Usury in United Kingdom

Usury and Medieval Law

Usury and Legal History

Meaning of Usury

The following is an old definition of Usury [1]: Originally, a premium or reward for the use of money, a commodity or other thing. Taking more than the lawful rate of inter- est for the loan or forbearance of money. The taking of more than legal interest for the forbearance of a debt or sum of money due. Lending money on a contract to receive again the principal sum and an increase by way of compensation for the use is called lending on ” interest ” by those who think it lawful, and ” usury ” by those who do not think so. . . The Mosaical precept was political, not moral: while it prohibited the Jews from taking usury from their brethren, it expressly permitted them to take it from strangers. This proves that taking a moderate reward for the use is not malum in se. To demand an exorbitant price for the loan of a horse, or a loan of a sum of money, is equally contrary to conscience; but a reasonable equivalent for the inconvenience the owner may feel by the want of the thing, and for the hazard of losing it entirely, is ijot more immoral in one case than in the other. . . To a moderate profit we give the name of ” interest,” and to an exorbitant profit the odious name of ” usury.” Usurious. Pertaining to, or of the nature of, usury: as, usurious interest, a usurious contract. whence (the word(s) which follow it are derivatives from the same root word) usuriousness. Tliere must be an intention knowingly to contract for or to take usurious interest. . Where a contract imports usury upon its face, as, b.y an express reservation of more than legal interest, inquiry is atan end. But where the contract on its face is for legal interest only, proof is necessary that there was some corrupt agreement to cover up usury. Where the promise to pay a sum above legal interest depends upon a contingency, the loan is not usurious. Sale at a discount greater than legal interest, of a note made and indorsed in blank for the purpose of raising money by a broker, to a purchaser ignorant of the purpose, is not usury. Where the promisor in a usurious contract makes it the consideration of a new contract with a person not a party to the original contract, or to the usury paid or received upon it, and the new contract is not a contrivance to evade the statutes against usury, the latter contract is not usurious. But payment of illegal interest, after the maturity of a note, for forbearance, is usury. In a usurious transaction, the borrower acts some what under duress; he is not wholly a free agent. The maxim in pari delicto does not apply. When an agent who is authorized to lend nloney for lawful interest exacts for his own benefit more than the lawful rate, without the knowledge of his principal, the loan is not thereby rendered usurious. But authority to make a usurious loan may be inferred from a general agency, pertaining to an extensive business. A national bank may take interest at the rate allowed by the laws of the State, territory, or district where the bank is located; and if no rate is fixed, then seven per centum, and it may take it in advance. Taking a greater rate of interest than that allowed by the preceding section, when knowingly done, shall be deemed a forfeiture of the entire interest which the evidence of debt carries with it, or which has been agreed to be paid thereon. The person by whom the greater rate has been paid, or his legal representative, may recover back, in an action of debt, twice the amount of interest paid, provided action is commenced within two years from the time the usurious transaction occurred. The suit may be had in any circuit, district, or Territorial court of the United States held within the district in which such association is located, having jurisdiction in similar cases, or in a State court. A national bank may take the rate of interest allowed to natural persons generally, and a higher rate, if State banks of issue are authorized to take it. Usurious interest paid a national bank on renewing a series of notes cannot, in an action by the bank on the last of the renewals, be applied in satisfaction of the principal of the debt. In most of the States it is provided that, as a penalty, the person who receives more than the legal rate of interest shall forfeit a sum equal to all interest so taken, and that this sum may be withheld from the principal at the time of payment, when that is due as a loan, or be recoverable by an action within a specified period after payment. In England, all restrictions upon rates of interest were abolished by 17 and 18 Vict. (1854), c. 90, See Bonus; Inteeest, 2(3); Uses, Utile, etc.; Void.

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Notes and References

1. Concept of Usury provided by the Anderson Dictionary of Law (1889) (Dictionary of Law consisting of Judicial Definitions and Explanations of Words, Phrases and Maxims and an Exposition of the Principles of Law: Comprising a Dictionary and Compendium of American and English Jurisprudence; William C. Anderson; T. H. Flood and Company, Law Publishers, Chicago, United States)

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See Also

• Medieval Church Law (in this legal Encyclopedia)
• Assumpsit (in this legal Encyclopedia)
• Medieval Justice (in this legal Encyclopedia)
• Quasi-Contract (in this legal Encyclopedia)
• Superior Courts of Common Law (in this legal Encyclopedia)

Bibliographies of English Law History

• Maxwell, William H. A Legal Bibliography of the British Commonwealth of Nations. Volume 1: English Law to 1800. London: Sweet and Maxwell, 1955-
• Beale, Joseph H. A Bibliography of Early English Law Books. Cambridge: Harvard University Press, 1926.
• Winfield, Percy H. The Chief Sources of English Legal History. Cambridge: Harvard University Press, 1925.