Usury

Definition

Usury is the act of charging, or agreeing to charge, interest on a loan at a rate higher than the legal maximum allowed.

Purpose

The prohibition of usury aims to protect borrowers from exorbitant interest rates and ensure fair lending practices. Usury laws set legal limits on the amount of interest that can be charged, promoting equitable financial transactions.

Examples of Use

• Loan Agreements: Ensuring that interest rates in loan contracts do not exceed the legal limit to avoid being classified as usurious.
• Credit Cards: Monitoring credit card interest rates to ensure compliance with usury laws.
• Personal Loans: Applying usury laws to personal loans to protect borrowers from predatory lending practices.

Related Terms

• Interest Rate: The percentage of a loan amount charged by a lender to a borrower for the use of the money.
• Predatory Lending: Unfair, deceptive, or fraudulent practices by lenders during the loan origination process.
• Consumer Protection: Laws and regulations designed to safeguard consumers from unfair business practices.

Notes

Usury laws vary by jurisdiction, and what constitutes usurious interest can differ significantly. Lenders must be aware of local regulations to ensure compliance and avoid legal penalties.