A bankrupt argument
January 10, 2015 § 17 Comments
Question 34 of the Usury FAQ addresses the issue of personal bankruptcy. Doubters of the contemporary relevance of the moral prohibition of usury frequently suggest that in the context of modern personal bankruptcy protections, usury is no longer immoral because the borrower has a legal escape hatch in cases of real duress. The argument typically suggests that personal bankruptcy protections in the positive law modify the contract such that the lender doesn’t truly have full recourse to the person of the borrower for recovery of (in kind) principal and profitable interest.
I’ve updated the answer in the FAQ to make the speciousness of this objection a bit more clear:
34) Doesn’t the safe harbor of personal bankruptcy imply that modern loans are really non recourse?
No. Even with the safeguard of personal bankruptcy, a usurious contract is – by its full recourse nature – a purchase of the potentialities of a person. The potentialities of a person are not something which actually exist at the time of purchase. Recall that, in order to “own an economic share” in (or have economic access to) the potentialities of a thing, you must own a share in (or have some sort of property claim against) the actual thing; and it is not morally licit to buy and sell economic shares in persons as if they were property.
Continuing the comparison to slavery (since usury and slavery are in the same moral genus), that a slave might have certain legal remedies in the case of an abusive master, or might under certain conditions have an opportunity to escape his condition, doesn’t make him any less a slave. He might be in better shape than other slaves who lack those remedies and opportunities; but he is still a slave.
Furthermore, that personal bankruptcy protection is available in cases of extreme financial duress does not change the fact that mutuum contracts require return of what is lent in kind as opposed to in particular (see Question 35): that what is loaned is, in Aquinas’ terms, consumed in its use by the borrower. The mutuum loan for interest still charges rent for literally no thing, nothing. Personal bankruptcy protection therefore does not change the basic nature of a usurious contract.