Usury

USURY. - The term has two acceptations, one absolute, the other relative to interest. In the first case usury is the profit received from a loan as if it were owed by virtue of the loan itself; in the second case it is excessive interest, that is, interest higher than the rate established by law. A loan is a bilateral contract by which one party grants to another for a certain time a fungible thing (consumable at the first use made of it) on the condition that, once the fixed time has elapsed, it be returned in its equivalent. The subject matter of this contract is any thing whatsoever, provided that it is fungible, but in a particular way usury is understood to refer to the lending of money.

I. HISTORICAL ORIGINS

From the time money appeared as a medium of exchange, the lending of it at interest also appeared; at the same time in every country an extensive body of legislation was born and developed, aimed at curbing the greed that immediately followed from it. Among the Hebrews the idea of gratuitous lending was deeply rooted, but violations were continuous, until, under the pretext of conforming to the practice of foreigners, they did not hesitate to openly violate the law (cf. Ex. 22:25; Lev. 25:35-37; Ezek. 18:8, etc.). The Greeks practiced usury without scruple; Plato and Aristotle, however, were opposed to it; Aristotle was in fact the first to find the rationale for its unlawfulness, a rationale that would be taken up again and developed in the Middle Ages (cf. Plato, Leges, V, 741-42; Aristotle, Polit., I, 2). In Rome too, both republican and imperial (Tacitus, Annales, VI, 22), usury was practiced, with grave harm to borrowers, and the law intervened many times, but without effect, despite the grave penalties imposed on transgressors (ibid., VI, 16; Cicero, Ad Att., V, 21, etc.). Justinian legislation, while holding as a principle the immorality of usury, limited itself to restricting the concessions of previous laws (13, C. 4,32; 1, C. 7, 46). The Fathers of the Church opposed usury with strong words, without giving it a doctrinal formulation: noting the harms that came from it (cf. Clement of Alexandria, Strom., II, 18; PG 8, 1024; Gregory of Nazianzus, Orat., 16; PG 35, 957; St. Basil, In divites, chaps. 2-4; PG 29, 266 ff.; St. John Chrysostom, In cap. XVIII Genes. hom. XLI; PG 53, 376-77; St. Ambrose, De Tobia, 2 ff.; PL 14, 798 ff.; St. Jerome, Commentar. in Ezech., 18, 6; PL 25, 176-77, etc.).

St. Thomas, linking himself to the patristic tradition and to Aristotle, examined the question deeply, concluding by judging every usury unjust, as that which violated commutative justice, since in this way the same thing is sold twice (Sum. Theol., 2a-2ae q. 78, aa. 1-4). The Council of Vienne (1311) declared that anyone who dared to deny that the practice of usury was a sin should be punished as a heretic (Denz. U. n. 479). In reality there were always abuses to lament, but the principles remained unshaken and in their light the morality of facts was judged. The first to attack the traditional doctrine were Calvin (1509-64) and Charles du Moulin (1500-1566). The former openly denied the sterility of money, equating it in its productive capacity to a field and a house; it followed as a consequence that, just as it is not a sin to rent a house for money, so too usury on money lent is not a sin; sin occurred only in excess. Du Moulin, on the other hand, undertook to maintain as a basic point that with a loan there was no transfer of ownership, and therefore of itself it did not require gratuitousness.

These new doctrines caused much stir and soon ended with the victory of traditional thought. A century later the question was taken up again by C. Saumaise (1588-1653), who maintained two fundamental principles: the use of money is vendible, and the price of this use must be determined by the free will of the contracting parties. Followed by many others who harked back to Calvin, he succeeded in prevailing, and his principles were accepted and practiced. In the Catholic camp ideas began to be sifted anew in the light of new commercial customs and of the introduction of new forms of contracts that seemed to have affinities with the loan. Some authors who undertook to maintain opinions that directly favored usury were condemned (Denz. U. 1190-91); after the condemnation some attempted to evade it with a clever distinction between mutuum consumptionis (money given for the necessities of life) and mutuum productionis (money given for commerce), concluding for the unlawfulness of usury in the first contract and its lawfulness in the second; and someone attempted to demonstrate that the civil power has authority to make lawful that usury which it permits and unlawful that which it prohibits. The ferment continued in France and in Holland with alternating fortunes in the prevalence of the contrasting theses; however, the conviction that usury was lawful kept making its way ever more. The echo of these disputes reached Italy, where the theoretical question was entirely dormant, even though there was an almost universal practice of usury; Pietro Ballerini, wishing to prevent the spread of the theories incriminated from beyond the Alps, energetically maintained the traditional idea and took no account of the progress made; moreover he went so far as to deny even those motives extraneous to the loan that legitimize a compensation, which had been admitted by St. Thomas himself, confusing the loan with other contracts, in themselves legitimate, and subjecting the whole to condemnation. Scipione Maffei took a position against Ballerini and sought to demonstrate that moderate usury was not unjust but lawful, indeed useful; only excessive usury was condemnable. His work Dell'impiego del denaro (1744) unleashed reactions and protests on the part of many moralists, and the exchange of accusations of heresy was frequent. Benedict XIV felt the need to intervene with an encyclical (Vix pervenit, 1 November 1745), which did not suffice to completely quiet the controversies. Among others Daniele Concina (v.) intervened in a rigorist sense in the debate, basing himself on the Vix pervenit. The question died down and the practice of usury did not change.

The distinction between usury and interest (v.) was introduced for the first time into official language in a law of the French Constituent Assembly. From then on all States concerned themselves with fixing the rate of interest and with punishing usury. In Italy loan and interest are regulated by the Civil Code (Book IV, chap. XV, arts. 1813-22) and by the Penal Code (Book II, tit. XIII, chap. II, art. 644).

II. THE PROBLEM OF USURY

For economists it is by now settled that interest may be demanded for the lending of money, under whatever form, and in order to be able to re-examine the situation radically today, it is useful to see briefly what the thought of the Scholastics was. It must be premised that neither Sacred Scripture nor Tradition speaks of usury in the technical sense of the word, and the Scholastics, in order to condemn it, do not base themselves on Revelation, but examine in depth the nature of things and in particular of money: for them the idea precedes and forges reality with an anti-opportunistic tendency; the moderns, on the other hand, study the contingency of reality, believe they see the nature of money changed, consequently posit other principles and deduce from them conclusions that are at the antipodes of those of the school. The starting point is to determine what is meant by capital, which are the res frugiferae and which are not frugiferae. The moderns have in view the production of new things, while the ancients thought especially of the distribution of a new value. For the moderns the intimate reason why a thing is capital is that it contributes to the production of a new value; while for the ancients it was that it had an estimable use, distinguishable from the thing itself. According to the moderns, three elements are necessary for production: nature, labor, capital, and the latter is defined as a part of produced wealth destined for new production; the Scholastic school, on the other hand, wishing to investigate to whom the profit should go, investigated from which sources a gain could be drawn and posited only two: nature and labor. By nature is meant anything that has the capacity to bring a utility of itself, therefore everything that can have a useful use; but according to the different essence of things, some remain in their being after the use made of them, others instead perish with the use made of them (quorum usus est abusus, according to the classical expression); therefore the former are ex se frugiferae, the latter steriles, even if by applying human industry they can become fruitful like seed. Capital therefore, always according to the Scholastic school, is constituted by those things that have an intrinsic profitableness, whose use, that is, is separable and distinct from the substance and can therefore be the object of a contract independently of it. There enter into capital the whole of immovable and movable goods, included in the classical phrase res quae primo usu non consumuntur. From this it is deduced that the concept of res frugifera was applied both to those things that are formally productive: fields, woods, plants, animals; and to those that are not formally so: houses, tools, furnishings; both the one and the other, however, are productive of a just profit, because they have an estimable use beyond the estimability of the substance.

Having thus delimited the field of capital, it is not said that everything that exists is included in it; there are other things that also have a useful use, but which is not distinguishable from their substance; those, that is, which by the fact that they have been used no longer continue in their being; thus salt for seasoning food, oil for lighting or for nourishment, coal for combustion. From the use there evidently derives a profit, but this is had formaliter through the consumption or substantial destruction of the thing itself, so that the use of such a thing is not distinguishable from its substance; if it is not distinguishable, it is not even appreciable distinctly from it, nor in the final analysis can it be the object of a distinct contract. This is the profound reason why such things are called unfruitful or sterile, even if they were evidently fruitful like seed. Therefore, setting aside donation, when there is a sale of such things, it is not lawful to demand that the profit of the use be valued or computed at more than the price of the substance. In the case of a loan, by granting the use of a sterile thing one gives the right to destroy it; this implies dominion over the thing itself, and therefore in the loan there occurs the transfer of dominion. For justice it will be necessary to restore the equivalent in quantity and quality; whoever demanded more would violate commutative justice, because in practice he would sell the same thing twice (bis vendere idem, vel vendere quod non est). This is the contract called mutuum, with its characteristics of the transfer of dominion and the gratuitousness of the use, of which the first condition justifies the second; the violation of this is true and proper usury, no matter whether great or small, whether one lends to the poor or to the rich, whether the loan is for immediate sustenance or for commercial purposes. It can happen that the lender, in lending, comes to lose: either because a profit that he obtained from the thing ceases for him (lucrum cessans) or because he actually suffers a loss from it (dannum emergens), or because he runs a serious risk of not getting back what is his (periculum sortis); in these cases one cannot deny him the right to demand something; but then it would not be by virtue of the mutuum (ex mutuo, vi mutui): rather for reasons extrinsic to the mutuum as such.

It is now a question of seeing in which category of goods money must be placed, given its complex nature.

It seems that the Middle Ages did not know the system of paper money; the Scholastic formulation, however, still today, and perhaps more than ever, has all its value, even if one took as one's starting point coinage made of more or less precious metal. Money is defined as the instrument that serves essentially for the exchange of things that have a value. For this it was invented and is therefore the measure, the price of all things, indeed it represents them all, transports them from one account to another, from one time to another, so that it becomes for man like a guarantor. According to St. Thomas it is the rule and measure of venal things; by its essence it entails that it have a relation to all things that can be exchanged in the reciprocal economic relations of man, not to the others that stand outside such relations. That is, the value of a thing necessary or useful to man is measured by the price that is given for it in order to have it; this price is money because it was found for the precise purpose that it be spent in exchange with other things: this is its use.

In other words, money, expressing the relation of value that exists between things, stands to all venal things among themselves (as measure of their value) as the balance stands to all things that have weight, as the meter to those that have length.

The task of money, of the balance and of the meter is essentially exhausted in measuring value, weight, length; it matters little whether such means are of gold, of silver, of iron, or of paper. If the essential property of money is to be a measure, its proper use will be that it in fact measure. Now it will not be able to measure, that is, to compare the value of two things, except when, received in the exchange of one, it is itself exchanged for the other and therefore insofar as it is money it is spent, that is, consumed. This immediately brings out the identity that exists between money and res primo usu consumptibilis: it is therefore also sterile. This identity is the starting point for the principles to be deduced.

St. Thomas, when he speaks of money as such, always prescinds from the material of which it is made, as well as from the purpose for which it is employed; whether, that is, for acquiring the necessities of life, or for further trading. Hence it would be wrong to say that he considered money as primo usu consumptibilis because at that time it was spent only for acquiring the necessities of life and not for commerce; and thus one would come to maintain, as conformable to his principles, the distinction between mutuum consumptionis and mutuum productionis. On the other hand, as the historians testify, monetary circulation was already very active in the 13th century; therefore the distinction between one kind of loan and another, deduced from the purpose for which it was made, had certainly not escaped the Angelic Doctor, who would have inserted it into his framework, had it truly squared with the principles deduced from the nature of things. From this one also understands in what sense the Scholastics intended this sterility: it does not mean that with money and human industry one could not derive profit (St. Thomas asserts: de pecunia lucrari posse): but then the profit originates only from human industry, or more precisely from labor and from the things acquired with money, never from money itself. Therefore the principle of the sterility of money was deduced from its specific nature, and St. Thomas by this by no means intended to give a scientific explanation of the prohibition of u.

Given the sterility of money, it is not possible to separate in it a use distinct from the substance and separately estimable; therefore it is not possible to give or sell the use of money separately from the substance: whoever gives the use gives the substance and vice versa; whoever sells the use sells the substance and vice versa. Now the contract to which money as such can be subject will be either unilateral and gratuitous, or bilateral and onerous. Leaving aside the first case (donation), in the second the only charge that can be imposed will be that of the restitution of the money in the same quantity in which it was received: that is, there is the loan, with all its properties, hence transfer of ownership and gratuitousness of use; by violating this there is u., injurious to commutative justice, with the obligation of restitution. The extent of the u. will be an indication of its greater or lesser gravity, without however its species being changed. It will be removed neither by the different uses to which the money may be applied, nor by the different condition of the borrowers.

This, in summary, is the traditional doctrine of the Church, sanctioned by the encyclical Vix pervenit of Benedict XIV. Even today moralists, as a general rule, adhere to it; they add, however, that, given the present economic situation, every loan of money can always be considered a lucrum cessans and moreover, since civil law permits interest, it is always lawful to exact it, provided it is kept within the permitted limits. There are some who take a position contrary to the traditional doctrine: «Money which in ancient times was not held to be res frugifera and which could be considered such only in potency, must now be called fruitful in act, and it is lawful for anyone to have a profit from the loan of money (except when by the law of charity he is bound to lend gratuitously) independently of an extrinsic title» (Noldin). Others return decisively to the traditional doctrine, updating it to the deopment that the economy has undergone (Thiberghien). It is held, however, that the question still awaits resolution.

Elio Degano

III. ITALIAN LAW

Art. 1815 of the Civil Code, which forms part of the regulation of the loan, establishes in its second paragraph: "If usurious interest has been agreed upon, the clause is void and the interest is due only at the legal rate." The civil-law regulation of usury is provided, in the sphere of private law, through the sanction of nullity (which strikes not the entire contract, but only the clause concerning the interest, which is not due at the agreed rate but at the legal rate); moreover, the Penal Code punishes the crime of usury (art. 644).

The position taken by the Italian legislator against usury is justified by the need to reconcile the recognition of freedom with a certain equality. The thesis according to which usury can be effectively combated only through the improvement of economic conditions and the perfecting of credit is, today, definitively superseded: even granting that by these means its practice may be reduced, the law has not intended to renounce its own intervention against it.

The usury must now be defined juridically. Its field corresponds, traditionally, to the loan at interest. The interest consists of money or of other fungible things, just as the things lent (art. 1813), to which it is reckoned as a percentage; with respect to the debt having as its object the restitution (of "as many things of the same kind and quality" as those lent), the debt of the interest, although it exists independently of the agreement of the parties (art. 1815, 1st paragraph), takes on an accessory character. When the remuneration, by means of interest, for the use of money and of the other fungible things given on loan assumes excessive proportions, usury occurs, and the interest takes on the attribute of usurious.

When the speculative intent revolves around the use of money (or of other fungible things), the problem becomes particularly acute and sensitive whether or not it is advisable to leave to the economically stronger subject the unlimited power to overpower the weaker; since speculations on the lending of money have been and still are particularly frequent and since they themselves constitute the subject matter of a specific and very grave social problem, one can understand how the legislator has intended to take a particular position in this regard, imposing nullity upon the usurious clause.

To this must be added the immorality of the usurious contract: it is repugnant, in truth, to the moral conscience that the debt of the interest should give rise to excessive enrichment in favor of the creditor; and this evaluation of a moral order has likewise inspired the legislator when it provided for the nullity of the usurious clause.