If a Christian in medieval times were punished for practicing usury how would they be punished? Would they be denied the sacrements ? Does Canon Law mention any punishment that could be meted out to a n offender?
Found this via Google: “The Second Lateran Council (1139) condemned usury as “ignominious.” Lateran III went further: canon 25, quia in omnibus, erected three capital decisions: (1) excommunication for open usurers, the church’s categorization of the usurer during this period, thus excluding him from the Christian community.”
Thanks Jasmine. Perfect!
With excommunication as a penalty under canon
law, you have to distinguish between two cases. It can either apply latae sententiae, which means it must be imposed by a church authority empowered to impose it; or ferendae sententiae, which means it operates automatically by virtue of the deed alone, with no need for an authority to proclaim it. It’d be interesting to know if canon law ever went so far as to make usury a latae sententiae crime.
Thanks Schnitte. From my understanding the punishment of *latae sententia" was reserved for the most serious offenses. I wondered myself whether usury would fall into this penalty category.
As long as the original question’s been answered, I’ll throw in a tidbit of related information. When lending money for interest was illegal, bankers got around this by making currency exchanges, which were legal.
Say the normal exchange rate was five guilders for one florin. You and I might make an agreement for me to give you one hundred florins in exchange for six hundred guilders. But part of the agreement was that I would give you the one hundred florins today and you’d give me the six hundred guilders in three months. So the extra hundred guilders that were above the normal exchange rate would be de facto interest on a ninety day loan.
This kind of circumvention is largely what the entire growing field of Islamic Finance is based on. Of course they charge interest; they just call it something else.
Just noticed that I got the two Latin terms mixed up. Ferendae sententiae is the one that must be imposed, latae sententiae the one that applies automatically.
These are the church punishments. I assume some states (kingdoms) also had separate secular laws that enforced the church dictates? (Presumably enforcement varied) It would after all be in the interest (sorry) of kings to limit usury since they were perpetually broke and borrowing from everywhere.
King John allegedly expelled the Jews from England and cancelled the debt he owed them, but that’s not something that can be done again. It also probably did not instill confidence in future creditors.
One thing that was noteworthy is that usury was not a zealously punished sin until the high and late middle ages. In the early middle ages, big time financing was done mostly by royalty and other bigwigs. There weren’t enough of these guys to really get the church all worked up and these guys had the power to cut off heads. So the clergy were a little more likely to choose discretion before accusing a duke or king of usury or going after his financiers. It wasn’t until wealthy peasants started getting loans that the church got their panties in a bunch over it. A lot more peasants so a lot more usury. And you could punish them without worrying about them wondering about who would rid them of any turbulent priests.
I’m bumping this because I found out about another method to circumvent usury. From time to time, authorities would debase coins to stretch out the money supply. This fooled no one and the debased coins would quickly have a lower market value that reflected their lower silver content. So a man might receive a loan of 100 Guilders that were 80% silver but be required to pay the loan back in guilders that were 100% silver. Legally, it was a like for like repayment. But in reality the bank got its profit.
Another way to get around usury is to use put-call parity to construct a loan. The loan consists of a long position in an asset, a long position in a put option and a short position in a call option at the same strike. This position is free of risk (other than one party defaulting) and is worth the strike price for sure at the options’ maturity, but there are no loans or interest rates.
Here’s a pretty good article about how early financial folks dealt with the problem of usury:
Medieval Origins of Financial Revolution: Usury, Rentes, and Negotiability