As new regulation on the finance industry became effective this weekend,
news reports are indicating that the average interest rate on credit cards is 14.7%. The highest level of average interest in 9 years and 11.45% above the prime interest rate (the largest gap in 22 years).
This information makes it clear that the finance industry’s well paid lobbyists were very effective on Capitol Hill. Not long ago, profit margins and interest rates like this would have been considered “biting” interest.
Ancient Israel had a lot stronger regulation on loans than we do. The Mosaic law prohibited charging “your brother” interest and all the tribes of Abraham were blood brothers. For Hebrews it was only permissible to charge interest to “a foreigner.” (Deut. 23:19-20)
The early Christians, considering each other brothers and sisters in Christ, extended the Deuteronomic prohibition against usury to all who shared their faith. Charging interest to even those outside the faith was viewed as a form of theft and harmful. Throughout the first millennia of Christian history, the opinion of
Ambrose (c. 337-397 A.D.) prevailed:
He fights without a weapon who demands usury: he who revenges himself upon an enemy, who is an interest collector from his foe, fights without a sword. Therefore, where there is a right of war, there also is the right of usury.
During the time of the Crusades, the Popes began to chafe at the interest they had to pay on the loans that they obtained from Jewish moneylenders (who could charge interest in good faith) to finance their wars to reclaim the Holy Land. Then Christian theologians started questioning the right of anyone to charge interest and began noticing the admonition in Christ’s sermon on the plain:
Love your enemies, do good to them, and lend to them without expecting to get anything back. Then your reward will be great, and you will be sons of the Most High, because he is kind to the ungrateful and wicked. (Luke 6:35 emphasis added)
Ultimately,
Thomas Aquinas (1225-1274) summarized the Roman Church’s new found emphasis on the brotherhood of all men in his
Summa Theologica:
The Jews were forbidden to take usury from their brethren, i.e., from other Jews. By this we are given to understand that to take usury from any man is simply evil, because we ought to treat every man as our neighbor and brother, especially in the state of the Gospel, whereunto all are called. (Emphasis added)
As Benjamin Nelson recounts in his book,
The Idea of Usury: From Tribal Brotherhood to Universal Otherhood
(1949), Aquinas’ view of the universal brotherhood of mankind held sway until the age of the Reformation. After writing forcefully against the idea of usury,
Luther sided with the territorial princes who put down the peasants revolting against monopoly prices on rent contracts and exorbitant interest rates on loans (as high as 60%). Luther and
Melanchthon began denouncing legalistic pronouncements about usury and announced that the Christian is free to lend his money and charge as much interest as conscience would permit (for Luther, no more than 5%).
In Nelson’s view,
John Calvin inaugurated a “transvaluation of values” by replacing both the Hebrew tribal brotherhood and Aquinas’ universal brotherhood with the idea of a “Universal Otherhood, where all become “brothers” in being equally “others.” He made it permissible to charge interest even to a brother.
Calvin interpreted scriptures to forbid only “biting” usury – interest taken from the defenseless poor. “If we wholly condemn usury,” he said, “we impose tighter fetters on the conscience than God himself.” Realizing that putting an end to usuries was impractical, Calvin said “we must make concession to the common utility” and concluded that:
Usury is not now unlawful, except in so far as it contravenes equity and brotherly union. Let each one, then, place himself before God’s judgment seat, and not do to his neighbor what he would not have done to himself, from whence a sure and infallible decision may be come to. To exercise the trade of usury, since heathen writers counted it amongst disgraceful and base modes of gain, is much less tolerable among the children of God; but in what cases, and how far it may be lawful to receive usury upon loans, the law of equity will better prescribe than any lengthened discussions.
Calvin and his fellow ministers fixed the maximum rate of usury at 5%. Those who charged more risked losing their principal plus a fine.
Calvin’s idea of “universal otherhood” has clearly become the predominant economic viewpoint of the modern world. It is equally clear that the boundaries within which Luther, Calvin and their contemporaries hoped to confine the practice of usury have been themselves been “transvalued.”
Today, the “defenseless poor” are forced to pay the highest interest rates. “Biting” usury is not only commonplace, it is considered to be among the best business practices of our strongest and largest lenders.
If the poorest Americans can obtain a credit card at all, they will be required to pay an interest rate of more than 20%. Military personnel can be charged up to 36% interest for a payday loan. Other low income Americans have legally been charged
up to 400% interest by payday lenders.
It is time for another “transvaluation of values.” If modern society cannot exist with credit and credit cannot exist without interest, then something must be done to make sure that the poorest among us have access to credit at a reasonable rate of interest.
Luther and Calvin put a cap on interest at 5%. Why can’t we negotiate a range somewhere between that and the 14.7% average that we see on credit cards today?