HOBS: Usury and Insolvency Legislation

In the modern age we frequently hear of credit cards and other credit facilities being offered with high interest rates. In some cases the levels of interest can be quite staggering. The practice of lending with excessive rates of interest, known as usury, is not new. The early medieval church, “had taught that all lending at interest was sinful.”[1] The church thought that moneylenders were idle and that their gains through lending were sinful as they did not actually do anything to earn the money on the loans they made. There was no physical effort. This position of the church may however have been tempered by the church’s own desire to cause these moneylenders (pictured right) to contribute to the construction and maintenance of church property as a way of atoning for their sinful money lending ways.

As noted above, the church took a dim view of usurious practices. A feature of the credit environment during the seventeenth century[1a] was the lending of monies at excessive rates of interest.[2] The bankruptcy Acts of the early modern period were usually closely accompanied by Acts that regulated usury[3] and there is vast contemporary literature on the subject.[4] There is evidence of lawyers, such as scriveners, engaging in money lending activity.[5] Individual moneylenders, such as Hugh Audley, made vast fortunes from their activities. The practice was criticised for its harmful affects on borrowers.[6] This kind of activity had of course occurred for some time.[7] The first noteworthy statute was enacted in 1235 and was entitled, Usury shall not run against any within Age.[8] It seems however that usury may still be with us.

[1] Cornish, W.R & Clark, GN. Law and Society in England 1750-1950. Sweet & Maxwell, London. 1989, page 227. See also: Graham, D. The Insolvent Italian Banks of Medieval London: Part I (2000) Int.Insolv.Rev, Vol.9(2); 147-156, page 151. See also: Goode, R. Commercial Law. 2nd Edition. Butterworths, London, 1998, at page 845.

[1a] Hoppit, J. Attitudes to Credit in Britain, 1680-1790 (1990) The Historical Journal, 33, 2, pp.305-322.

[2] For an exposition of moves to preclude such activities in the late medieval period see: Seabourne, G. Controlling Commercial Morality in Late Medieval London: The Usury Trials of 1421 (1998) Legal History, vol.19, no.2 (August), pp.116-142.

[3] See for example the following Inns of Court readings which discuss the area and pertinent statutes: Manuscript – Nicholas Fuller. Reading at Gray’s Inn on usury, 13 Eliz I, c.8. 1587; Manuscript – George Chawworth. Reading on usury at Gray’s Inn, 13 Eliz I, c.8, usury. 1601; Manuscript - William Hussey. Reading at Middle Temple on usury, 21 Jac. I, c.17, usury. Autumn 1642 (H-1777); Manuscript – William Farrer. Reading at Inner Temple on usury, 21 Jac. I, c.17, usury. 1643; Manuscript - Edward Johnson. Reading at Inner Temple on usury, 21 Jac. I, c.17, usury. 1639; Manuscript – George Watt. Reading on 37. Hen V.III, c.9, usury at Lincoln’s Inn; Manuscript – Godfrey Copley. Reading at Lincoln’s Inn on usury, 21 Jac. I, c.17, usury. 1634; Manuscript – George Snigge. Reading at Middle Temple on usury, 13 Eliz I, c.8. 1590; Manuscript – Egremond Thynne. Reading on usury at Middle Temple. 13 Eliz I, c.8, usury. 1622; Manuscript – William Hussey. Reading at Middle Temple on usury, 21 Jac. I, c.17, usury. 1642. Cited in: Baker, JH. Readers and Readings in the Inns of Court. Seldon Society. Volume 13, supplementary series, 2000.

[4] Fenton, RR. A Treatise of Vsurie, diuided into three bookes, etc. pp.155. Imprinted by Felix Kyngston, for William Apsley, London, 1611; Mosse, M. The Arraignment and Conviction of Usurie. That is, the iniquitie and unlawfulness of usurie, displayed in sixe Sermons. Printed by the Widow Orwin for T. Man: London, 1595; Usurie arraigned and condemned, etc. Printed by WS for J Smethwicke, London, 1625; Culpeper, T. A tract against usurie, etc. T. Leach for Christopher Wilkinson, London, 1668; Usury Stated: being a reply to Mr Jelinger’s ‘Usurer Casr’ Whereto are adjoyned, some animadversions on Mr Bolton’s and Mr Capel’s discourses…written by TP. London, 1679; The case of usury further debated, in a letter to the author of Usury stated, London, 1684; Anonymous. Discourses shewing the many advantages which will accrue by the abatement of usurie. 1668; Anonymous. Case of Usury further debated in a letter to the Author if ‘Usury Stated’. 1684.

[5] Brooks, CW. The Common Lawyers in England, c.1558-1642, in: Prest, W (Ed). Lawyers in Early Modern Europe and America. Croom Helm, London, 1981, page 49 and 56. See also: Brooks, CW. Pettyfoggers and Vipers of the Commonwealth: The ‘Lower Branch’ of the Legal Profession in Early Modern England. Cambridge Studies in English Legal History, CUP, Cambridge, 1986, at page 196.

[6] Anonymous. Usurie arraigned and condemned or a discoverie of the infinite injuries this kingdom endureth by the unlawful trade of usurie, 1625

[7] Barrett, A & Harrison, C. Crime and Punishment in England – a sourcebook. UCL Press, 1999, page 80.

[8] [1235] Stat.Merton, Henri III. c.5.

Picture Credit: http://www.reformation.org/small-demon-usury.jpg


James Nicholls said…
The tendency for moneylenders to be usurous is of course still with us. And if you think credit cards are expensive you should look at payday loans and cheque-cashing type loans where the interest rates are in the thousands of percent. I also imagine there is an even worse level below these loan companies where they break your knees if you don't pay.

On the other hand APR calculations are not really appropriate when looking at some lending. On a payday loan of say £500 for a month you might have to pay £100 in fees. That is proportionately a great deal but you have to bear in mind that there are admin costs in setting the thing up, just opening a file at my firm takes about one hour because of all the regulatory red-tape. And many people find that this kind of credit is the only credit they can get quickly and easily.

What is changind and getting gradually easier is bankruptcy. The history of bankruptcy is a pretty harsh and in some instances gory affair but goes all the way back to the Babylonians (circa 2000 BC) and probably before then too.

Bankruptcy now is pretty good. You do not lose your liberty, your job (generally) or even your tv or car and quite often you can hang on to your home (assuming not too much equity in it. So things have moved one a great deal. England is now described as the "bankruptcy brothel" of Europe because we are generally very accommodating for debtors.

The issue though, as with all moral hazard, is whether by getting rid of the stigma and "punishment" it has taken away the incentives to be prudent, careful or even honourable with
our finances. Sounds like a good idea for an essay!