If you don’t like my cooking, try consuming the Magisterial text
June 9, 2018 § 34 Comments
“Loan for consumption” is the way that the Latin term “mutuum” is sometimes translated into English. Any (and all) profits from mutuum contracts are what constitutes usury. Profits on non-mutuum contracts are not usury: such profits may or may not be licit on other grounds, but they are not usury specifically. The great majority of present day business investment is not usurious: usury occurs mainly in lending to consumers, especially in the form of credit cards, student loans, and the like.
I’ve given my own various descriptions of what distinguishes a mutuum from other contracts. A mutuum is secured by the promise of the borrower as opposed to (or in addition to) collateral property. The agreement is that the borrower may consume all of the actual property – that the property lent and any collateral may be fully alienated from the possession of both borrower and lender – and yet the borrower’s obligation to repay remains. The lender has recourse to the borrower himself through his promise, and not merely to an inventory of collateral property, for recovery of what the lender invested. The “asset” securing the loan simply is the promise or personal IOU of the borrower: it literally does not exist as something distinct from the contracting parties themselves. The modern terminology for this distinction is (at least roughly speaking) “non recourse” lending, as distinct from “recourse” lending or lending backed by a personal guarantee.
Citing a blogger with a goofy pseudonym doesn’t really do it for many people though, and understandably so. If someone asks you for a Magisterial citation for what distinguishes mutuum contracts (where profit is immoral) from contracts which may give rise to morally just profits, a helpful one comes from Pope Callistus III (1455-1458), Usury and Contract for Rent, from the Constitution “Regimini universalis” May 6, 1455 (quoted in Denzinger). In this citation Pope Callistus III describes what specifically makes the charge of rent or interest morally licit, that is, non-usurious:
“As guarantee for the payment of the aforesaid revenues and rents [borrowers] mortgage those of the aforesaid houses, lands, fields, farms, possessions, and inheritances that have been expressly named in the relevant contracts. In the favor of the [borrowers] it is added to the contract that in proportion as they have, in whole or in part, returned to the said [lenders] the money just received, they are entirely quit and free of the obligation to pay the revenues and rents corresponding to the sum returned. But the [lenders], on the other hand, even though the said goods, houses, lands, fields, possessions, and inheritances might by the passage of time be reduced to utter destruction and desolation, would not be empowered to recover even in respect of the price paid.”
Well done as always.
Everyone has a favourite song. This is now one of mine, and boy does it need singing time and again.
I’m working my way through Debt by David Graeber. What an eye opener.
I think what moderns miss (what I missed for a long time) is how pernicious and common slavery due to debts is in human history. And that is often tied up with usury.
It makes pre-modern denunciations of usury seem antiquated and foolish when the worst that happens from a usurious debt today is bankruptcy and maybe (at the extreme) homelessness. Neither of those are a picnic, of course, but I’d take either over the possibility of having to hand my children over to become slaves or prostitutes.
[…] Source: Zippy Catholic […]
This still happens.
I don’t know any foreign languages, but I wonder if there is any language that still maintains a single word that means what mutuum means in Latin. English obviously doesn’t, and even the distinction between full and non-recourse loans gets fuzzy when non-recourse loans can still have deficiency judgments against the borrower. I think this is a very good example of just how words (or lack of them) can shape the thinking of a very large group of people.
That’s an interesting point. I don’t know the history of “mutuum” as a word either, but (realizing it’s not a 1:1 analogy) it does put the loss of “mutuum” and the pronoun wars of transgenderism in context.
You can see this language obfuscation happening in real time right now with words like “adultery”. How many modern people would consider it “adultery” for a divorced person to “have an affair” with his “ex”?
I don’t even know what this sentence means.
Sally divorces John and then “marries” Jack. Sally then has conjugal relations with John behind Jack’s back. How many people would consider it “adultery” or “having an affair” when Sally sleeps with John behind Jack’s back.
Yes. And it makes figuring out what relation to call people difficult. For instance, my uncle is divorced and remarried. To what extent is it appropriate to refer to the woman he “married” as my aunt, since she’s in reality neither related by blood or by marriage to me.
It seems that one injustice that is done by this is the conflation between the adulterous and the widowed. A widower may have a first wife and a second wife, but a man who divorces and remarries just has the one wife, and yet we call the other woman a “second wife.”
To your knowledge, did the word “loan” in English ever actually suffice as a direct translation of “mutuum,” or has it always had the broader meaning that it does today?
Wood, Tim Finnegan
This commentary on Lk 6:35 may be helpful in determining the root and history of the word mutuum. I’m referring in particular to the 7th to last paragraph at this link of the Commentary of Cornelius a Lapide
Mutuum comes from meum tuum – what is mine, is thine.
If that’s the accurate meaning of a mutuum (what is mine, is thine), then it seems like the idea of turning a mutuum into a profit making venture is against its nature. This would make it easier to understand that mutuum loans are only licit as acts of friendship or charity to a borrower in need.
Yeah, the terms for “family” relations in the age of serial monogamy are an ambiguous mess. The homo- and trans- freakitude is really just more of the same: ordinary people sold themselves up the language-conflation river long before.
Regarding the reddit discussion –
My understanding is that the slavery analogy was supposed to be just an intuition pump and not the crux of the argument.
The idea of personal recourse lending corresponds neatly with Aquinas’ idea of “selling what does not exist”. The borrowers personal guarantee of repaying principal with interest when the proceeds of the loan have been consumed is to promise property rights to something that is only a potentiality, and not actually existing at the time of the loan.
HappyThomist says that “a personal guarantee is itself just a particular form of collateral, representing the future labor of a person.”
This part of Aquinas’ discussion may be helpful to HappyThomist to get him to see that the future labor of a person has no actual existence – “because he must not sell that which he has not yet and may be prevented in many ways from having” (ST II-II, Q78, A2, Reply to OBJ.1).
The fruits of the borrowers future labor may come into being, but they may not. It potentially has existence, but has no actual existence at the time of the loan.
And this is literally the case, since per the agreement the borrower may completely dispose of the property lent. The lender retains no claim on the actual property he lent: that is what he agrees when making a mutuum. What the lender receives in return when the agreement is made is not actual property at all: it is merely the borrower’s promise of repayment.
This is why Aquinas insists that once the property has been lent under mutuum, the borrower literally owns that actual property. And this is why this specific kind of agreement may only, categorically and without exception, be made out of charity or friendship: never in pursuit of financial self-interest or profit.
“Once the property has been lent under mutuum, the borrower literally owns that actual property. ”
Why use the word “lent” then at all?
Is the borrower of a mutuum loan obliged, in justice, to return the loan or not?
It is first claimed that it is usury to profit from a mutuum. That is fine. But that statement is consistent with the obligation of the borrower to return the loan. To say now, that the borrower literally owns the actual property is something else.
The borrower is not obligated to return the actual property which was lent, no. A mutuum – by the nature of the agreement – authorizes the borrower to dispose of (“consume”) that actual property.
A borrower may be obligated (though not absolutely) to restore in kind the amount of property which was lent (though not the actual property lent), at some time in the future. But this obligation does not attach to or terminate in any actual property which actually exists. Therefore profiting or charging rent (interest) for the use of this nonexistent “thing” is intrinsically unjust.
In order to accurately think about usury it is necessary to distinguish, categorically and consistently, between actual property which actually exists and merely hypothetical property which does not actually exist.
In a mutuum, the actual property is owned by the borrower. It is literally given to the borrower and becomes his.
It is fair to ask “well, then why would anyone ever make a mutuum loan?”
And the answer to that question is “only out of friendship or charity; never in pursuit of profit.”
Correct — and we are also working with language ambiguity and editorial choices, as always. Criminals who are forced to make license plates in prison might be called “slaves”, for example.
I take HappyThomist’s gotcha defenses of chattel slavery for profit as overall good for my presentation of usury though.
Sorry if this conversation should die, since it’s kinda off-topic at this point.
When my youner sister got married, the Archbishop of Ghana officiated. (She’s a nurse who does all kinds of aid work, and they met when she was in Ghana for a couple years.)
This was when the Archbishop met my older sister and her … significant other. My older sister married (civil ceremony only) a few years previously, then got divorced a couple years previously, and had ‘married’ again a year after that.
When the Archbishop found out about her family history, he very particularly referred to them, instead of husband and wife, as ‘sister and her boyfriend’.
I think that’s about right, despite the fact that it sent the rest of the family into a tailspin of butthurt.
Sometimes you should be careful what you say to whom, in the effort not to drive people away from the truth. But at the same time, coddling people in their errors won’t get them anywhere.
[…] borrower in a mutuum owns the actual property he is “lent”, because the mutuum authorizes him to dispose of […]
” I wonder if there is any language that still maintains a single word that means what mutuum means in Latin”
Portuguese does, at least. And I’d wager most if not all Latin-based languages do.
In Portuguese, and indeed Portuguese law, a mutuum contract is called “mútuo”, defined as “the contract by which one of the parties lends money or anything fungible to the other party which is then bound to return the same amount of same kind and quality.”
Seems to me the meaning is the same.
In fact, after reading Zippy for a while I went to look and I can confirm that usury was defined in Portuguese law as “charging interest on mútuo contracts”.
So I consider that matter established and it is surprising the amount of ignorance regarding this matter once you learn the truth.
I now have it as an heuristic, sometimes a test, of whether people know what their talking about.
A Portuguese Man:
Thank you for that. That’s wonderful news and I think actually a great practical example we can give others in these discussions.
I had a look around and I can see the exact same definition in all Latin countries but France:
Portugal (and Brazil): https://pt.wikipedia.org/wiki/Contrato_de_m%C3%BAtuo
Note that, for Romania, I think it is actually only called loan for consumption – “Imprumutul de consumatie”, the mutuum being a reference for clarity or disambiguation purposes that nevertheless commonly co-occurs.
In Spain all “mutuo”, “contrato de mutuo” and “préstamo de consumo” – mutuum, mutuum contract and loan for consumption, respectively – terms seem used.
Portugal and Italy use “mútuo” and “mutuo”, respectively.
As to France, I couldn’t find anything. They seem to adopt some other taxonomy, with personal loans and amicable loans and such. Possibly an artifact of being ground-zero for “progress”. I guess they can consider themselves lucky for managing to keep the calendar…
Anyway, yes, mutuum is definitely used: the word and/or the definition occurs on all Latin countries except France.
It is likely, also, that most Spanish-speaking South American countries also use it – in the same way Brazil does.
For those interested, the word “mutuum” appears to have meaning in English as well. If one Googles the word “mutuum”, the following is the second search result:
It is important to keep in mind (as Aquinas and Vix Pervenit emphasize) that what makes a mutuum is the nature of the agreement, not the nature of the property transferred to the borrower. Any property at all can be transferred via a mutuum: the kind of property is never in itself what makes the distinction between a mutuum and a non-mutuum contract.
Then the civil law definition has already diverged.
In the Portuguese civl code, at least, the definition specifies the kind of property: money or another fungible thing.
A Portuguese Man:
The key, I suppose, is recognizing that all property is fungible; so “fungible thing” must always be understood to mean “thing treated as fungible by the contract.”
I looked for the definition of fungible. There is an acception particular to Law: that which may be replaced by another thing of the same kind, quality or quantity.
The common acception says only “that which is spent or consumed with use or first use”.
I suppose it depends upon how broadly the term is construed. It is part of the essence of property (I would argue) that it is exchangeable for other property: that is, fungible, at least broadly speaking.
[…] could licitly do is buy equity in the borrower’s lawn mower for one sack of flour. You could then rent your share of his lawn mower back to him until he redeems it by giving you one sack of flour, or, barring that, the lawn […]
A Portuguese Man:
This post cites Aquinas and the Magisterium on the fact that “fungible” for the purposes of usury pertains to, not the nature of the property itself, but the nature of the contract. This post provides additional Magisterial warrant, specifically with the words “…money, animals, or any other things whatever, …” (Emphasis mine).
It makes sense to me that if usury pertains to the nature of the contract then actual type of property should not matter insofar as it doesn’t change the contract’s nature.
I have no clue, however, of what the legislator was thinking when he specified “money or another fungible thing”.
A few more interesting bits of our Civil Code:
article: “The mútuo-ed [exchanged] things become property of the mútuo-ary on delivery.”
article: “The parties may agree the payment of interest as retribution for the mútuo. The contract is presumed onerous in case of doubt.”
article: “it is considered usurious, the mútuo contract for which annual interest is established exceeding the maximum legal interest amount plus 3% or 5%, according to whether or not there is a real guarantee.”
A Portuguese Man:
There of course is a tendency for things to have ‘primary’ uses and ‘secondary’ uses, and for the primary use to dictate the nature of the contract. But what makes a mutuum or non-mutuum is the contract itself, not the nature of the property.
Aquinas (in “On Evil”):