Comments on: Usury & Interest Guide: Usury Definition, Usury Rates, and is Your Credit Card Usurious?

By: s'hatz

s'hatz — Tue, 30 Aug 2011 12:34:14 +0000

Those who practice usury (lending with interest) are subject to the same punishment as any sin without redemption…death. Remember, the only time that Yeshua actually resorted to physical intervention was over the money lenders in the temple court. The New Testament story that supposedly gives a green light to allowing some reasonable interest is portrayed in the parable of the rich man and talents. The rich man was shown to be a hard taskmaster, he would reap where he did not sow, he would gather where he did not seed. This is of course what the world esteems as a sophisticated business individual. Woe to be a banker when the LORD returns.

By: Joel

Joel — Thu, 24 Dec 2009 03:35:55 +0000

It is a tough one because there are some great points on both sides.

I think that the #1 deciding factor for me is that access to credit is not a right but a privilege and no one is forcing anyone to take out a loan so as long as the lender is acting in a forthright and honest fashion then it should be a matter of borrower beware.

If a lender wants to charge 3,000% interest then that is fine with me as a potential borrower because I will just say thanks but no thanks and move on to somewhere else (or not take out a loan at all).

That being said, I am however very much opposed to lenders that do not clearly spell out the terms of their loans.

By: Ron

Ron — Thu, 24 Dec 2009 01:17:23 +0000

This is a tough one. I think usury today is a matter of making poor choices on the part of the consumers and a matter of greed/risk on the part of issuers.

Personally, I think you should give if you’re able and lend to the bank otherwise, and I think usury laws are a good idea. How much interest is usury? Probably somewhere just north of 25% for me personally, depending on the risk of loss.

Great, thought provoking post.

By: Joel

Joel — Sat, 19 Dec 2009 19:07:12 +0000

I agree that in most cases the onus for finding the lowest cost option is really on the consumer to shop around and compare different companies either by phone, Internet, or in person. This is as it should be and the only real problem areas are people in maybe small communities who are just not as savvy with price shopping as maybe they should be and so they just go with what they know which may be the only payday loan/cash advance/title loan/etc. place in town.

By: Joel

Joel — Sat, 19 Dec 2009 19:04:21 +0000

That’s a good point because with my American Express TrueEarnings Card that I use for the cash back I could care less what the APR is because I never carry a balance. However, most high APR cards also come with minimum rewards and high fees as well. Very true though!

By: Financial Samurai

Financial Samurai — Sat, 19 Dec 2009 17:40:46 +0000

Excellent, informative and timely post Joel!

Do people actually sign up for credit cards without checking what the fees and interest rates are?

I would think we let free market reign. S/he who wishes to pay 79.9% APR, so be it. Why should we stop them? Maybe they get a kick out of flirting with danger, without ever paying it since they are always on time!

Sam

By: Len Penzo

Len Penzo — Sat, 19 Dec 2009 17:01:36 +0000

I too have no problems with mandatory, clearly written in layman’s terms, truth-in-lending disclosures, Joel. In fact, I think those should be mandated by the government (I’m not one of those “no regulation at any cost guys”). For the system to work properly truth in lending disclosures are required simply because there are many people out there that are incapable of “running the numbers” for themselves.

Unfortunately, it is a given that those laws aren’t fool-proof because most people fail to read their truth in lending statements anyway.

Regarding your last point about some areas with a lack of competition – I think that is rare, but a valid concern just the same.

I saw something that said 76% of all US households had a computer with Web access in 2008.

Of the remaining 24%, I would conservatively venture at least half of them live in high population areas where there should be plenty of competition. So we are left with roughly 12% – and I still think that is over-stating the problem. I mean, I’ll bet they have a phone with a phone book. There is no reason they can’t make a few phone calls, right? In this day and age, money can be transferred to accounts electronically – no need to have to get a loan from a local bank, right?

Even so, the fact that some areas might exist with minimal or no competition offers an opportunity for other lower-priced lenders to swoop in and take advantage of that.

By: Joel

Joel — Sat, 19 Dec 2009 04:16:43 +0000

I can see how your comments might be inflammatory to some but I actually agree with pretty much everything you said.

I think that I could pretty much say with confidence that I am opposed to usury laws BUT I am all for consumer protection laws that force lenders to fully disclose all of the rates and fees associated with their loans.

It’s perfectly fine IMO for lenders to charge whatever rate of interest they want to charge because as you mention there is (and shouldn’t ever be) some kind of guaranteed access to a low interest loan for anyone and everyone.

That being said, I am very much in favor of laws that protect borrowers by forcing all lenders to be 100% up front and honest about the terms of their loans and not hiding behind incomprehensible fine print that is difficult to understand at best and downright trickery at worst.

One thing that does give me pause about saying that I am fully two feet inside of the anti usury laws camp is that in order for the free market to work properly then there must be a lot of competition and in some small neighborhoods in certain areas of the country there may not be adequate enough competition to force down rates as in a highly populated city with a lot of competition.

Granted, the Internet with its price shopping and competition amongst online payday loan lenders has alleviated some of this concern but that is just one concern that I have. Do you think that this is a legitimate concern of mine or am I just being a traitor to my capitalistic roots? Thanks for the comment Len!

By: Len Penzo

Len Penzo — Sat, 19 Dec 2009 02:59:11 +0000

I’m in the anti-usury law camp. My opinions are based on the premise that nobody is automatically entitled to a loan – if you can’t afford the terms of the loan, or cannot understand the terms or their long-term impacts, then buyer beware.

I definitely think usury laws inhibit a collector’s ability to be justly compensated for lending money to high-risk individuals.

I also believe usury laws ironically make it more difficult for higher credit risk borrowers to get a loan.

In my opinion, in the free market, people looking for loans should be able to comparison shop for the best loan rates.

An informed and fiscally savvy public will allow competition to keep rates reasonable. The lender of an unsecured loan also has an interest in keeping rates at a point that will not cause the borrower to default. Charging obscene interest is not a really good idea in that regard.

I’m sure I my opinions will stir up a bit of a hornet’s nest.

Best,

Len
Len Penzo dot Com