After the renaissance arguments within protestant

after the Renaissance, arguments within
Protestant nations changed from
whether usury
was permitted, to how much was a reasonable rate.
It became common for secular powers to regulate
rates of interest. These changes in attitude were
buttressed by then-new classical economic argu-
ments regarding issues such as risk and the time
value of money from the likes of John Locke.
Not until the 19th century, however, did the
Catholic Church finally soften its position on
usury. The Church ruled that “. . . the faithful
who lend money at moderate rates of interest are
‘not to be disturbed,’ provided they are willing
to abide by any future decisions of the Holy See”
(Divine, 1967, p. 499).
While the taking of interest is more or less
universally legal in the industrialized west,
restrictions on interest rates remain to this day.
Many U.S. states restrict permissible interest rates
on consumer retail loans to something close to
twenty percent. More than one American state
has had usury limits incorporated into its con-
stitution. Arkansas’ constitution of 1874 limited
permissible interest rates in that state to only ten
percent. Many of the state’s financing companies
were simply forced to leave the state when efforts
at passing a constitutional amendment to the
usury provision failed (Martin et al., 1990, p. 6).
By 1990, Arkansas still had not effectively
changed its usury law. By comparison, nearby
Tennessee, which also had constitutionally
mandated usury limits, changed its law in 1979.
Using national loan market data from January
1983 to August 1989, Liu et al. (1990) estimated
that 60% of short-term, fixed rate small loans
(between $1000 and $24000) made in the U.S.
during that period were negotiated at rates above
the legal maximum in Arkansas.
In spite of the Arkansas case, if one looks at
the United States as a whole, it can no longer
be argued that usury is much of an ethical issue
in the modern American marketplace. While
federal and state limitations on interest rates do
exist in the U.S., banks and other financial insti-
tutions have on the whole been left alone to
charge what markets will bear. The anti-usury
attitude dating from antiquity has been sup-
planted by modern moral ambivalence. If moral
objections are raised at all, they are to the taking
of
excessive amounts of interest rather than the
taking of interest per se . This is, in fact, the
meaning conveyed through modern use of the
term “usury”, excessive interest rates. Of course,
in the U.S. it is precisely the people in the most
precarious economic positions that are paying the
most “usurious” rates, which is ironic since the
biblical injunction is explicit in its condemnation
of any interest charges to the poor.
On the other hand, there still are segments of
Conflicts of Interest? The Ethics of Usury 333

the modern economy that continue to shun
usury on the basis of these very same ancient
biblical exhortations against it. For these com-
munities, the biblical commandments to “lend
freely” to the poor remains alive today.