Usury Laws
Prompt:Usury laws limit the amount of interest that can be charged on a loan. The idea is to protect borrowers from excessively high interest rates.
However, by limiting the amount of interest that can be charged, some lenders may be unwilling to lend to those borrowers with limited credit histories or bad credit.
Based on this, are usury laws are a good idea? Is this an appropriate role for the government?
Notes:
1. Usury laws are generally controversial. Some say that it’s simply not a job for the government to intervene in private markets, including the market for loanable funds. Or they may argue that a price ceiling such as a usury law simply will cause a shortage of loanable funds with its accompanying inefficiencies.
2. “The rich rule over the poor, and the borrower is slave to the lender.” (Proverbs 22:7 NIV)