Origin of the Problem with Penance
Gregory the Great was pope of the Catholic Church from September 3, 590 until his death, March 12, 604. He was the first of the popes from a monastic background. Many ideas relating to purgatory, good works, obedience and Christian conduct can be traced to his extensive writings. Gregory provided an optimistic outlook, which could make the Christian feel more secure about his future.
Gregory asserted “that, while the death of Christ could be said to free the baptized from original sin, when it came to sins committed after baptism it availed to convert the eternal punishment into temporal penalties which could be discharged in this life only by an adequate amount of suffering – either self-imposed or imposed by the Church. Penitence thus became the prelude to a forgiveness that could only be obtained or realized (perhaps one should use the term earned) in, what came to be called satisfaction (Moralia XVI)." [i]
This interpretation of salvation in terms of satisfaction was rejected by Martin Luther when he tried to fit the penitenial discipline into the framework of a doctrine of justification by faith.
[i] Brian Horne, “What has been Lost? Penance and Reconciliation Reconsidered.”