Usury:"The practice of lending money at an exorbitant interest rate" - Websters

[panader0]

Isn't 30% exorbitant? Mine got jacked to 26.9% without my noticing for a few months. Where does lending money become usury? Where is the edge of exorbitant? I think anything over 20% is exorbitant, maybe even 15%. I understand that banks need to make money, but if you can't make money on 15%, you aren't running your business very well.

[stray cat]

1. Currently I guess its whatever someone is willing to pay for a loan

[nuxvomica]

2. I recall an interesting article somewhere about this recently

The author said that the end of usury was the beginning of the financial crisis. Usury laws are at the state level and a SC decision back in the 80s or 90s declared that the usury law of where the lender was headquartered determined the legality of the loan rate. After that, all the credit card companies moved their headquarters to South Dakota, which has no usury law.

[surrealAmerican]

4. I think the article may have been in Harpers ...

... and the court decision actually dates to the late 1970's.

I agree with th OP that these rates are usury, the problem is that it's not illegal.

[nuxvomica]

7. You are correct

Here's a link to the article for reference but only subscribers can get the full text.
http://harpers.org/archive/2009/04/0082450

[spin]

3. You're damn right it's usury...

the credit card companies are able to get away with this exorbitant rates because of a SCOTUS decision.

In Marquette vs. First Omaha Service Corp., the Supreme Court ruled that a national bank could charge the highest interest rate allowed in their home state to customers living anywhere in the United States, including states with restrictive interest caps.

"It's whatever is agreed to in the contract," says Michael Donovan, a consumer attorney and partner at Donovan Searles in Philadelphia.

"They can export rates to other states and override state law limits."

When it comes to credit card interest rates, the law in a lender's home state rules. It doesn't matter what kind of rate cap exists in a customer's state.

A funny thing happened after the Marquette ruling. Major credit card companies began relocating to states with liberal or no usury laws. New York-based powerhouse Citibank moved its credit card business to South Dakota in 1981.
http://www.bankrate.com/brm/news/cc/20020320a.asp

You just have to remember that big corporations are always more important than little peons.

[donco6]

5. It used to be labeled "immoral" by the religionists.

Now, I guess it's OK. Funny how that works.

[dgibby]

8. That was before the "new" religion of prosperity and greed became popular.

Also before the religionists bought stock in the banks and credit card companies.

[azul]

6. Using money to control other people's lives.

Is another definition that I heard.

It is corruption pure and simple. They lenders write the legislation, pay off congress to enact it, and it's then legal and highly profitable if not morally bankrupt.

[MercutioATC]

9. There's no way to set a specific absolute rate for "exorbitant".

If the prime rate is 3%, "exorbitant" is a lot different than if the prime rate is at 12%.

That said, different types of loans and different borrowers dictate different terms.

Is the loan secured or unsecured? If secured, secured by what collateral? What is the debt/income ratio of the borrower? Their credit history?

It's silly to suggest that one maximum rate would apply to all of the different possible situations.