Usury
Usury is the practice of making loans that are seen as unfairly enriching the lender. The term may be used in a moral sense—condemning taking advantage of others' misfortunes—or in a legal sense, where an interest rate is charged in excess of the maximum rate that is allowed by law. A loan may be considered usurious because of excessive or abusive interest rates or other factors defined by the laws of a state. Someone who practises usury can be called a usurer, but in modern colloquial English may be called a loan shark.
In many historical societies including ancient Christian, Jewish, and Islamic societies, usury meant the charging of interest of any kind, and was considered wrong, or was made illegal. During the Sutra period in India there were laws prohibiting the highest castes from practising usury. Similar condemnations are found in religious texts from Buddhism, Judaism, Christianity, and Islam. At times, many states from ancient Greece to ancient Rome have outlawed loans with any interest. Though the Roman Empire eventually allowed loans with carefully restricted interest rates, the Catholic Church in medieval Europe, as well as the Reformed Churches, regarded the charging of interest at any rate as sinful. Christian religious prohibitions on usury are predicated upon the belief that charging interest on a loan is a sin.
History
Usury was denounced by religious leaders and philosophers in the ancient world, including Moses, Plato, Aristotle, Cato, Cicero, Seneca, Aquinas, Gautama Buddha and Muhammad.Certain negative historical renditions of usury carry with them social connotations of perceived "unjust" or "discriminatory" lending practices. The historian Paul Johnson comments:
Theological historian John Noonan argues that "the doctrine was enunciated by popes, expressed by three ecumenical councils, proclaimed by bishops, and taught unanimously by theologians."
Roman Empire
During the Principate period, most banking activities were conducted by private individuals who operated as large banking firms do today. Anybody that had any available liquid assets and wished to lend it out could easily do so.The annual rates of interest on loans varied in the range of 4–12 percent, but when the interest rate was higher, it typically was not 15–16 percent but either 24 percent or 48 percent. They quoted them on a monthly basis, and the most common rates were multiples of twelve. Monthly rates tended to range from simple fractions to 3–4 percent, perhaps because lenders used Roman numerals.
During this period, moneylending primarily involved private loans given to individuals who were consistently in debt or temporarily so until harvest time. This practice was typically carried out by extremely wealthy individuals willing to take on high risks if the potential profit seemed promising. Interest rates were set privately and were largely unrestricted by law. Investment was always regarded as a matter of seeking personal profit, often on a large scale. Banking was of the small, back-street variety, run by the urban lower-middle class of petty shopkeepers. By the 3rd century, acute currency problems in the Empire drove such banking into decline. The rich who were in a position to take advantage of the situation became the moneylenders when the increasing tax demands in the last declining days of the Empire crippled and eventually destroyed the peasant class by reducing tenant-farmers to serfs. It was evident that usury meant exploitation of the poor.
Cicero, in the second book of his treatise De Officiis, relates the following conversation between an unnamed questioner and Cato:
England
In England, the departing Crusaders were joined by crowds of debtors in the massacres of Jews at London and York in 1189–1190. In 1275, Edward I of England passed the Statute of the Jewry which made usury illegal and linked it to blasphemy, in order to seize the assets of the violators. Scores of English Jews were arrested, 300 were hanged and their property went to the Crown. In 1290, all Jews were to be expelled from England, allowed to take only what they could carry; the rest of their property became the Crown's. Usury was cited as the official reason for the Edict of Expulsion; however, not all Jews were expelled: it was easy to avoid expulsion by converting to Christianity. Many other crowned heads of Europe expelled Jewish people, although again converts to Christianity were no longer considered Jewish. Many of these forced converts still secretly practised their faith.The growth of the Lombard bankers and pawnbrokers, who moved from city to city, was along the pilgrim routes.
In the 16th century, short-term interest rates dropped dramatically. This was caused by refined commercial techniques, increased capital availability, the Reformation, and other reasons. The lower rates weakened religious scruples about lending at interest, although the debate did not cease altogether.
The 18th century papal prohibition on usury meant that it was a sin to charge interest on a money loan. As set forth by Thomas Aquinas in the 13th century, because money was invented to be an intermediary in exchange for goods, it is unjust to charge a fee to someone after giving them money. This is because transferring ownership of property implies the right to use that property for its purpose: "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."
Charles Eisenstein has argued that pivotal change in the English-speaking world came with lawful rights to charge interest on lent money, particularly the 1545 act, "An Act Against Usurie" of King Henry VIII of England.
Religion
Judaism
The book of Deuteronomy prohibits Jews from charging interest except when making loans to foreigners. Typically, a loan is considered a form of Tzedakah or Ṣedaqah, a Hebrew word meaning "righteousness" but commonly used to signify charity. In the Rabbinic period, the practice of charging interest to non-Jews has been restricted to cases when there is no other means of subsistence. "If we nowadays allow interest to be taken from non-Jews, it is because there is no end to the yoke and the burden king and ministers impose on us, and everything we take is the minimum for our subsistence, and anyhow we are condemned to live in the midst of the nations and cannot earn our living in any other manner except by money dealings with them; therefore the taking of interest is not to be prohibited".This is outlined in the Jewish scriptures, specifically in the Torah:
Johnson contends that the Torah treats lending as philanthropy in a poor community whose aim was collective survival, but which is not obliged to be charitable towards outsiders.
As Jewish people were ostracized from most professions by local rulers during the Middle Ages, the Western churches and the guilds, they were pushed into marginal occupations considered socially inferior, such as tax and rent collecting and moneylending. Natural tensions between creditors and debtors were added to social, political, religious, and economic strains.
Several historical rulings in Jewish law have mitigated the allowances for usury toward non-Jews. For instance, the 15th-century commentator Rabbi Isaac Abarbanel specified that the rubric for allowing interest does not apply to Christians or Muslims, because their faith systems have a common ethical basis originating from Judaism. The medieval commentator Rabbi David Kimhi extended this principle to non-Jews who show consideration for Jews, saying they should be treated with the same consideration when they borrow.
Christianity
Bible
The Old Testament "condemns the practice of charging interest on a poor person because a loan should be an act of compassion and taking care of one’s neighbor"; it teaches that "making a profit off a loan from a poor person is exploiting that person." Similarly, charging of interest or the taking of clothing as pledges is condemned in Ezekiel 18, and Deuteronomy 23:19 prohibits the taking of interest in the form of money or food when lending to a "brother".The New Testament in Luke 6:34-36, likewise teaches giving rather than loaning money to those who need it:
"And if you lend to those from whom you expect repayment, what credit is that to you? Even sinners lend to sinners, expecting to be repaid in full. But love your enemies, do good to them, and lend to them, expecting nothing in return. Then your reward will be great, and you will be sons of the Most High; for He is kind to the ungrateful and wicked. Be merciful, just as your Father is merciful."
Church councils
The First Council of Nicaea, in 325, forbade clergy from engaging in usuryAt the time, usury was interest of any kind, and the canon forbade the clergy to lend money at interest rates even as low as 1 percent per year. Later ecumenical councils applied this regulation to the laity.
Lateran III decreed that persons who accepted interest on loans could receive neither the sacraments nor Christian burial.
The Council of Vienne made the belief in the right to usury a heresy in 1311, and condemned all secular legislation that allowed it.
Up to the 16th century, usury was condemned by the Catholic Church. During the Fifth Lateran Council, in the 10th session, the Council for the first time gave a definition of usury:
The Fifth Lateran Council, in the same declaration, gave explicit approval of charging a fee for services so long as no profit was made in the case of Mounts of Piety:
Pope Sixtus V condemned the practice of charging interest as "detestable to God and man, damned by the sacred canons, and contrary to Christian charity.