Usury

whiteonion

Usury is a practice that is considered un-christian, however usury used to mean to charge interest on a loan. Does this mean that charging interest on loans is un-christian? Is it against the Bible and gods laws to charge interest on loans?

Keylem

This is a good article on what the CC teaches about usery!

Economics were much different during early biblical times than what it is today. I would say that exorbitant interests would be sinful - money lenders IMHO would fall into that category as they can charge ridiculous interest rates on those who can ill afford it!

PDN

No.

Usury (as regards charging interest on loans) was forbidden to Jews in the Old Testament.

Today 'usury' normally refers to the charging of excessive interest.

Overature

its good to learn a new word, having never heard of it before, but say that i have lost interest in this topic

whiteonion

PDN wrote: »

No.

Usury (as regards charging interest on loans) was forbidden to Jews in the Old Testament.

Today 'usury' normally refers to the charging of excessive interest.

How do you define excessive interest rates?

hivizman

whiteonion wrote: »

How do you define excessive interest rates?

The English jurist Sir William Blackstone (1723-1780), in his Commentaries on the Laws of England, wrote the following: "When money is lent on a contract to receive not only the principal sum again, but also an increase by way of compensation for the use, the increase is called interest by those who think it lawful, and usury by those who do not."

At various times, either custom or legislation has specified maximum legal rates of interest - any contracts involving rates of interest greater than the specified maximum would not be enforceable through the courts (though they were no doubt often enforced by threats of violence). However, in the UK, the legal maximum, which was, I think, 42% per annum, was abolished in the 1970s, which is why we now see online lenders such as Wonga.com charging interest at an annual percentage rate of 4214%.

In the pre-modern period, lending money at interest often involved a great disparity of bargaining power between the lender and the borrower, and hence was often exploitative. For example, in pre-Islamic Arabia, a common loan structure involved the lender advancing a sum of money to a borrower with the requirement that the borrower repaid the amount of the loan one year later. However, if the borrower could not repay the amount of the loan, then the loan was renewed, but at an amount twice as much as the original loan. Very quickly, the loan would grow exponentially, and when the lender demanded repayment, the borrower would be unable to repay and would be sold into slavery.

However, by the 16th century, early Protestant reformers argued that loans were not necessarily the product of an unjust imbalance between lender and borrower. John Calvin, for example, stated: "[T]he gain which he who lends his money upon interest acquires, without doing injury to any one, is not to be included under the head of unlawful usury." So if the borrower was able to repay the loan with interest, then charging interest would not injure the borrower, and would be acceptable. Usury would be charging a rate of interest that would make it very difficult for the borrower to repay.

Further discussion can be found in Against Usury: Resolving the Economic and Ecological Crisis by Robert van de Weyer, an economist turned Anglican priest. The author suggests that "usury" should be interpreted as an inequitable allocation of risk. Lenders charge interest mainly to cover (a) the so-called time value of money - compensation for deferring consumption through lending money rather than being able to consume now, (b) expected inflation, (c) administrative costs of managing the loan, and (d) default risk - the estimated loss from borrowers who do not repay the loan. If the time value of money is 3%, expected inflation is 3%, administrative costs are 4%, and default risk is 10%, then an annual interest rate of 20% would be a fair return to the lender for the risks that the lender takes on, but an annual interest rate of 40% would be usurious.