Usury in the Middle Ages

This is an interesting passage from the Jewish Encyclopedia:

Jewish Encyclopedia (abridged)

The Church … declared any extra return upon a loan as against the divine law, and this prevented any mercantile use of capital by pious Christians. As the canon law did not apply to Jews, these were not liable to the ecclesiastical punishments which were placed upon usurers by the popes… Christian rulers gradually saw the advantage of having a class of men like the Jews who could supply capital for their use without being liable to excommunication, and the money trade of western Europe by this means fell into the hands of the Jews. They were freed from all competition, and could therefore charge very high interest, and, indeed, were obliged to do so owing to the insecure tenure of their property. In almost every instance where large amounts were acquired by Jews through usurious transactions the property thus acquired fell either during their life or upon their death into the hands of the king. … It was for this reason indeed that the kings supported the Jews, and even objected to their becoming Christians, because in that case they could not have forced from them money won by usury. Thus, both in England and in France the kings demanded to be compensated for every Jew converted. In the former country only in 1281 would the king give up his right to half the property of Jews who were converted. There was a continual conflict between the papal and the royal authority on this subject, and thus as early as 1146 the pope Eugenius declared all usury null and void, while the debtor was on a crusade, and Innocent XIII. made an indignant protest against usury, calling on all Christian princes to demand the return of the interest. Clement V. in 1311 protested against all civil law which permitted any form of usury by Christians.

It was impossible to carry out the canonical restrictions without stopping all progress in commerce, and numerous expedients were adopted to avoid the canonical laws. Especially the Cahorsins and Lombards invented methods by which usury was disguised in the form of payment for possible loss and injury, payment for delay, and so on. The competition of these Italian usurers-they were called the “pope’s usurers” – rendered Jews less necessary to the kings in France and England in the middle of the thirteenth century, and both Louis IX. (1254) and Edward I. (1275) attempted to influence the Jews to avoid usury, but without effect … No other means of livelihood was open to them.

Amount of Interest.

Very high interest was permitted the Jews in France under Philip Augustus, two deniers on the pound per week, or 43.3 per cent per annum, and King John in 1360 allowed this even to be doubled. In Sicily Frederick II. allowed 10 per cent in 1231. In Castile Alfonso X. allowed 25 per cent, while in Aragon the Cortes of Tarragona put 20 per cent as the maximum, and this was reduced to 12 per cent in the year 1231. In Navarre Philip III. established 20 per cent (“5 for 6”) in 1330, while in Portugal Alfonso IV. (1350) fixed the maximum at 33 1/3 per cent.

The enormously rapid increase of indebtedness due to this large interest caused ordinances to be passed to prevent interest being counted on interest, but without avail. As an instance of the extent to which interest could grow, the abbot of St. Edmund in 1173 borrowed about 40 marks from Benedict the Jew, and this had grown to £880 in seven years, though not entirely through interest (see Jacobs, “Jews of Angevin England,” p. 60).

The loans were generally made upon Pledges, which could not be sacred vessels of the Church, to pledge which was punished as early as 814 by confiscation of goods. Almost all other objects could be pledged, and it became a problem whether when a Jew had the pledge he could claim usury as well. This applied when lands were pledged for loans, when it was claimed the land or the produce thereof was sufficient to compensate for any loss of use of capital without further payment. Notwithstanding this the Jews claimed interest until both capital and interest were repaid.

… The lending of money with the expectation of any further return was still regarded as unnatural and disreputable, but in the later Middle Ages the Jews had been bereft of all capital, so that from the fifteenth century onward they are found mostly as dealers in second-hand clothing, rather than as usurers. Moreover a class of Christian merchants arose which evaded the canon law and lent money on interest without any opposition.

Notwithstanding this, the reputation of usurers has clung to the Jews even to modern times, though there is little evidence of their being more addicted to it than other persons who trade in money. In Russia the Christian “kulak” is regarded as being much more stringent in his demands than the Jewish money-lender, though in Bukowina the latter has proved to be somewhat of a plague. The poverty of the majority of Jews prevents them from any extensive addiction to this practise.