If it comes up at all, it is usually presented as an example of the Church changing its teaching by folks who would like to see the Church change its teaching on other matters. The basic argument is that the Church repeatedly condemned usury up until the year 1836, then fell silent on the matter, and finally overturned the teaching in 1917, when the Code of Canon Law allowed those responsible for the Church’s financial affairs to invest in interest-bearing securities. There are, therefore, two reasons why Catholics should be interested in a discussion of usury: first, because if this is still a serious sin, then our financial conduct ought to be guided by a desire to avoid it; second, because if it is an example of a change in the Church’s teaching on morals, it would seriously undermine the doctrine of infallibility.
What Is Usury?
Usury is the practice of exacting interest on loans. According to Vix Pervenit, an encyclical promulgated by Pope Benedict XIV in 1745: “The nature of the sin called usury has its proper place and origin in a loan contract. This financial contract between consenting parties demands, by its very nature, that one return to another only as much as he has received. The sin rests on the fact that sometimes the creditor desires more than he has given. Therefore he contends some gain is owed him beyond that which he loaned, but any gain which exceeds the amount he gave is illicit and usurious” (No. 3).
The Catechism of the Catholic Church states: “Contracts are subject to commutative justice which regulates exchanges between persons in accordance with a strict respect for their rights. Commutative justice obliges strictly; it requires safeguarding property rights, paying debts, and fulfilling obligations freely contracted. With commutative justice, no other form of justice is possible” (No. 2411). The traditional understanding of commutative justice centered on the idea of a “mutuum,” a form of contract concerning the loan of consumables, such as wheat, wine or money. Commutative justice demanded that when consumable goods were loaned, the lender would receive back exactly the same amount of comparable goods as had been lent.
Within a capitalist economy where people are almost conceived of as having a right to profit, this seems like a strange idea. What motivation would a lender have for lending if they didn’t expect to profit? Church teaching answers: “The goods of creation are destined for the whole human race.... The right to private property, acquired or received in a just way, does not do away with the original gift of the earth to the whole of mankind. The universal destination of goods remains primordial, even if the promotion of the common good requires respect for the right to private property and its exercise” (Catechism, Nos. 2402-2403). Lending is conceived of as a duty which is binding on Christians. “In his use of things man should regard the external goods he legitimately owns not merely as exclusive to himself but common to others” (No. 2404).
Although usury is rarely discussed explicitly within Catholic discourse today, the same economic principles that led to its condemnation are still promulgated by the teaching authority of the Church. On those occasions when usury is mentioned, as in the encyclicals Rerum Novarum (on capital and labor) or Caritas in Veritate (“Charity in Truth”), it is always discussed as a grievous injustice.
Vix Pervenit did not allow for profit, but did allow for the existence of “extrinsic titles.” An extrinsic title is a repayment for aspects of lending and borrowing that are not directly related to the loan. A lender might have legitimate overhead costs, or he might charge a reasonable administrative fee for his labor in overseeing his loans. He could also have a legitimate claim to be repaid more than he lent if the repayment represented the prevention of a loss. So, if the value of the original goods diminished over the course of the loan, then the lender would be entitled to receive back a value equivalent to what he had loaned. In contemporary economic practice it would, for example, be reasonable to take inflation into account when working out what is owed. A lender making loans to a number of potentially insolvent borrowers was permitted to charge for the risk of the loss of his capital, and a lender who lent out money that he would otherwise have used to turn a profit could legitimately charge the borrower for the loss of profit. A contract that was just according to these principles would have been considered morally valid even if the nature of the extrinsic titles was not made explicit.
Over time, economic systems have become increasingly baroque, and theologians are less able to judge adequately whether or not the rate of interest charged conforms to legitimate moral specifications. When Vix Pervenit was published the Church was able to see that the emerging world financial system was one in which the practice of loaning at interest would become almost ubiquitous, and in which, as a result, it would be increasingly difficult to differentiate just from unjust economic practice. The Church’s attempt to oppose the creation of such a system ultimately failed. Today, it is practically impossible to interact with money without in some sense participating in a usurious system, and as a result the Church has become less stringent in the application of its doctrine in individual cases.
This is similar to the tack that St. Paul took with the Corinthians regarding the eating of meat sacrificed to idols. The decree of Jerusalem established that pagan converts to Christianity must abstain from such meat, and the consciences of some of the Corinthians were disturbed because in Corinth any roast that you picked up in the marketplace might have been consecrated to Diana. Paul told the Corinthians not to scruple; “Eat anything sold in the market, without raising questions on grounds of conscience” (1 Cor 10:25). He recognized the practical difficulties and wanted to avoid placing onerous burdens on the consciences of his Corinthian converts.
The Church today behaves in the same way regarding usury. She recognizes that the vast majority of Catholics seeking to invest on a small scale don’t have the economic knowledge or theological training necessary to work out whether their financial dealings are, or are not, strictly usurious. For this reason the Church has chosen to concentrate on promulgating sound economic principles for individual Christian life, and has focused criticism on systematic evils and injustices such as usurious international loans.
Contemporary economic evils tend to be systematic, so it is important for Catholics to engage with the economy in a way that encourages responsibility and justice. In Caritas in Veritate, Pope Benedict XVI points to micro-finance, credit unions and consumer associations as possible means by which laypeople can help promote just financial practices. “It is good for people to realize that purchasing is always a moral — and not simply economic — act. Hence the consumer has a specific social responsibility” (No. 66). Catholics can oppose usurious systems by choosing credit unions over major banks (particularly for large loans), by investing in ethical funds, by demanding just practices on the part of any financial organization that they support, and by placing their own wealth at the service of the common good. TCA