Has debt got you feeling down? That’s no surprise. More than 80% of Americans have debt, with the average household debt being around $90,000.
So at the very least, you aren’t alone. However, that statistic is unlikely to make you feel any better. Debt is a big problem, and it’s intended to keep people in bondage to monthly payments forever, as that is how big banks and lenders make their executives rich.
How else are they supposed to buy their yachts and mansions?
It’s not all bad news for us regular folk, however. There are certain protections in place to prevent usury, which is the act of charging excessively high interest rates.
Of course, one could argue that credit cards are a form of usury, but that’s another topic.
If you feel like you are paying far too much interest then you need to inform yourself of usury laws and the common usury rate. Keep reading for all the answers you need now.
What Is Usury and Why Is It Terrible?
First off, start out by reading this usury definition. Usury is the act of loaning out money and charging a higher interest rate than is allowed by law.
Yup, there are laws that dictate how much lenders can charge when it comes to interest. This wasn’t always the case though. In the middle ages, for example, usury was common, often initiated by leaders such as King Henry VIII in England.
Today, there are luckily enough regulatory agencies in the US intended to protect civilians from unreasonably high interest, as a means of preventing modern-day slavery as well as maintaining a healthy, viable economy.
If interest rates were allowed to be as high as they once were, some people would never be able to get out of debt, as their monthly payments would barely be enough to pay off the interest, let alone pay down any principle.
Therefore, usury is a form of financial abuse and is punishable by law.
How Lenders Get Away With Usury
So how do modern lenders get away with providing a usurious loan today? It’s simple. Many people who are desperate to borrow money don’t understand the current laws and regulations regarding interest rates and lending products.
This is understandable, considering that America (quite surprisingly), has a really low level of financial literacy. When it comes to financial knowledge, the US has a financial literacy rate of only 57% while Denmark, the country with the highest rating, has a 71% financial literacy rate.
Many Americans don’t understand financial concepts, the impact of financial decisions such as taking n debt, and what the laws regarding debt are.
Therefore, many sneaky lenders can get away by setting up shop, either physically, or online, and attracting people who are desperate for cash. These people either don’t know or don’t care, how high an interest rate is, so long as someone is willing to loan them money.
Maybe they’ve been denied a loan by reputable lenders, and have turned to the more shady lenders. Either way, they become victims of usury and may be stuck for years before taking action against it.
What to Do About Usury
So if feel like you are a victim of usury, there are a few things you might be able to do. Here’s where to start.
Understand the Current Interest Rates
Usury law is supposed to limit the maximum amount of interest you pay on any particular loan. Most states have usury laws, though they can be quite complicated.
First off, look up your state’s usury law limits, which for Arkansas is 17% and Colorado is 45%, for example.
Then, understand the exceptions to the rules. Oftentimes, banks and credit card issuers can get around this limit due to various loopholes. More specialized lenders, that don’t function as traditional banks, are more likely to have to oblige these laws and might be a better option for your loan.
Be Wary of Payday Lenders
Predatory lenders often take on the guise of payday lenders. These small lenders, often located in poor areas of town, provide unsecured loans against upcoming paychecks.
If you need a paycheck now, but still have two weeks until your employer’s next pay period, you could get a payday loan. But because these loans are unsecured, and are typically given to low-quality borrowers, high-interest rates are to be expected to mitigate risk for the lender.
This is often where usury takes place. In fact, this is why payday loans are banned in 12 different states. In 18 states, interest rates are capped at 36% on $300 loans. Other states have limits, but these can be pretty high, considering the average rate on a payday loan is over 300%.
If you are in a state where a cap is in place, be sure to know the cap, otherwise, you can report these lenders to regulatory authorities.
Consider a Class Action Lawsuit
Maybe you have a loan with a larger lender. And maybe they have been secretly charging higher interest rates than they should’ve been.
Although you may be paying higher interest rates, your particular case may be very small compared to the size of the lender. That means that it might make sense to bring a case up against this lender all by yourself.
However, it’s likely that if you are a victim of unfair practices by a large institutional lender then many other people are in the same boat. In these instances, a class action lawsuit may be the best approach.
A class-action lawsuit is when a large group of people brings a collective case against an institution, such as lenders, credit bureaus, and so forth. They do this by hiring a lawyer that specializes in class action lawsuits, such as those found on Financialjusticenow.com.
There is a lot that goes into the process, and enough people need to participate to justify the cost of the lawsuit. While the individual rewards of a successful lawsuit might be small, often only hundreds, if not a few thousand dollars, it will deal a huge blow to the corrupt lender.
If they are engaging in unfair practices, they deserve to pay for their mistakes and endure public humiliation.
Take Charge of Your Finances
Paying interest is never fun. However, it’s necessary on important loan products such as mortgages or automobile loans, which help to improve the quality of life.
However, usury isn’t uncommon, and you should always be on the lookout for lenders who claim to have one interest but are actually charging you more without you realizing it.
Looking for other ways to solve your financial problems? Visit our blog today to keep reading.