Posts tagged with: usury

and112812blogNear the top of the list of things I despise is companies that take advantage of the plight of the poor and desperate. But just above that on my list is something I hate even more: being poor and desperate. That’s why I loathe payday lending companies that charge usurious interest rates—and why I’m not yet ready to see them abolished.

Here’s how payday lending works. If you have a job (and pay stub to prove it), a payday lending company will allow you to write and cash a post-dated check. For this service the company will charge an absurd interest rate. A typical two-week payday loan with a $15 per $100 fee equates to an annual percentage rate (APR) of almost 400 percent. So if you need $100, you write the check for $115 and they’ll give you $100 in cash. Two weeks later they cash your check or you can renew or “rollover” the amount—for an exorbitant fee.

Why would anyone agree to such terms? Because they have no other choice. About twenty years ago I made some terrible choices and found myself in a serious financial bind. The amount I needed wasn’t much—about $200—but without it I wouldn’t have been able to pay my rent. I took out a payday loan that cost me $30 every two weeks. It took about eight weeks to get clear of the loan, resulting in a cost of $120 to borrow $200 for two months.

If you’re middle class and think of it in terms of interest rate, that repayment cost sounds appalling usurious. And it is. But as the poor will tell you, man does not live on APR alone. Having to pay an extra $120 was cheaper than having to find a new place to live. Yes, it was a bad deal. But it was better than all my other choices.

That is why I believe every serious critique of payday lending needs to be accompanied by a serious proposal to help those who are trapped by such “poverty problems.” An excellent example of an alternative approach is the one offered by Wesley Memorial United Methodist Church in Richmond, Virginia. One of their church members, Nina McCarthy, was initially trapped in the vicious payday lending circle:

Fail-Debtors-Prison-Poor-TaxWhile payday loans can help some people out of a financial jam, they tend to prey on the poor and create a usury situation. Now that same predatory financial monster is moving into a new territory: bonds, courts fees and fines.

Take the case of Kevin Thompson, a 19-year-old who was fined for speeding and failure to renew his license. Although he had a job, he could not afford to pay the $810 fine the court handed down. What happens next sounds Kafka-esque: (more…)

MolinaCover - CopyCLP Academic has now released A Treatise on Money, a newly translated selection from Luis de Molina’s larger work, On Justice and Right (De iustitia et iure). The release is part of the growing series from Acton: Sources in Early Modern Economics, Ethics, and Law.

Molina (1535–1600) was one of the most eminent theologians of the Jesuit order in the sixteenth century. Known widely for developing a theory of human freedom of action (and in turn, a new religious doctrine now known as Molinism), Molina was also the first Jesuit to make major contributions to economic thought through a major treatise (On Justice and Right).

In the book’s introduction, Rudolf Schuessler offers more on the historical context and Molina’s contribution therein. As Schuessler explains, Molina’s views on freedom impacted his entire approach to economics and helped “set the pace for Jesuit economic thought.”

Jesuit economic thought in the seventeenth century gravitated toward individual freedom and displayed a keen appreciation of the market economy while upholding moral restrictions for market activities in a flexible and low-profile form. These features of Jesuit economic thought are of great—although not universally recognized—importance because the Jesuits were the teaching order par excellence in early modernity. Almost all early modern economic thinkers in Catholic countries were taught by the Jesuits, and Molina had the privilege to set the agenda for his order’s economic thought…

…By summarizing and discussing the state of the art of his time, Molina sets the pace for Jesuit economic thought. After the demise of the scholastic tradition and the temporary abolition of the Jesuit order in the eighteenth century, the respective doctrines traveled on back roads into the nineteenth century where they influenced the Austrian school and the marginalist revolution in economics. Molina and his contemporaries were the first to apply the laws of supply and demand systematically to money markets, and as a result conceived the quantity theory of inflation. They began to understand the role of risk, of liquidity, and of time preference in economic contexts, as well as the institutional role of property rights. For this they still deserve our attention.


AzpilcuetaCoverCLP Academic has now released On Exchange, a new translation of a key section in Martín de Azpilcueta’s Manual de confesores y penitents, his most influential work.

Originally published in 1549, the section was included as one of four appendices to the Manual, offering commentary on Gregory IX’s prohibition of nautical usury. The release is part of the growing series, Sources in Early Modern Economics, Ethics, and Law.

Azpilcueta (1492-1586), also known as Doctor Navarrus, was a leading canonist and moral theologian of the early modern period. Although On Exchange was meant to provide moral guidance for pastors and penitents, it has drawn the attention of economic historians for its indirect analysis of 16th-century economic realities, including explorations on exchange practices, supply and demand, and the nature of money. As noted in the book’s overview, Azpilcueta’s “account of the fluctuation of the value of money marks a significant development in early modern economic thought.” (more…)

Interest-Rate-burdenUsury is the practice of making immoral monetary loans intended to unfairly enrich the lender. But what, for Christians, counts as an immoral loan?

For much of church history, any interest was considered immoral. The 12th canon of the First Council of Carthage (345) and the 36th canon of the Council of Aix (789) declared it to be reprehensible even for anyone to make money by lending at interest. But that view eventually changed, and today even the Vatican participates in modern banking.

Some Catholics have used this example to argue for other changes, such as contraception. As Jay Richards notes,

davebratIn a piece today for the NYT Magazine, economics reporter Binyamin Appelbaum examines David Brat’s fusion of faith and free-market economics. Appelbaum finds that mixture problematic, to say the least, but it’s hard to sort out whether it is the religious faith or the free-market sympathies that Appelbaum finds more troubling.

In the opening paragraph, Appelbaum asserts that before Brat’s rise to prominence “there was plenty of skepticism about whether he merited the label of academic economist.” Who these skeptics are, who knew so much about Brat “even before” his “out-of-nowhere” victory, we are simply left to ponder. It seems some of his colleagues at Randolph-Macon College now harbor such skepticism. (Brat is running against a Randolph-Macon sociologist, Jack Trammell. Brat once wrote that “Capitalism is the major organizing force in modern life, whether we like it or not. It is here to stay. If the sociologists ever grasp this basic fact, their enterprise will be much more fruitful.”)

Brat’s academic record is a wortwhile question to take up, and one that there has been a great deal of interest in following his primary victory. I, like many others, wanted to find out more, and went in search of Brat’s publications (with the help of one of our interns). I’ve had a chance to look at a few, and even turned up the paper on Ayn Rand that had gained such notice. The Rand paper turned out to be a co-authored piece with a student, and something which barely qualified as a poorly-edited introduction to a conference presentation. It is certainly not a smoking gun for tracking down Randian sympathies.

The problem with Appelbaum’s piece isn’t that he is asking questions about Brat’s academic record. These questions should be asked. The problem is the tone of Appelbaum’s inquisition and his presumption against the coherence of Brat’s position. The sarcasm oozes from Appelbaum’s prose: Brat “is certainly not in danger of winning a Nobel Prize.” Likewise Brat has written “discursive papers devoid of math,” “cited Wikipedia as a source,” and “never been published in a significant journal.”

On Exchange and Usury, Cajetan, ThomasChristian’s Library Press has released a new translation of two treatises on exchange and usury by Thomas Cajetan (1469-1534), a Dominican theologian, philosopher, and cardinal.

Although best known for his commentaries on the Summa of Thomas Aquinas, Cajetan also wrote dozens of other works, including short treatises on socioeconomic problems.

Published under the name On Exchange and Usury, these treatises reflect on the banking industry of the early modern era in the context of the Church’s usury doctrine, examining which transactions were licit, and which involved usury, among other things. The book is part of CLP’s growing series, Sources in Early Modern Economics, Ethics, and Law.

In the introduction, Raymond de Roover summarizes some of the historical context, as well as Cajetan’s contribution therein:

Because of the Church’s usury doctrine, bankers were not supposed to charge interest and, consequently, had to look for some other way of lending money at a profit, with the result that banking became tied to exchange: local banking to manual exchange (cambium minutum), and foreign banking to real exchange or exchange by bills (cambium per litteras). Since the discounting of commercial paper was ruled out by the usury prohibition, bankers bought bills of exchange at a price that was determined by the foreign exchange rates… (more…)