Biblical Usury and Modern Times

Question

In the Reformed tradition, how do we account for the Bible's treatments of usury and interest charged on loans? On what basis does the Bible condemn usury? In the modern day, high interest rates are usually charged because of the risk associated with the investment. These high rates are not typically forms of extortion. However, it seems that from a superficial glance, the Bible feels differently.

Answer

The economy and lending practices in biblical times were different from those in modern times. For instance, we do not find speculative investing in Scripture, or laws governing institutional lending. Also, the biblical system was generally non-inflationary, so that interest was not required in order for the lender to be paid back in full at a later date. Risk also does not seem to have been handled in the same manner — the law required lending without interest to those least able to repay (the poor; see below), required the return of collateral to the poor on a daily basis (Exod. 22:26-27), and forgave all debts every seven years (Deut. 15:1-2). These types of factors complicate the application of the ancient texts to modern lending. However, there are still many general principles we can observe in Scripture.

When the Bible condemns interest, it typically has exorbitant interest in mind. In the category of "exorbitant," it includes any interest charged to the needy/poor (e.g. Exod. 22:25; Lev. 25:36-37; Deut. 23:19; Prov. 28:8; Ezek. 18:8ff.; 22:12). The underlying idea is that we should never try to profit from the misfortune or our fellow "countrymen" in the covenant community. In the Old Testament, that was the nation of Israel. In the New Testament and modern world, it is the church.

On the related matter of canceling/forgiving debts (Deut. 15:1-2), this applied only to loans made to those in the covenant community. Just as loans made to those outside the covenant community could bear interest, they did not have to be canceled (Deut. 15:3). The principle of cancellation probably ought to apply in the church today, such that we forgive the debts of those who have not been able to repay us in a timely fashion.

But the Bible also explicitly permits interest in other contexts. For instance, interest could be charged to those outside the covenant community (Deut. 23:20). Arguably, Jesus implicitly affirmed interest paid by banks in the parables of the talents (Matt. 25) and minas (Luke 19). To my recollection, these parables are the only mentions in Scripture of institutional lending. Jesus does seem to affirm it in some sense by comparing the bank to God and his righteous judgment. Still, even institutions are subject to God's laws. Insofar as they practices are oppressive, opportunistic and uncharitable toward the covenant community, they are wrong.

Laws governing lending practices in Scripture pertained mainly to loans between individuals, and gracious lending was required within the covenant community. Gracious lending required the lender to take on risk for the sake of those in need. It was also involuntary in some cases, with the lender not having the right to refuse the loan (Deut. 15:7-9). In light of these factors, it is probably best not to see it primarily as an investment or business relationship, but rather as a form of charity. This same type of charity still ought to characterize the church.

Of course, most modern lending involves an institutional lender. Institutional lenders are not part of the covenant community. But they must still follow the principles of charity because God's character is the standard by which everything must be judged, and the standard of his character is revealed partly in the Old Testament laws regarding lending. For instance, a bank might argue that the risk it adopts necessitates a high interest rate, and it might rightly apply this reasoning to those outside the covenant community. But God holds the bank accountable to lend to the covenant community according to different standards. That is, when lending to the covenant community, the bank is required to lend in a charitable fashion, accepting otherwise unreasonable risks without the payoff of high interest rates. When it does not show this charity, it incurs the same type of guilt that foreign nations incurred in Scripture when they mistreated Israel or the church.

Finally, while it is sinful to charge exorbitant or inappropriate interest, it seems to me that Scripture does not condemn the paying of such interest. Scripture does not condemn the poor for taking the necessary means to meet their daily needs, even when that involves borrowing at interest. Certainly this is not ideal (Deut. 15:6), but that is because the circumstance in which lending becomes necessary is not ideal. This does not imply that borrowing to meet true needs is sinful. Poverty compels the poor to accept whatever terms are offered to them. This seems to be one reason Scripture places the burden of creating charitable terms on lenders rather than on borrowers.



Answer by Ra McLaughlin

Ra McLaughlin is Vice President of Finance and Administration at Third Millennium Ministries.