Usury Takes a Bite Out of the Poor

Those of us struggling with the issues raised by payday and title loans are consistently told to take morality out of the equation when considering these loans. Thus, it was refreshing to hear a recent presentation by Professor Alex Mikulich of the Jesuit Social Research Institute at Loyola New Orleans entitled “From the Peril of Predatory Lending to the Hope of Economic Justice: A Religious Social Ethical Perspective.” Rather than avoiding morality questions, Professor Mikulich focused exclusively on them in his eye-opening presentation at a recent Family Impact Seminar. He noted that the loans create many unjust results, and then explained that the literal translation of the word usury in Hebrew is to “take a bite out" of the poor.   He distinguished usury from mere  “interest,” which Professor Mikulich defines as part of a mutually beneficial relationship that is good for the community as a whole.

Interestingly, in Exodus 22:25-27, the Torah commands that if a lender lends with a garment as collateral, the garment must be returned by sundown. In fact, no collateral could be taken that could threaten the well-being of the borrower, an interesting idea in light of the home foreclosure mess. Moving forward in history, in the 13th Century, Thomas Aquinas said that “usury leads to inequality which is unjust in itself.”

Modern Catholic social teachings also provide insights into these issues, for example by providing that human dignity for all can only be protected through community efforts, that the economy or economic development must serve people, not the other way around, and that prioritizing economic justice for the poor is a necessary condition for economic justice and the common good, which is in turn necessary in order for people to achieve full development as human beings.

Professor Mikulich concluded that predatory lending violates the Truth of God’s creation and human dignity in Torah and Gospels, violates basic truth of an honest business, and is in no way a “service” that helps people or produces any kind of good.  Rather it “bites” the life out of the poor and working classes, violates basic principles of justice, and as such, hurts individuals and the entire community.

Professor Mikulich is a Research Fellow at the Jesuit Social Research Institute College of Social Sciences at Loyola New Orleans, and has written numerous books and articles on white privilege and the Catholic Church.  We appreciate his foray into the payday lending debate and look forward to reading his future work.  He can be reached at [email protected].

 

 

Comments

[rjs]

western pressure on islamic finance to conform:

http://www.reuters.com/article/2012/04/06/us-finance-islamic-accounting-idUSBRE8350EC20120406

ever wonder why sharia law prohibits charging interest?

[Patches]

Great post!! Thank you!

[chris m]

I really appreciate this post. I love this website!

[JJ]

Of course, the Torah prohibits charging any interest, not just "usurious" interest. Or, to put it another way, a loan for which any interest at all is charged is considered to be usurious in the Jewish, Christian and Islamic faiths.

Of course, that doesn't really work well with moderns concepts of economic growth and is, frankly, regressive. Rather than pine for an impossible and possibly non-existent past, I think that a more profitable question to consider is how to encourage economic growth while minimizing the potential harms that lending money for interest can cause to our vulnerable populations?

[mt]

I've commented for years that a usury law is superior to the conventional wisdom of disclosure - centric lending regulation.