So interest was more often than not charged on these “micro credit” or “micro finance” loans to the poor
By these remarks, however, We do not deny that at times together with the loan contract certain other titles-which are not at all intrinsic to the contract-may run parallel with it. From these other titles, entirely just and legitimate reasons arise to demand something over and above the amount due on the contract.
As with just about anything there are a number of ways to interpret this conceptually, because the terms can be understood to mean various different and sometimes incompatible things. For example one way to think about a non recourse “loan” (and you will see some folks discuss it under this kind of framing) is to think of it as a mutuum together with an additional contract. This “add on” contract removes the personal pledge for repayment and replaces it with a pledge to transfer ownership of specific property if the borrower stops making payments: thus we get a non recourse loan.
However when the terminology is used that way – when the most essential property of a mutuum (Aquinas: “the borrower holds the money at his own risk and is bound to pay it all back”) is removed and replaced by a pledge of actually existing property which fully bounds and terminates the borrower’s obligation – it is editorially more clear to just recognize that what we have is an essentially different kind of contract. These kinds of contracts in fact have their own names: a census (See Question 31) or non recourse mortgage (see the full citation of “Usury and Contract for Rent” from Regimini Universalis), along with explicit approval by the Magisterium as non-usurious when non recourse.
These institutions sometimes loaned money for no fees https://loansolution.com/pawn-shops-al/ or interest at all, but of course even a non profit institution has real expenses and someone has to come up with the cash to pay them
The Magisterium (and Aquinas) make the distinction between full recourse and non recourse contracts central to usury in a number of authoritative proclamations (see Question 31 and Question 36). It is not surprising then that using language which reflects that essential distinction is editorially clarifying, whereas language which ignores the distinction tends to muddy the waters; even in those cases where it can be interpreted in a manner which is technically correct.
That isn’t to suggest that just titles to something above the principal cannot arise in the case of a simple mutuum loan. The specific title of “damnum emergens”, or compensation for actual out-of-pocket lender’s costs or actual damages directly arising from making the loan, was accepted even by the usury hard-liner Aquinas.
The conceptual approval (or non-disapproval) of extrinsic titles generally speaking, combined with explicit Magisterial approval of the specific practices of the “Mountains of Piety” (next up in part (c)), constitute the main progressive Catholic argument in favor of charging profitable interest on a simple mutuum loan.
It is from this second, add-on contract, which grants the lender an ownership interest in the collateral and cancels the borrower’s personal obligation to repay, that a just title to profit arises
It is worth pointing out again though that the Magisterium directly condemned charging interest on a mutuum to recover “opportunity cost” or “time value of money” (See Questions 14 and 15). As we will see, when it comes to the third pillar of the progressive case the actual evidence in fact cuts against the idea that making a profit on a simple mutuum loan is ever morally licit for any reason whatsoever.
c) Question 13 touched on the third pillar generally and briefly. The so-called “Mountains of Piety” were an institutional development of efforts to provide credit to the poor to help them escape from dire situations, including usury and other exploitation by greedy lenders. There was a tremendous clash over whether these particular institutions were or were not themselves guilty of usury. This conflict was settled by the Magisterium: