# What is "usury" and at what point is it illegal? **URL:** \ **Category:** Factual Questions\ **Created:** [May 13, 2005, 3:40am UTC](https://boards.straightdope.com/t/what-is-usury-and-at-what-point-is-it-illegal/303638 "2005-05-13T03:40:58Z")\ **Posts on this page:** 11\ **Page:** 2
**Author:** ![Billdo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/billdo/32/315_2.png) [@Billdo](https://boards.straightdope.com/u/Billdo)\ **Post date:** [May 13, 2005, 6:08pm UTC](https://boards.straightdope.com/t/what-is-usury-and-at-what-point-is-it-illegal/303638/21 "2005-05-13T18:08:30Z")
The short answer is that usury laws are usually a matter of state law, though some federal financial regulations can affect the state laws, and the answer can often be difficult to determine. You may want to check with your state’s attorney general’s office if you think you are subject to an unfair or illegal business practice. ---
**Author:** ![Giles](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/giles/32/60_2.png) [@Giles](https://boards.straightdope.com/u/Giles)\ **Post date:** [May 13, 2005, 6:46pm UTC](https://boards.straightdope.com/t/what-is-usury-and-at-what-point-is-it-illegal/303638/22 "2005-05-13T18:46:15Z")
> [@pulykamell](#): > > Heh. You think 59% is bad. Check out those Pay Day/Cash Advance places they got here in Chicago. I was looking at their rate table once, having to Western Union some money, and on a $1000 loan, you need to pay back $1500 by the end of the month. That works out to 600% annual! That’s at least 50% per month. Since interest compounds, that comes to about 12,875% per annum. (If you borrowed $1,000 from them on January 1, and paid nothing back during the year, you would owe nearly $130,000 on December 31.) ---
**Author:** ![iamthewalrus\_3](https://avatars.discourse-cdn.com/v4/letter/i/258eb7/32.png) [@iamthewalrus\_3](https://boards.straightdope.com/u/iamthewalrus_3)\ **Post date:** [May 13, 2005, 7:38pm UTC](https://boards.straightdope.com/t/what-is-usury-and-at-what-point-is-it-illegal/303638/23 "2005-05-13T19:38:17Z")
> [@aaslatten](#): > > Credit card rates are capped at like 22%, right? Nope. Credit card rates are limited by the state from which the card is issued. South Dakota (where Citibank is and most credit cards are issued from) has no legal limit on credit card interest rates. ---
**Author:** ![ralph124c](https://avatars.discourse-cdn.com/v4/letter/r/8797f3/32.png) [@ralph124c](https://boards.straightdope.com/u/ralph124c)\ **Post date:** [May 13, 2005, 7:48pm UTC](https://boards.straightdope.com/t/what-is-usury-and-at-what-point-is-it-illegal/303638/24 "2005-05-13T19:48:03Z")
I think the BIGGEST racket (barring loan sharks) are those sleazy “Rent to Own” appliance outfits. They will “rent” you a $500 TV set for, oh, maybe $10.00 a week. After 3 years, you own it! So you have paid out $1560.00 for something worth $500.00 That works out to over 200%/year…how come this is leagl? Vinny (of the local Mob) would be pleased to get such vigorish. ---
**Author:** ![Gfactor](https://avatars.discourse-cdn.com/v4/letter/g/9de053/32.png) [@Gfactor](https://boards.straightdope.com/u/Gfactor)\ **Post date:** [May 13, 2005, 7:48pm UTC](https://boards.straightdope.com/t/what-is-usury-and-at-what-point-is-it-illegal/303638/25 "2005-05-13T19:48:05Z")
Another good article about the lack of control on credit card interest rates. [http://www.bankrate.com/brm/news/cc/19980202.asp](http://www.bankrate.com/brm/news/cc/19980202.asp) And of course we all know about the recent thwarted attempt to cap credit card interest rates at 30%. [http://www.senate.gov/legislative/LIS/roll\_call\_lists/roll\_call\_vote\_cfm.cfm?congress=109&session=1&vote=00020](http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=109&session=1&vote=00020) ---
**Author:** ![iamthewalrus\_3](https://avatars.discourse-cdn.com/v4/letter/i/258eb7/32.png) [@iamthewalrus\_3](https://boards.straightdope.com/u/iamthewalrus_3)\ **Post date:** [May 13, 2005, 9:20pm UTC](https://boards.straightdope.com/t/what-is-usury-and-at-what-point-is-it-illegal/303638/26 "2005-05-13T21:20:59Z")
> [@ralph124c](#): > > I think the BIGGEST racket (barring loan sharks) are those sleazy “Rent to Own” appliance outfits. They will “rent” you a $500 TV set for, oh, maybe $10.00 a week. After 3 years, you own it! So you have paid out $1560.00 for something worth $500.00 That works out to over 200%/year…how come this is leagl? Vinny (of the local Mob) would be pleased to get such vigorish. Yeah, but if you think about it as a rental business, it’s not bad. It would cost far more to rent a TV for a week or a month from a video rental store (do they even do that? I know you could rent game systems and DVD players). If they didn’t even have the option to have bought it after a while, it would be reasonable. So how can adding that benefit be unreasonable. ---
**Author:** ![Wallenstein](https://avatars.discourse-cdn.com/v4/letter/w/b5a626/32.png) [@Wallenstein](https://boards.straightdope.com/u/Wallenstein)\ **Post date:** [May 13, 2005, 11:35pm UTC](https://boards.straightdope.com/t/what-is-usury-and-at-what-point-is-it-illegal/303638/27 "2005-05-13T23:35:48Z")
I’m not too good on the maths of it, but this has been a hot topic in the UK recently since a family were let off a loan by the courts. The companies that offer these loans claim that their interests rates are not excessive for the following reasons: 1. they offer loans to risky client groups, and are therefore justified in setting high interest rates to offset their risk. 2. although the interest seems excessive, particularly compared to credit cards, it’s not as it appears. This is where my memory lets me down - but one of the advocates for the loan firms pointed out that looked at in a particular way, most credit cards have a whopping interest rate… much, much higher than we think. Will try to find out more details, but their point (which has been supported by consumer associations in the UK) is that it’s not high interest rates that cause the problem. Capping interest rates just means that low income families have no access to regulated credit, and are forced to go to loan sharks. The government here is concentrating much more on mis-selling of loans - several major high-street banks have been rapped for giving loans to people who clearly can’t pay them back. High interest rates on their own are not the problem - it’s the rest of tactics which accompany the industry. ---
**Author:** ![Lsura](https://avatars.discourse-cdn.com/v4/letter/l/7993a0/32.png) [@Lsura](https://boards.straightdope.com/u/Lsura)\ **Post date:** [May 14, 2005, 12:03am UTC](https://boards.straightdope.com/t/what-is-usury-and-at-what-point-is-it-illegal/303638/28 "2005-05-14T00:03:12Z")
> [@aaslatten](#): > > Yeah, I saw a rate like that (it was around 400%) posted at one of those quick cash places. I don’t normally do business at those places, but I had to cash a check that was about to expire. I thought surely the 400% had to be a misprint. How could that possibly be legal? Credit card rates are capped at like 22%, right? > > Then I started hearing stories on the radio and seeing threads like this and realized this was indeed a real thing going on. I guess it is just another example of the government protecting business over poor people. Since I’m a previous employee of a cash advance company (I have not worked for them since 2000, so things may have changed since then). In many states, cash advance or payday loans are not technically (under state law) charged interest (and are not loans, but advances) but they are charged a fee on the amount of the loan. During the time I worked for one in Tennessee, the laws regarding payday loans changed (before, there were no laws, but then some regulations were put into place). There was a spiel we had to do with each customer, every time they were in - it went something like: This is the amount of the advance you are getting today. $200. The fee on that advance is $30. We are holding check number 9999 for $230. If you have not paid the amount of the advance plus the fee on the due date, we have the right to deposit that check to your bank account. The fee we charge is a fee, it is not an interest rate. If it were an interest rate, the APR would be: (usually something like 365.15% for a 14 day advance). Under state law, however, the fee is not interest. Signatures and so forth. But yeah, now that I look back on it, it does feel like a dirty business - at the time, I was glad to have a job. ---
**Author:** ![Balthisar](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/balthisar/32/2825_2.png) [@Balthisar](https://boards.straightdope.com/u/Balthisar)\ **Post date:** [May 14, 2005, 2:32pm UTC](https://boards.straightdope.com/t/what-is-usury-and-at-what-point-is-it-illegal/303638/29 "2005-05-14T14:32:40Z")
> [@iamthewalrus(:3=](#): > > Yeah, but if you think about it as a rental business, it’s not bad. It would cost far more to rent a TV for a week or a month from a video rental store (do they even do that? I know you could rent game systems and DVD players). If they didn’t even have the option to have bought it after a while, it would be reasonable. So how can adding that benefit be unreasonable. If you rent from a rental place like these, can you give back the stuff whenever you want to? Are you under any obligation other than paying to continue keeping your stuff? I can see this as kind of a benefit you don’t get with credit, then. Send back that dining room set and stop making payments whenever you want to. With credit, you’re stuck with the dining set and the payments. ---
**Author:** ![Northern\_Piper](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/northern_piper/32/5304_2.png) [@Northern\_Piper](https://boards.straightdope.com/u/Northern_Piper)\ **Post date:** [May 14, 2005, 3:40pm UTC](https://boards.straightdope.com/t/what-is-usury-and-at-what-point-is-it-illegal/303638/30 "2005-05-14T15:40:28Z")
> [@shelbo](#): > > I’ve always thought that the usury laws were pretty funny. > Make a law regarding loans of money, and then exempt basically every single type of company that loans money as a business. Depends on the particular law in a particular jurisdiction. In Canada, an interest rate above 60% is a criminal rate of interest under s. 347 of the [Criminal Code](http://laws.justice.gc.ca/en/C-46/42972.html), without exceptions for any industries. In fact, last year the Supreme Court held that a gas company was potentially liable to repay late payment fees to its customers, because the way they calculated the fees made them exceed the 60% rule: [Garland v. Consumers’ Gas](http://www.lexum.umontreal.ca/csc-scc/en/pub/2004/vol1/html/2004scr1_0629.html). > [@Lsura](#): > > In many states, cash advance or payday loans are not technically (under state law) charged interest (and are not loans, but advances) but they are charged a fee on the amount of the loan. > … > The fee we charge is a fee, it is not an interest rate. If it were an interest rate, the APR would be: (usually something like 365.15% for a 14 day advance). Under state law, however, the fee is not interest. Again, it varies from jurisdiction to jurisidiction. In Canada, s. 347(2) defines “interest” to include the fees like you describe - you can’t evade the law by calling it something fancy like a fee or service charge. > [@](#): > > “interest” means the aggregate of all charges and expenses, whether in the form of a fee, fine, penalty, commission or other similar charge or expense or in any other form, paid or payable for the advancing of credit under an agreement or arrangement, by or on behalf of the person to whom the credit is or is to be advanced, irrespective of the person to whom any such charges and expenses are or are to be paid or payable, but does not include any repayment of credit advanced or any insurance charge, official fee, overdraft charge, required deposit balance or, in the case of a mortgage transaction, any amount required to be paid on account of property taxes ---
**Author:** ![Gfactor](https://avatars.discourse-cdn.com/v4/letter/g/9de053/32.png) [@Gfactor](https://boards.straightdope.com/u/Gfactor)\ **Post date:** [May 14, 2005, 3:42pm UTC](https://boards.straightdope.com/t/what-is-usury-and-at-what-point-is-it-illegal/303638/31 "2005-05-14T15:42:12Z")
> [@Balthisar](#): > > If you rent from a rental place like these, can you give back the stuff whenever you want to? Are you under any obligation other than paying to continue keeping your stuff? I can see this as kind of a benefit you don’t get with credit, then. Send back that dining room set and stop making payments whenever you want to. With credit, you’re stuck with the dining set and the payments. True, but OTOH, you can spend $1500 “renting” a $500 tv, and have nothing to show for it. But then, that’s how rentals work. If I rent a car, I pay the price, and when the rental period is over, I give it back. If that is a benefit, so be it. Many people think the “rent” is too high, and it is high because the people who pay it have few options. E.g., [Maryland Attorney General - Brian E Frosh](http://www.oag.state.md.us/consumer/edge109.htm) [Previous page](https://boards.straightdope.com/t/what-is-usury-and-at-what-point-is-it-illegal/303638.md?page=1)