The term 'Usury' is included in the Investments edition of the Financial Dictionary. Get your copy on Amazon in Kindle, Paperback or Audio edition. Check for lowest price here...
Usury has several meanings. The modern day connotation of the word equates to charging high rates of interest on loans which enrich the lender unreasonably. This is considered to be immoral, unethical, and in many countries illegal.
The original meaning of the word revolved around interest charges of any type for a loan. In historical Christendom, as well as in modern day and historic Islamic society and nations, the practice of charging any amount of interest was called usury. Today an individual who engages in collection of usury is either called a usurer or in English speaking societies a loan shark.
The term usury is often times utilized to decry an immoral abuse of gaining at the expense of other human beings’ misfortunes and suffering. It is also utilized in legal contexts to describe the legal governing of interest rates. In moral contexts, the word has equated charging interest on any type of loans with wrong doing and sin.
Usury has been addressed in religious texts dating back to the Vedic Texts from India and the Old Testament of the Bible from Israel. Buddhism, Christianity, and Islam also condemn the practice. At various points in history, great empires and states ranging from the ancient Chinese and Greeks to the ancient Roman Republic and early Roman Empire have made it against the law for people to make loans with interest attached. Eventually the later Roman Empire permitted these types of loans that included closely regulated interests rates. Medieval Christendom followed the leading of the Catholic Church by banning the practice of charging interest at any interest rate, or even for charging fees for using or changing money.
Philosophers and public speakers like Charles Eisenstein have made the case that the economic turning point within the British and later American led empires and world came with the legal rights to exact interest on loaned money. This began officially under the 1545 dated act, “An Act Against Usurie” passed by England’s infamous King Henry VIII.
Banking in the era of the Roman Republic and Empire proved to be quite different than modern day banking of the Anglo-American world. In the era of the Principate, the majority of banking endeavors occurred at the instigation of private citizens as opposed to enormous banking houses and firms of the early modern age and today. The typical interest rates annually on these loans ranged from four to twelve percent. A higher interest rate documented from these times came in at either 24 percent or 48 percent. Interest was charged on a monthly basis with the most typical rates being multiples of 12.
Banking at the time was the purvey of the side street smaller shopkeepers which were lower middle urban classes. The severe currency shortages of the third century and beyond caused these lending shops to decline. In time, the wealthy took over the practice by becoming moneylenders to the ever increasingly poor peasants who suffered from higher and higher taxes in the failing days of the Roman Empire. They eventually had to sell themselves as serfs to cover their debts. This is why the Medieval Catholic Church decided that usury was in fact unfair exploitation of human misery and the poor of society.
This prohibition against charging interest began in 325 at the First Council of Nicaea that made it illegal for the clergy to practice usury by charging interest of any kind. Subsequent ecumenical church councils extended this ruling to the rest of the Christian population. It culminated with the Lateran III council that made it a cardinal sin to accept interest payments on loans. Such individuals who defied the church teaching and ruling on this matter were not allowed to receive Church sacraments like communion or marriage or to have a Christian Last Rights and burial.
By 1311, Pope Clement V decreed that charging usury was heresy, abolishing any secular laws that permitted it still. Pope Sixtus V articulated this moral repugnance against the practice of charging interest best with his statement that charging such interest was “detestable to God and man, damned the by the sacred canons, and contrary to Christian charity.”