What Does the Church Say About Usury?

Q1: There is no canon in the current Code of Canon Law relating to usury.  The 1917 Code contained an explicit provision, canon 1543.  What is the Church’s latest position on usury? –David

Q2: I am a lay Catholic in need of answers to the question of usury in the Church.  The Catholic Encyclopedia is ambiguous, to say the least: the Third Lateran Council (1179) and the Second Council of Lyons (1274) condemn usurers, but then the Fifth Lateran Council (1517) said usurers “ought not to be condemned in any way.”  What does the Church define usury as?  When (if at all) is it permitted? –Thomas

A: David is absolutely correct that the current Code of Canon Law is silent on the subject of usury.  Over the course of previous centuries, however, there have been countless church regulations and declarations on the subject—which, as Thomas notes, often contradicted each other.  Let’s take a look at how the term “usury” is defined, and at past church pronouncements about it.  Then we might be able to draw some conclusions as to why the code says nothing about usury today—and what current Catholic teaching on the subject really is.

In trying to define the term, we run up against a problem immediately: if you check almost any English dictionary, you’ll see that the meaning of the word “usury” has changed over time.  In centuries past, the term was neutral, and simply referred to the interest paid on a loan—based on the Latin word usura, meaning “interest.”  But in more recent times, the English word “usury” acquired a very negative connotation, as it came to mean the practice of charging an excessive, unreasonable rate of interest on a loan. The definition changed in this way because starting in the Middle Ages, the Church struggled for centuries with the question of whether or not it was ever moral for someone who loaned you money to charge you a fee.

Nowadays, it’s pretty hard for those of us in first-world countries to imagine why this would even be an issue: there’s nothing particularly controversial about taking out a bank loan in order to buy a house or a car, and gradually repaying the amount with interest.  If we think the interest-rate is too high, we normally just search for a lower one.  But it would be hard to find anybody today actually advocating that banks lend money to us at zero-interest! Centuries ago, however, the monetary system that today we take for granted did not yet exist.  We easily forget that the very concept of a “bank” had to be invented.  And in the midst of economic and societal changes, the Church simultaneously wrestled with how to apply God’s teaching as found in the Old Testament book of Deuteronomy.

You shall not lend upon interest to your brother, interest on money, interest on victuals, interest on anything that is lent for interest.  To a foreigner you may lend upon interest, but to your brother you shall not lend upon interest (23:19-20).

Catholics believe that this teaching was given by God Himself to the Jewish people, and thus should not be disregarded; but how are we to interpret the terms “brother” and “foreigner” today?  And given that Christians believe the Old Law has been fulfilled by the New, has this prohibition become null and void altogether?  For centuries, theologians went back and forth on this issue.  St. Thomas Aquinas (to take only one example of many) addressed the question back in the 13^th century in his Summa, at one point noting that it is unjust to exact interest when loaning money, while acknowledging that apparently other biblical passages—as well as civil law—condoned it.

Gradually, the opinion became prevalent that the prohibition applied to Christians borrowing money from other Christians, and to Jews borrowing from Jews: in many minds this was the appropriate interpretation of the ban on charging interest of one’s own “brother.”  But since the passage permits usury when dealing with “foreigners,” in many European nations during the Middle Ages it became legally permissible for Jews to loan money to Christians, and vice versa.  And because the overwhelming majority of Europeans were Christians, this then gave rise to the common, legal practice of Christians borrowing money from Jews.  In this way, members of both faiths could borrow and lend money for business purposes, without violating the prohibition laid down in Deuteronomy.

But the problems with charging interest for loaning money didn’t end there.  Numerous European sovereigns continually had to deal with complaints about “excessive” rates of interest.  Note that deciding what is excessive, and what is reasonable, is invariably a matter of subjective judgment; one man’s notion of a reasonable rate could be another man’s idea of outrageous extortion!  Once again, Catholic scholars batted the issue back and forth, while many of the laws set down by civil rulers in various nations likewise varied dramatically over time.  Canon 67 of the Fourth Lateran Council (1215), for example, prohibited “oppressive and immoderate interest” rates, but it may shock readers to learn what many Christian rulers and church officials of that era considered moderate: annual rates of interest sometimes as high as 80%!  If this was “reasonable” in centuries past, we can easily see that the ideas we generally hold today about what constitute appropriate interest-rates have changed dramatically.

For generations, this uncertain, shifting and evolving state of affairs was in place here in the Western World.  That’s why, as Thomas rightly observed in his question above, it’s quite easy to find conflicting statements about charging usury in various official church documents.  It all boils down to how Church and society choose to interpret the biblical prohibition mentioned above, and the amount of interest that we feel is “excessive.”  Since the world was changing, and gave rise to different business situations which perhaps had not existed in generations past, the Church tried to keep up with developing circumstances, and to determine what was moral and what wasn’t, in a business world that seems to have often changed fairly quickly.  (Perhaps a sort of parallel could be made with Church pronouncements today on the moral issues surrounding various cutting-edge types of fertility treatments.  Faced with these new and unprecedented situations, the Church suddenly has to assess the ethical implications of medical options which it never had to deal with before—and this can be very tricky business.)

David is right that the 1917 Code of Canon Law did mention usury, in the former canon 1543.  But once again, we find a lot of ambiguity, as that particular law spoke approvingly of “lawful profit” from the loaning of certain things, “unless it is immoderate.”  What was “lawful” and what was “immoderate” were not specifically defined. When the current, 1983 Code of Canon Law was in the works, the Code Commission members simply opted to eliminate this vague canon altogether.

There is, however, one mention in the current code of charging/paying interest for a loan.  Canon 1284.2 n. 5 asserts that administrators of ecclesiastical goods (basically, anyone responsible for finances in an ecclesiastical institution, like a diocese, a parish, a monastery, a Catholic university, etc.) are required to make timely interest-payments on mortgages or other loans, and to take care that eventually the loan itself is repaid.  Clearly the canon presumes that charging interest for a loan is not inherently objectionable, since administrators who’ve taken out such loans are obliged to pay it!

But while the Church today accepts the generic notion that interest can be charged on a loan, that doesn’t mean the problem of excessive interest-rates has disappeared from its radar.  The Catechism tackles the problem of third-world nations struggling to repay their debts to wealthier, more advanced countries:

There must be solidarity among nations which are already politically interdependent. It is even more essential when it is a question of dismantling the perverse mechanisms that impede the development of the less advanced countries.  In place of abusive if not usurious financial systems… there must be substituted a common effort to mobilize resources toward objectives of moral, cultural, and economic development, “redefining the priorities and hierarchies of values” (CCC 2438).

And even more recently, Benedict XVI warned in his 2009 Encyclical Caritas in Veritate against disproportionate rates of interest that keep poorer persons and nations in perpetual debt:

Both the regulation of the financial sector, so as to safeguard weaker parties and discourage scandalous speculation, and experimentation with new forms of finance, designed to support development projects, are positive experiences that should be further explored and encouraged, highlighting the responsibility of the investor…. This is all the more necessary in these days when financial difficulties can become severe for many of the more vulnerable sectors of the population, who should be protected from the risk of usury and from despair. The weakest members of society should be helped to defend themselves against usury… in order to discourage the exploitation that is possible… (65, emphasis in original).

We can see that while there is no explicit discussion of usury in the Code of Canon Law today, the Church is nonetheless firmly opposed to it, in its contemporary definition of interest-rates that are unreasonable.  But the Church also refrains from laying out precise figures, knowing full well that every loan around the world is not the same!  Speaking broadly, we normally tend to know exploitation and injustice when we see it, even if there is no official, mathematical formula upon which our conclusion is based.  The Catholic Church isn’t opposed to charging or paying interest on a loan per se; but its moral teachings on dealings with our fellow-man can definitely be applied when the conditions for obtaining a loan fail to take into consideration the humanity of the borrower.

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