The prohibition of usury and the Rentenkauf

The canonical doctrine

The medieval Church condemned the taking of interest on a loan. Drawing on the Old Testament prohibition of lending at interest to a brother, on the saying of Christ in Luke 6:35 (“lend, hoping for nothing again”) and on the Aristotelian argument that money is sterile, the canonists and theologians of the twelfth and thirteenth centuries defined as usury (usura) any payment demanded by a lender beyond the principal of a loan (mutuum). The Historical Dictionary of Switzerland summarises the doctrine plainly: moral theology and canon law condemned “any interest on loans as usury”. This doctrine remained unchanged throughout the Middle Ages, even when commentators on Roman law regarded only excessive rates as objectionable.¹ Usurers were excluded from the sacraments and from Christian burial, while their testaments were subject to the obligation of restitution.²

The doctrine had practical consequences far beyond the learned treatises. It shaped the forms of contract used by merchants, landowners and cities, determined who could openly lend money for profit and gave rise to a sophisticated casuistry that distinguished between prohibited interest and permitted compensation. The canonists admitted compensation for loss actually suffered by a creditor (damnum emergens) and, more cautiously, for profit foregone (lucrum cessans), as well as a penalty for late payment (poena conventionalis). They also held that a partnership (societas) in which the investor shared the risk of loss was not a loan and could lawfully yield a profit.³ Each of these doctrines opened a door through which interest could enter the economy in disguise.

Two such doors mattered most in Zurich. The first was the pledge of land. The Historical Dictionary notes that Pope Alexander III in 1163 prohibited interest-bearing pledges in which the creditor collected the income of the pledged land without deducting it from the principal (the so-called Satzung), a prohibition which tended to push credit towards other forms.⁴ The second and much more important door was the Rentenkauf, the purchase of an annuity.

The Rentenkauf

The Rentenkauf is the key to understanding late medieval credit in Zurich and in the whole of German-speaking Europe. In law, it was a purchase. The creditor bought from the owner of a piece of land, or from a town, a right to receive a fixed annual payment (Zins, Gült or Rente) in money or in kind, paying the price once, in cash, to the seller. In legal analysis the annual payment was the fruit of a thing, the rent, that the buyer had acquired. On this view the transaction contained no loan on which interest could accrue. The Historical Dictionary describes the Gült in exactly these terms: a creditor bought an annuity from a landowner, which became a charge on the property and was documented in a debt instrument, the Gültbrief. Because the arrangement was not classified as a loan, it offered a way around the ecclesiastical prohibition of usury.⁵ Economically, the transaction was of course a loan secured on land, with the annuity as interest and the purchase price as principal.

The Historical Dictionary dates the emergence of the Rente or Gült as a significant credit instrument to the late twelfth century and describes the transaction as one in which the lender acquired an income secured by the borrower’s real property in exchange for advancing capital.⁶ In its oldest form the annuity was perpetual (Ewigrente, ewige Gült) and could not be redeemed at all: the land remained burdened for ever, while the right to the rent passed from one holder to the next by sale or inheritance. The decisive development of the fourteenth and fifteenth centuries was the spread of the redeemable annuity, the Wiederkaufsrente or ablösige Gült, which allowed the debtor to buy back the annuity by repaying the purchase price. The Historical Dictionary describes the buyback clause as a critical innovation, which introduced standardised capitalisation ratios, typically 1:20 or 5 per cent a year, and turned the perpetual annuity into a negotiable instrument resembling a modern bond.⁷

The theological legitimacy of the redeemable annuity was not beyond dispute, since it came very close to a loan repayable at the will of the debtor. The canonists debated its admissibility throughout the fourteenth century. Only in 1425 did Pope Martin V declare that annuities secured on property with a right of redemption were permissible.⁸⁹ Two conditions were generally attached. The right of redemption belonged to the debtor alone, who could not be compelled by the creditor to repay the capital. In addition, the annuity had to be secured on a fruitful thing, in principle land, whose yield justified the payment. The first condition is reflected in the Historical Dictionary’s observation that Gülten were typically redeemable unilaterally by the debtor alone and not by the creditor, although some later forms allowed termination by both sides.¹⁰

A regest in the Zurich state archives gives an idea of the mechanics and the rates. On 20 August 1401 the burgomaster, councils and burghers of Zurich resold a Gült of 3 pounds 15 shillings in Zurich pennies for 63 pounds.¹¹ Since 3 pounds 15 shillings are 3.75 pounds, the annual rent amounted to just under 6 per cent of the price, a ratio of roughly 1:17. The document also shows that the city was an active trader in such rights, buying and reselling annuities as part of the management of its assets.

Life annuities

The life annuity, Leibrente, Leibgeding or, in the language of the Zurich sources, Lybding, differed from the perpetual or redeemable rent in that the annual payment ceased with the death of the beneficiary. Since the capital was not repaid, the buyer in effect exchanged a sum of money for an income for life. The Historical Dictionary describes the life annuity as a popular instrument of retirement provision from the fourteenth to the mid-sixteenth century, with annual payments generally around 10 per cent of the capital. The higher rate compensated for the extinction of the capital on the death of the beneficiary and created, depending on longevity, an element of speculation.¹² Canon law had fewer difficulties with the life annuity because the element of risk, the uncertain duration of the payments, made it resemble a contract of chance and distinguished it from a loan.

For cities, life annuities were an attractive means of borrowing. The capital was never repaid and the obligation ended with the life of the annuitant. The buyers, often widows, clerics, retired craftsmen and the religious houses of the town, preferred a secure income from the city to the risks of private lending. Basel, according to the Historical Dictionary, became the most important annuity market in Switzerland in the fifteenth and sixteenth centuries, while Bern financed its debt through annuity sales to buyers in some twenty towns.¹³ The perpetual and life annuities issued by cities were secured on the entire public revenue of the issuer. According to the Historical Dictionary, cities issued such annuities backed by public revenues to finance deficits.¹⁴ Zurich participated in this market both as seller and buyer, as section VII below will show.

Interest in the open: the rates charged by licensed lenders

Alongside these disguised forms of interest, late medieval towns tolerated open interest-bearing lending by particular groups who were outside the Christian community or who operated under special privilege: Jews, Lombards and Cahorsins. The Historical Dictionary notes that, despite the Church’s condemnation of interest as usury, princes and cities granted privileges from the thirteenth century onwards for this generally despised and prohibited business, which was carried on mainly by these three groups.¹⁵ The rates were high. The Historical Dictionary reports that Jewish and Lombard lenders operated under princely privileges with rates reaching 43⅓ per cent a year in the fourteenth century, with lower rates of 22 to 32½ per cent in some Swiss cities.¹⁶

The figure of 43⅓ per cent is not an arbitrary number. It results from a customary weekly rate of two pennies per pound: two pennies on 240 pennies is one hundred-and-twentieth of the capital, which over fifty-two weeks gives 43⅓ per cent. Exactly this rate is recorded for Zurich. According to the analysis by Marco Anzidei for the Schauplatz Brunngasse project, Jews and Cahorsins in thirteenth-century Zurich could charge two pennies per pound a week, about 43 per cent a year, from citizens of Zurich, while higher rates were permitted for outsiders. By 1423 the permitted rate had fallen to 22 per cent.¹⁷ The weekly reckoning reflects the nature of this business: most loans were small, short-term consumption or working-capital loans against pawns, in which the lender’s costs of administration and risk were high in relation to the amount lent.

The coexistence of these two systems, disguised interest at 5 to 10 per cent in the annuity market and open interest at 20 to 43 per cent in pawnbroking, reflected a division of the credit market. Annuities, which required land or public revenue as security and were suited to long-term finance, served landowners, cities and religious institutions. Pawn loans served those who had no land to pledge or who needed money quickly: artisans, peasants in a bad harvest, knights preparing for a campaign, and sometimes cities facing an emergency. The high rates were in part the price of the moral and legal marginality of the lenders, who bore the risk of cancellation of their claims by political authority and of violence against their persons.

Notes

1. HLS, “Wucher”, medieval section by Hans-Jörg Gilomen, https://hls-dhs-dss.ch/de/articles/017472/2014-11-18/. ↩
2. Third Lateran Council (1179), canon 25: notorious usurers “should not be admitted to communion of the altar or receive christian burial if they die in this sin”, Papal Encyclicals Online, https://www.papalencyclicals.net/councils/ecum11.htm; Second Council of Lyon (1274), constitution 27, refusing ecclesiastical burial until restitution had been made or pledged and declaring usurers’ wills made otherwise void, https://www.papalencyclicals.net/councils/ecum14.htm. The Council of Vienne (1311) made the belief in a right to usury a heresy (“Usury”, Wikipedia (English), https://en.wikipedia.org/wiki/Usury). ↩
3. Arthur Vermeersch, “Usury”, The Catholic Encyclopedia, vol. 15 (New York, 1912), https://www.newadvent.org/cathen/15235c.htm, listing among the extrinsic titles to compensation positive loss, privation of profit, the risk of losing capital and “a conventional penalty” for delay in payment; Wikipedia, “Usury”, https://en.wikipedia.org/wiki/Usury, on Hostiensis’s thirteenth-century list including lucrum cessans and on the rule that an investor who shares in the profit must share the risk as a joint venturer. ↩
4. HLS, “Wucher” (as above), which states that Alexander III (1163) forbade interest-bearing mortgages. ↩
5. HLS, “Gült”, by Anne-Marie Dubler, https://hls-dhs-dss.ch/de/articles/025980/2007-03-13/. ↩
6. HLS, “Kredit”, by Martin Körner and Richard Schwertfeger, https://hls-dhs-dss.ch/de/articles/013893/2011-11-10/. ↩
7. HLS, “Renten”, by Anne-Marie Dubler, https://hls-dhs-dss.ch/articles/013706/2011-12-23/. ↩
8. HLS, “Wucher” (as above). ↩
9. Paolo Astorri, “Early Modern Lutheran Theologians and the Redeemable Census”, Studia Historica. Historia Moderna (2022), https://revistas.usal.es/uno/index.php/Studia_Historica/article/download/29424/28433: two bulls of Martin V (1425) and Callixtus III (1455) (Extrav. Com. 3.5.1 and 3.5.2) “admitted the lawfulness of the annuity on real estate” and allowed the seller’s right of redemption. ↩
10. HLS, “Gült” (as above), which describes the typical Gült as “unilaterally redeemable only by the debtor, not by the creditor”. ↩
11. Urkundenregesten des Staatsarchivs des Kantons Zürich, vol. 4: 1401–1415, ed. Urs Amacher and Peter Niederhäuser (Zurich: Staatsarchiv, 1999), no. 4506 (20 August 1401), https://archives-quickaccess.ch/attachments/URStAZH_Band_4_1401_1415.pdf. ↩
12. HLS, “Kredit” (as above); the article “Kapitalmarkt”, https://hls-dhs-dss.ch/de/articles/013913/2010-02-18/, likewise states that life annuities gave “das Recht auf eine lebenslängliche Zinszahlung, in der Regel 10% des Kapitals”. ↩
13. HLS, “Kredit” (as above). ↩
14. HLS, “Renten” (as above). ↩
15. HLS, “Kredit” (as above). ↩
16. HLS, “Wucher” (as above). ↩
17. Anzidei, “Zürich, die Juden und das Geld” (as above). ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.