Usury - Has the Church Erred?

I've moved this post on Usury from the Infallible Safety thread to give some focus to this important topic, which I hope to explore further.

According to the Consumer Federation of America:

Payday loans range in size from $100 to $1,000, depending on state legal maximums. The average loan term is about two weeks. Loans typically cost 400% annual interest (APR) or more. The finance charge ranges from $15 to $30 to borrow $100. For two-week loans, these finance charges result in interest rates from 390 to 780% APR. Shorter term loans have even higher APRs.  Rates are higher in states that do not cap the maximum cost (How Payday Loans Work).

A Catholic today, in good conscience, could set up his own Payday loan business and charge whatever “exorbitant” interest rate or “finance charge” that is approved by the state.  780%? No problem - and the Catholic Church will have nothing to say to disturb his conscience, for there is nothing to confess, and the penitent is not to be disturbed.

But, if this same Catholic decides to read the Catechism of Trent and, after having discovered it defines usury as “whatever is received above the principle, be it money, or anything that may be purchased or estimated by money” he might develop a pang of conscience, especially when he then discovers that:

“For most of the first 1500 years of Christianity, the lending of money at interest was unanimously condemned by the Fathers of the Early Church, and by popes, councils and saints, as a damnable sin equivalent to robbery and even murder. Any interest on loans of money, not just exorbitant interest, was defined de fide as a grave transgression against God and man” (Hoffman, Usury in Christendom.

Disturbed, this compels him to look further and he discovers that, yes, usury is still defined the same way, but there are simple Church-sanctioned methods for circumventing God’s law.

Such as, if he simply sets up a separate loan contract or “title” to run parallel with the first zero or low-interest loan contract (he is charitable, after all), the parallel title is not “intrinsic” to the first, and he can, therefore, charge the 780% percent interest or fee, or whatever the governing body allows. After all, Pope Benedict XIV, who gave magisterial teeth to these “parallel” contracts, declared in the same 1745 Bull (Vix Pervenit): “From these other titles, entirely just and legitimate reasons arise to demand something over and above the amount due on the contract.”

Alternatively, he learns that he can charge, guilt-free, the mega-profitable and state-approved interest on his payday loans provided the borrower provides collateral, and in the case of default, recourse would be limited to only the named collateral. Oh happy day!

Our Catholic Payday Loan entrepreneur became slightly dismayed when he discovered that the 1917 Codex Juris Canonici, Canon 1543 declared: “…it is not per se unlawful to contract for the legal rate of interest, unless that be clearly exorbitant” (Usury in Christendom, pg. 147).

He asked his parish priest what was meant by “exorbitant”, and the priest said he had no idea, and neither does the Church, but not to worry, “per se” means as long as you are charging no more than the rate cap established by your state (if you have a cap), you’re fine. Besides, the Vatican Bank is always embroiled in scandal, and “money” no longer means the same thing as it did in those first 1500 years of the Church’s history, it now has “time value” and has an inherent capacity to produce good stuff!  

Sleep well, says the parish priest, you are “infallibly safe”. Say, have you contributed to the Annual Bishop’s Appeal yet?

I am going to borrow the esteemed Arnaldo Vidigal Xavier de Silveira from my thread on Inafallible Safety and allow him to opine on why the usury condemend for the first 1500 years of the Church - is no longer usury.

In Chapter 11 of the same cited study (https://www.traditioninactiondobrasil.org/Collection/A_003_AX-English.pdf), de Silveira discusses the apparent "prohibition of loans for interest, by St. Thomas Aquinas, and by the classic theologians in general."

2. Apparent Condemnations of All and Every Loan for Interest

Another very enlightening example, of the phenomenon to which we allude, is that of the condemnation, by the classical theologians, of loans for interest. Saint Thomas, for example, writes in a peremptory fashion: “to receive interest for a loan of money is in itself unjust” (4). The absolute character of the assertion appears to indicate that, for the Angelic Doctor, in each and every historical situation loaning for interest would be immoral.

Now, a careful analysis of the writings of Saint Thomas and of the classic theologians in general, show that they prohibited interest because they considered money a simple instrument destined for the facilitation of exchanges. In modern economics, however, the function of money has been increased tremendously. In addition to facilitating exchanges, it has come to represent the goods themselves for which it can be exchanged at any moment:

“he who is the owner of money – writes Cathrein – possesses, not formally, but equivalently, all that in concrete can be acquired with that money” (5).

That being the case, loans at interest have today a character fundamentally different from that which they had in the Middle Ages, equivalent in a certain way to rents and leases. The moralists do not hesitate, thus, in declaring that Saint Thomas, in spite of his absolute affirmation to the contrary, would not condemn interest in an economic order like this in which we live (6).

Is this true? Michael Hoffman might have something to say about that, as we shall see.

Mike,

Usury is a very good topic to discuss in the vein of the hierarchy and the Church's indefectibility. I know you've touched on that in the past in our correspondence. And I have also read Hoffman. What makes it particularly interesting is that at the level of the infallible, solemn Magisterium, the Church is consistent in it's absolute prohibition - e.g., Trent. It's at the disciplinary level - the code, the discipline regarding penance = that things go haywire. Hmmm.