On minding your own business and the unpersoning of contract counterparties
March 17, 2017 § 22 Comments
In Question 49 of the Usury FAQ I discuss whether a merchant may licitly charge an individual penalties for late payment on unsecured merchant credit, distinguishing between two cases.
In one case the individual mutuum debtor has the resources to pay the merchant on time and refuses to do so. This is a form of theft or fraud, and thus is (under the natural law) a criminal act subject to the extrinsic titles and criminal penalties which arise from criminal acts.
In the other case the debtor has suffered misfortune and is unable to pay on time. By extending unsecured credit the merchant took the risk of this occurring upon himself, and is not entitled to late payment penalties.
Notice that this means that the merchant who extends unsecured credit, and the enforcing sovereign, have to understand the individual holistically and charitably as a human being, in order to make this distinction. It means – and I’m sorry to break this to you – that the dehumanizing incantation “it is just business” doesn’t actually turn contract counterparties into unpersons.
Treating others like the human beings they are in reality is a lot of work, and doesn’t always make for the most efficient business operations. The other horn of the dilemma is that failure to extend unsecured credit will almost certainly limit a merchant’s available market. With those moral constraints in place, it is almost as though extending unsecured personal credit should only be an act of charity, not a business decision. It is almost as though we are to expect nothing in return when we lend money in exchange for a personal IOU.
 As usual, the prohibition of usury applies to debt qua personal IOUs not to debt qua impairment of specified property. The balance sheets of institutions are inventories of property and the various claims against that property, so “debt” which impairs the balance sheet of an institution is not the kind of “debt” implicated in usury.