Charitable, nonprofit, credit organizations that lend money at low rates of interest on the security of pawned objects. Montes were established in the mid-15th century to provide financial assistance to the poor in a temporary crisis, as a protection against the exploitation of usurers. The interest compensated for the care of pawns and was used to defray administrative expenses, including the salaries of employees, to prevent the exhaustion of capital through the cost of operation.
Historically, the word mons was used to designate funds collected for a specific purpose, and was applied, before and during the Middle Ages, to public debts, stock and insurance companies, and banks of exchange and credit. As these banks often lent money on pawned objects, the charitable organizations operating on this basis assumed the name but added the word pietatis to identify them as beneficent, not speculative.
In the Middle Ages money was difficult to obtain and the prohibitions against usury imposed on Christians created a kind of monopoly on lending for the Jews and such groups as the Lombards, who exploited the situation by charging exorbitant rates of interest (averaging 32 1/2 to 43 1/2 per cent). In an effort to find a remedy for usury various proposals were made for lending money at low interest, or gratuitously, either through institutions created for this purpose or through municipal sponsorship.
In 1361 Bp. Michael Nothburg of London left a sum of money for the foundation of a bank to lend money on pawned objects without interest. This venture failed because of the provision that expenses be defrayed from the foundation capital, which was inevitably exhausted.
Durandus of Saint-Pourçain (?–1332) and Philip of Maizières (?–1405) conceived of a public institution that would lend money to the poor at a low rate of interest intended only to defray the cost of services rendered. There is no evidence that this proposal was ever put into practice, but in 1461 Hermolaus Barbarus (c. 1410–71), Bishop of Verona and papal delegate to Perugia, had authorized the foundation, in Perugia, of the first Mons pietatis by the Franciscans. Barbarus, upon his appointment as papal delegate, had abolished an existing statute that directly violated Canon Law, viz, the authorization of Jews to take limited usuries in the city. The mons provided an acceptable substitute to give financial assistance to the needy. The montes spread rapidly throughout Italy and their success is attributable largely to the Franciscans who promoted them, especially Bl. Bernardino of Feltre (1439–94). In 1467 Pope Paul II (1417–71) approved the constitution of the Perugia mons despite theological opposition, and successive popes sanctioned montes in other Italian cities.
As the montes developed they became either autonomous or municipal corporations, administered by a director, an appraiser, an accountant, and a staff of clerks. A rate of interest ranging from four to 12 per cent was charged, and at the end of a specified period the net profits were applied to the capital. If the profit was substantial, interest rates were lowered. The amount of a given loan equaled two-thirds of the value of the pawned object, which, if not redeemed within a stipulated period, was sold at public auction. If the price brought exceeded the amount of the loan plus the interest, the residue was given to the original owner.
A big step in the development of montes was the sanctioning of interest charges in order to raise and maintain capital, a need that had not been met by voluntary donations and collections. By the mid-16th century it was common practice to accept deposits from anyone wishing to invest and to pay five per cent on them. Many montes accordingly became "mixed montes," i.e., institutions not financed by charity alone, but also by private investment, and they made loans to businessmen at eight to ten per cent as well as to the poor. The secular mixed montes were unlike a commercial banking system in that they did not create credit, but their structure was essentially similar to that of savings banks, financed by deposits and lending at interest to all.
Opposition, directed against the charging of interest rather than against the montes themselves, came from two main groups, viz, those whose interests were affected, and theologians and canonists who maintained that lending money at interest was illicit. That the interest was used for charitable purposes and not for profit did not justify the practice, which, they contended, was expressly forbidden by Christ (Lk 6.33). The question became an issue between several orders, Dominicans (with some exceptions) opposing montes as usurious and Franciscans defending them. Legal and theological faculties from many universities and some individual jurists also gave opinions favorable to the montes. Of the written attacks [the first by Nicholas Bariani, an Augustinian, in 1494] Gaetano Cajetan's [Tommaso de Vio (1469–1534)] De Monte pietatis (1498) is one of the most thorough and objective. Untinged by the bitterness of the conflict, though aimed at proving montes illicit, this analysis presents arguments for both sides of the question, and makes an important and significant distinction between defenses based on collective and on distributive justice. Navarrus [Martin Aspelcueta (1491–1586)] was the first important canonist and scholastic to make a detailed defense of montes and to discuss their financing, and the first to extend the principles used in this defense to other lending organizations.
The controversy was finally settled by the papal bull Inter multiplicis (May 14, 1515) of Leo X (1475–1521). The pope and the Lateran Council (tenth session) declared montes in no way sinful or illicit but meritorious, and declared those who preached or wrote against them subject to excommunication. By the 18th century montes were universally accepted in continental Europe.
The particular significance of the montes lies, not so much in their charitable function and successful reduction of usury, as in their influence on the justification of charging moderate interest. They prepared the way for the acceptance of credit business as a means of livelihood, and for the legitimacy of investment in lending organizations.
Bibliography: a. parsons, "The Economic Significance of the Montes Pietatis," Franciscan Studies 22.3 (1941) 3–28. b. n. nelson, The Idea of Usury (Princeton, N.J. 1949). j. t. noonan, The Scholastic Analysis of Usury (Cambridge, Mass. 1957). h. holzapfel, Die Anfänge der Montes Pietatis (Munich 1903). o. scalvanti, Il Mons Pietatis di Perugia (Perugia 1892); Il Mons Pietatis con qualche notizia sul Monte di Gubbio (Perugia 1892). c. jannet, Le Crédit populaire et les banques en Italie du XVe au XVIIIe siècle (Paris 1885).