Usury, << YOO zhuhr ee, >> is interest at a higher rate than the law allows. In Biblical times, all payments for the use of money were usury and were forbidden. In general, people considered interest and usury as the same thing until the late Middle Ages (between 1300 and 1500). Most borrowers were poor and needed to borrow to obtain the necessities of life.
The Industrial Revolution, the rapid rise of industrialization that began during the late 1700’s, brought demand for large amounts of money to invest in railroads, factories, and shipbuilding. It became normal for borrowers to pay interest on a loan. Usury no longer meant interest. Instead, it meant extremely high charges for borrowing money.
Some banks charged high interest rates to borrowers they considered high risk. High-risk borrowers are those thought to have a greater likelihood of defaulting (not paying back their loan). The higher interest paid by risky borrowers who did not default made high-risk loans profitable for banks. However, many people believe that charging extremely high interest rates is morally wrong. In the United States, states began passing usury laws that limited interest rates that could be charged to borrowers.
An unintended result of usury laws was the rise of loan sharks—individuals who charge excessively high interest rates. Law courts cannot enforce repayment of such private loans. Loan sharks often enforce payment themselves by threatening to harm the borrower.
The United States Congress passed the Depository Institutions Deregulation and Monetary Control Act in 1980. The act enabled credit card companies and many other types of lenders to charge interest rates much higher than state usury laws had allowed.
