are or are not usurious. Unfortunately, a great many modern credit instruments – credit cards come immediately to mind, but that is just the most obvious in a vast sea of consumer credit instruments – seem to be both formally (in their contractual terms) and materially (in what actually occurs over the course of the loan) usurious.

There are other unjust acts which involve selling what doesn’t exist; this post specifically addresses the species usury, not those other generic acts. Acts of government in issuing currency and that sort of thing are outside the scope of these conclusions. And of course it is eminently possible that I’ll have to modify this view in light of some new information or argument of which I am currently unaware. But there is enough now in my view to warrant this definite conclusion, including definite criteria based on Magisterial sources for determining when the sin of usury specifically is being committed.


§ 12 Responses to Usury Coda

  • William Luse says:

    Credit cards. I knew it.

  • Hmyer says:

    Both my church and my diocese solicit donations and contributions by credit card. I guess they're guilty of formal cooperation with sin.

  • Zippy says:

    Material cooperation, sure. If I borrow from a userer and donate to my parish, both I and my parish have materially cooperated with usury. Indeed it is hardly possible to avoid material cooperation with usury in the modern world.

    Of course even if it were shown that the Pope himself formally cooperates with usury that wouldn't cast doubt on this result.

  • Lydia McGrew says:

    But people _could_ just use the credit card to donate conveniently and then pay the full balance off every month, and never pay a penny in usurious interest to the credit card company. So the diocese isn't encouraging people actually to cooperate in being exploited by usurers.

    I've had a credit card all my adult life, and the only time they ever got a penny from me beyond the charges from the seller was once when my check got lost in the mail and I had to pay a late fee.

  • William Luse says:

    Sounds like Lydia's right, but the credit card company is still a userer because if everybody were as conscientious as she, the company would go out of business.

    “…once when my check got lost in the mail and I had to pay a late fee.”

    If that happened today, they'd jack your interest rate to up in the 20's somewhere.

  • Zippy says:

    Providing other business to usurers – e.g. the fees they charge merchants on the front end of a credit card transaction – is also a kind of material cooperation with usury, though arguably a more remote kind.

    But I don't see the relevance of the fact that it is nearly impossible to avoid material cooperation with usury. Belloc observed the same thing many decades ago. The teaching of the Magisterium is what it is, Aquinas' understanding is far more sensible and pertinent than most are prepared to admit, and whatever juridical or administrative things are or have been done are completely irrelevant.

  • Lydia McGrew says:

    I've often wondered about that merchant fee thing. Does _everybody_ who allows you to pay by credit card pay a fee to the credit card company? If churches take donations that way, does the church have to pay a fee to the credit card company in order to offer that convenience to donors?

    In any event, I entirely agree that it's impossible to avoid material cooperation at some level. You can't buy milk at the store without that money going somewhere to somebody who is going to do something bad with it. Hey, just look at the magazines they sell in the store!

    (Speaking of which, sad news today: That Catholic pharmacy in Virginia went out of business for economic reasons. They even still have debt left over. Bummer.)

  • Tony says:

    Lydia, my family used that pharmacy, (Divine Mercy) and we were hoping that it would make it permanently, but I guess the economics were not adequate.

    The founder, Dr. Bruchalski, (well, he's one of them) has been a friend of ours for almost 20 years. He is a great man, and I thought maybe he could make the pharmacy work. But I was always doubtful given all the competition and the problems.

  • zippy says:

    I don't know anything about accepting credit card payments for charity: perhaps the credit card companies waive the merchant fees in some of those cases, though I tend to doubt it.

    (As an aside, fundraising for charities is itself big business. The charity itself may not be a for-profit business, but the fundraising company which actually does the phone calls, collections, and charitable events is very often a for-profit business, and the fundraiser sometimes gets a pretty remarkable cut of the proceeds. Even some of the ones with lower fees in the 20% range often involve what I think are detestable practices, like collecting peoples' Christmas card lists for solicitation. Enough of the side rant though.)

    When buying from merchants, though, yes, there are merchant fees. Merchant fees do tend to vary quite a lot based on the merchant: Wal Mart has vastly greater negotiating power than Mom and Pop's Market, so Wal Mart gets far better rates, AFAIK.

    Or at least that is my understanding. I've never managed or owned a retail business, though I'm a passive investor in some.

  • Paul Cella says:

    The utter ubiquity of usury in our age is a really daunting problem. Individual citizens are of course deeply implicated in it; we might almost say that it is usury which has reduced the citizen to a mere consumer. But as one's analysis ascends from the consumer up toward more and more complex business structures, right up to the top where the plutocracy blends state actor and a private actor beyond the point of reasonable distinction. the usury only gets more and more pronounced and integral.

    This integration of usury with the development of our civilization, as one begins to perceive it, can really become a temptation to despair.

  • Speaking of which, sad news today: That Catholic pharmacy in Virginia went out of business for economic reasons. They even still have debt left over. Bummer

    Bummer indeed as the usual enemies are licking their chops and proclaiming the very concept doomed to fail as opposed to more likely pedestrian explanations.

  • […] “Debt”, when it is asset-recourse as opposed to person-recourse, is really just a specific kind of preferred share.   When interest-bearing debt has recourse to a person rather than to specific contractual assets for recovery of principal, it is usury. […]

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