Usury

Definition

Usury refers to the practice of charging excessively high-interest rates on loans, often considered exploitative and unethical. In historical contexts, particularly during the Middle Ages, usury was heavily criticized by religious authorities who viewed it as morally wrong, leading to a significant discourse on interest rates and ethical lending practices.

5 Must Know Facts For Your Next Test

1. Usury was condemned by prominent theologians during the Scholastic period, including figures like Thomas Aquinas, who argued that it violated natural law and the moral obligation to assist others.
2. The definition of usury varied over time; while it originally referred to any interest on loans, it later came to mean excessively high rates that exploit borrowers.
3. Many Christian authorities sought to regulate interest rates and promote fair lending practices, leading to various economic theories that justified or condemned usury based on moral grounds.
4. In medieval society, those accused of usury faced social stigma and legal repercussions, highlighting the strong moral stance against such practices.
5. The debate over usury laid the groundwork for modern financial ethics and discussions about responsible lending in today's economy.

Review Questions

• How did Scholastic thinkers view usury, and what moral arguments did they present against it?
  • Scholastic thinkers like Thomas Aquinas viewed usury as a violation of moral principles. They argued that charging excessive interest exploited the borrower and contradicted natural law. This perspective was rooted in the belief that money should serve to facilitate trade and assist others rather than being used as a means of profit through exploitation.
• Discuss how the condemnation of usury influenced medieval economic policies and practices regarding lending.
  • The condemnation of usury led to the establishment of guidelines for fair lending practices during medieval times. Religious authorities imposed restrictions on interest rates, aiming to protect borrowers from exploitation. This regulation not only shaped the economic landscape but also encouraged discussions about ethical financial behavior, influencing how loans were structured and managed within society.
• Evaluate the long-term impact of usury debates on contemporary financial ethics and practices.
  • The debates surrounding usury have had a lasting impact on contemporary financial ethics by shaping discussions around responsible lending and consumer protection. Modern laws against predatory lending can be traced back to historical condemnations of excessive interest rates. As a result, these discussions have influenced regulatory frameworks designed to prevent exploitation in financial transactions, emphasizing fairness and equity in lending practices today.

Related terms

Interest: The cost of borrowing money, usually expressed as a percentage of the principal loan amount, which lenders charge borrowers in exchange for the use of their money.

Loan Sharking: The practice of lending money at extremely high-interest rates, often without legal authority or regulation, frequently targeting vulnerable individuals.

Just Price:

A concept in medieval economic thought that suggested prices should reflect the true value of goods and services based on fairness and equity, opposing practices like usury.