Usury Laws

  

Categories: Credit, Ethics/Morals

See: Usury Rate.

Yes, there are laws. You can't charge borrowers a ridiculous rate of interest on their loans or credit chargers.

The harder question: what is the usury rate? Like...40% interest a year? Something like that.

And usury laws developed in large part to protect ignorant borrowers from doing stupid things with their money. As America grew and loans were needed for homes and cars and, well...clothing in the bad times, lenders popped up everywhere. If the lender could borrow money at 5% and then mark it up to 40% to sell to farmers, then wow...huge profit margins. So like...why not?

And they did. And people were burned by their own ignorance. So the government stepped in to protect them, and created various laws against these predatory and unfair lending practices. They still exist today, more or less.

Related or Semi-related Video

Finance: What makes a fair market...fair...0 Views

00:00

Finance allah shmoop what makes a market fair Well fairness

00:09

Okay so what is farewell Honest advertising for one like

00:13

if we're talking about the market for stocks and buns

00:15

A company can't claim they have a billion dollars of

00:18

profits this year when they don't Yeah regulators are picky

00:21

about accuracy that way Too many liars cheats and deceivers

00:25

stole money from hardworking farmers in the history of this

00:28

country So the feds come down hard for good reason

00:31

on those whose pants are you know on fire So

00:34

yeah honesty in Numbers is 1 definition of fair Another

00:38

is full disclosure The numbers might be accurate technically but

00:43

they're not really reflective of how well or poorly the

00:45

company actually did Like a discount rectal thermometer company might

00:50

have technically made eighty million bucks in the quarter But

00:53

if only twenty million of that profit came from the

00:55

selling of invasive temperature taking devices and sixty million came

01:00

from wild currency swings Because the company had tons of

01:03

exposure to zimbabwean dollars which had a meteoric rise in

01:07

the quarter when china agreed to take over debt payments

01:11

on all of the countries obligations in return for well

01:14

basically owning the country Then the sixty million of currency

01:18

gain on the zimbabwean dollars would be a thing the

01:20

company would have to very loudly disclosed Well odds are

01:24

good that miraculous swings like this won't happen again next

01:27

quarter Or maybe ever It's not the business that they're

01:30

in So what else makes a market fair Strict laws

01:34

Maybe an arbiter for when those laws are broken not

01:38

selling your data if you don't agree to allow them

01:40

to do so Yeah all of the above What do 00:01:42.359 --> [endTime] you think makes a market fair What a concept

Up Next

Finance: What is the Fair Debt Collection Practices Act?
1 Views

What is the Fair Debt Collection Practices Act? The Fair Debt Collection Practices Act is the set of rules that debt collectors follow. These rules...

Finance: What is the Fair Credit Reporting Act?
4 Views

What is the Fair Credit Reporting Act? The Fair Credit Reporting Act that governs credit reporting agencies and all activities that occur involving...

Finance: What is the Process of a Bank Loaning Money?
107 Views

What is the process of a loan? Collateral. Do you have it? The bank lending you money wants to be sure that A) they get paid back, and B) they char...

Find other enlightening terms in Shmoop Finance Genius Bar(f)