HOW MUCH INTEREST IS HONEST?

New Zealand Tablet, Volume XII, Issue 4, 16 May 1884, Page 27

HOW MUCH INTEREST IS HONEST?

The Rev. Patrick O'Donnell, a Professor ia Maynooth College, Irei*™! w writing a series of articles called " Plain Truth About Interest, for the Irvih Ecclesiastical Record. From the number iust received we extract the following :— J •♦ • "P^iast price for a loan should be easily determined. Obviously iLn^ at? h ws".?^w 5 ".?^" 1 public mar *et. There is no other standard by which to decide the value of goods for sale. And as in ordinary circumstances the man who charges his neighbor a shilling for a sixpenny loaf is guilty of injustice, so too is he who, without any special reason, charges higher interest than he can secure on his loan in the open competition of commerce. «^f"i N -° W ' the which can be had from investments open to EB?^ 1 «DO« DO 6eCret " . At he present time ' whether the man of money Kn.Si?^ 11111 ?^ 810 ?; ° r railway Bhare8 ' or trßdiD S "Peculations, cannnf £ ? xt ' cm ely hard to secure four per cent. Plainly then more a SJ? aSn'rtf "? de ™ anded , from a P oo ' »«»> compelled to borrow ience ffi^JV^ l^ ge £ d ' and , I , f tbere be no B^ cM inconveneurren? nlit * hlmbave the small sum he desiieP. Hence the current price, something under four per cent., is the DroDer rate of interest when this twofold condition is fulfilled. In private lending fh7?lf^TT bat m ° re * rouble and risk aie mvolved,especia°Fy Xfn^J *\ ■"?♦* P^P ol^ oo^ allowance must be made? It is important to determine the amount of this proportion. Where the •SSTfcta JSC? iJ . PerfeCt i y reHable ' ° r brin * 8 an exceptional 111 l £nY» ,• ?« i °i Bee h ? W any notable increaEe on th e normal at thl «»if J» 8 fi tlfied - . s«ch cases, to go beyond four and a-half, o C Ifmi i. Te ' I** cont., 1S patent extortion. Plainly five per sSfcSJ f^ Wa f e for some extra rißk . aßd hence ordinary rates SSlrfioiT* 3 83 - A shmin S in the pound seems, no SXifo! 8 ? i °, ™ oDey - l en<lers, who fence themselves within a secure amount fp 1 zn6trum ents, and afterwards exact three times that KnsthehiLrf? ffi h^ever good judges. Their profession ssrsifaf as ts &*£ human feeling * and *° often

" Nothing above four per cent, can be taken in justice at the present time, unless by way of compensating labor or hazard not found in lending to railway companies in these countries. How to assess fairly for extra peril, where it exists, can best be determined by what an Assurance company would demand on becoming responsible for the additional danger. This can be ascertained from the daily transactions of such companies, and should be added to the normal four per cent., to come at a fair interest. Such is tbe method which Crolly recommends, and under its guidance, he concludes, in his practical rules, that for goods sold on credit to tbe poor a merchant should not charsre more than six per cent., unles3 where the danger is very extraordinary, even in respect of this class of customers. " Barely is it lawful to demand a higher rate for money lent. Iwo per cent, is considerable insurance. In those very exceptional cases, however, where it would not caver the risk, three, four or fire per cent, might be added on this score alone, so as to make the aggregate rate 7dol. Bdol, or 9dol. for every lOOdols. SeA seohuo aUquo casu, periculi valde extraordinari nunquam co-ncederemus vt fenus 8 vel 9 pro 100 excederet. " In imposing interest the lender must decide each case, or class of cases, on its merits, and not fine one man for the risk of lending to another. But from wbat has been said, it is obvious a moneyi lender or shop-keeper cannot charge tbe run of his poor customers a higher rate than six percent. There is absolutely no title for more, and to exact it is to traffic .on the necessity of those who are in want. Yet, sad to say, within recent years, this amount has been enormously exceeded on the necessaries of life supplied by credit to starving people. . . . Fancy fourteen shillings' worth of provisions costing eighteen shillings at the end of eight or ten weeks! It seemed as if what would bare been a highly usurious rate for a year did not suffice for the sixth of it. Nor is it the least justification to say that very little more would have been, added for the whole year. However plausible such a plea may seem to a merchant whose credit trade is largely restricted to May, June and July, it cannot make a loan for twelve months identical."