History of the Term
Wayne A.M. Visser and Alastair McIntosh provide a short, scholarly summary of history of this term in "A Short Review of the Historical Critique of Usury".1
The religious prohibition
against usury is found in all of the world religion
s. The first recorded use of the term "derives from the Vedic
- e-hadj} texts of Ancient India
(2,000-1,400 BC) in which the “usurer” (kusidin) is mentioned several times and interpreted as any lender at interest." The Christian tradition is found in Luke
6: 34-35: "And if ye lend to them of whom ye hope to receive, what thank have ye? for sinners also lend to sinners, to receive as much again. But love ye your enemies, and do good, and lend, hoping for nothing again; and your reward shall be great, and ye shall be the children of the Highest: for he is kind unto the unthankful and to the evil.". However, the biblical usury theme borrows strongly from Judaism. Visser and McIntosh remark, "The Hebrew
word for interest is neshekh
, literally meaning "a bite" and is believed to refer to the exaction of interest from the point of view of the debtor
." Perhaps the most famous literary reference to usury is Shakespeare
's The Merchant of Venice
, although I fear the Bard took the Hebrew for "bite
" a bit too literally...
More recently, usury has generally been interpreted in both the religious and secular context to refer to the undesirable practice of lending at excessive
rates, rather than as a ban on all interest-based lending. The exception is current-day Islam
, and the growing practice of Islamic Banking
Many legal jurisdictions have usury laws
that function to limit the amount of interest creditors may charge. In spite of the popularity of such laws for consumer advocates
, these laws have been on the books in one form or another for ages, and owe their origin to the religious heritage of the word. One way to conceptualize this difference is, in the context of contemporary consumer protection, the debtor is the victim of usury and the creditor is the perpetrator; whereas in the Christian religious context, both the creditor and the debtor are harmed by usury; the creditor (or more accurately, his soul) is harmed because the worldly lure of interest perverts the Christian spirit of altruistic charity. Discussion of the economic implications of usury laws is addressed adequately by the interest
Commentary on the Other Contributions to this Node
claims the United States
has wage slaves
subjected to credit card usury
. A wage slave is someone who is paid a wage, but is not free to quit their job, change jobs, or to attempt to organize for collective bargaining. That such slaves exist in the US is certainly news to me!
Its true many people don't manage their credit very well. Such people probably shouldn't be allowed to buy cigarettes, lotto tickets, etc. both of which are at least as "addictive" as credit cards. But, we permit all those things and more because freedom includes the freedom to screw up. Oh yeah: the "usual" way to get out of long term debt is not suicide or the lotto, its called personal bankruptcy. There are any number of outfits that will take you through this process, at little or no upfront cost; the good ones will even prevent you from making unrealistic repayment commitments. In the worse case, you can rack up mounds of debt, declare personal bankruptcy, and emerge a mere seven years later with a completely unblemished credit record.
Interest rates don't increase from 6% to 30% by magic. While the fine print of a typical credit card contract is quite dense, the basic outlines of the terms really aren't rocket science: the initial rate is promotional; there's an easy-to-read, legally required chart on or near the last page that shows the actual, non-promotional interest rate; pay your minimum payment on time, every time, and your interest rate will stay low, typically 9-15% which isn't bad for an unsecured loan. Pay your balance in full each month and you won't pay a single dime in interest! Use your card from time to time, pay your balances in full, and you may find (as this author found in the past year) offers to take out a cash advance at 3.9 percent, this rate guaranteed not to increase until the entire cash advance is paid back
There are few barriers to entry in the credit providing business; you need to be little more than a local bank in order to start making loans and issue your own credit card using at one of at least three competing clearing houses (Visa/MC, Discover, or American Express). Because of this, the credit markets are competitive, interest rates stay reasonable as long as you play by the rules. Eliserh
points out that usury statues exist in many states, but are effectively circumvented by states that keep their usury laws weak or non-existant in order to encourage credit card companies to set up shop in those states. Consumers presumably are aware that many states offer usury protection, as these laws are publicized by any number of institutions such as Consumer Reports Magazine
, Ralph Nader
's state Public Interest Research groups (e.g. NYPIRG
, and each states own bureaucracy in charge of consumer protection. Yet consumers don't appear to find the protection afforded by credit cards issued in states with usury laws attractive. So strong usury laws probably aren't that necessary so long as you believe the consumer is capable of managing their own affairs rationally.
The only basis for Shanoyu
's statements seems to be a barely acknowledged, wholesale acceptance of a fairly recent re-interpretation of traditional Adhesion Theory3
by the Critical Legal Studies
" movement, who are in turn indebted (if you'll forgive the pun) to such luminaries
as Jacques Derrida
and the Deconstruction
movement. According to the Crits, average people cannot meaningfully be said to exercise informed consent
and free will
when entering into Contracts of Adhesion
such as employment contract
s or the credit card agreement
. Therefore, it is the role of the government to unilateral
ly supersede the terms of contracts between nominally free, consenting, private parties. The Crit's points are philosophical
; they are not necessarily based on an empirical
judgment about how much workers are actually paid and how much interest they are actually charged. Even well-paid workers paying affordable interest rates are wage slaves paying usury, because they are part of a system that is giving them favorable treatment not for their benefit but for the system's own, nefarious reasons
. Think "house slave
" in the American antebellum South
Only if one accepts the "Crit" theory, under which neither employment nor debt is voluntary, can one credibly argue that US creditors practice "usury" against "wage slaves". The pros and cons of the "Crit" movement are beyond the scope of this write-up. Sadly, Shanoyu
adds little to the discussion, other than to vent in a GTKY
fashion that is particularly gall
ing in a node that should contain referential or historical information about this term.
1. First published in Accounting, Business & Financial History
, 8:2, Routledge
, July 1998, pp. 175-189. It's available at http://www.alastairmcintosh.com/articles/1998_usury.htm
, accessed Oct. 10, 2003.
2. See for example the web site of the Islamic Party Of Britain
, "The Facts About Usury: Why Islam Is Against Lending Money At Interest", at http://www.islamic-awareness.org/History/usury.html
, accessed Oct 10, 2003.
3. Thanks eliserh
for pointing out that traditional Adhesion Theory long predates the Critical Legal Studies movement. Traditional Adhesion Theory is certainly sufficient basis for certain usury laws, but such theory would dictate that the usury laws only take into account the provisions of the credit contract (e.g. are its terms "unconscionable") when "policing the bargain", and not the income of the debtor. A usurious contract is so regardless of whether the debtor party is well off or not. The usury statute from Ohio cited by eliserh
is an example.
To get all the way to Shanoyu
's finding of wage slaves subject to usury in the United States, one must, in my opinion, venture into Critical Legal Studies. I don't know enough about how the German law cited by eliserh
interprets vague (in my opinion) terms such as "state of duress", "inexperience", "lack of judgment" or "substantial weakness of will" (!?!) but I suspect these are polite circumlocutions
for what I'd call the socio-economic status
of the debtor. If this is correct, the German usury law would draw from the Critical Legal Studies movement.