Usury Laws

What do you think the cost of money is these days?  The Federal Government borrows money at about 1%.  The banks borrow money and use the money of their depositors at a cost of a little over 1%.

Money today, even though not readily available, is cheap if you can get it.  The rich have access to money at a very low interest rate.

But if you are part of middle America, what we call the middle class, when you borrow money your cost is going to be very high.  And your cost is especially high if you use a credit card and don’t pay the entire balance due at the end of the month.

You won’t remember this but 30 years ago most states, including Nevada, had usury laws.  These laws were designed to keep financial predators from taking everything you owned or would ever own.

Nevada had a 12% maximum interest rate and financial institutions had to live with it.  One of the ways they kept their losses low and their profits high was to be careful with regard to the financial strength of those who borrowed from them.

But then all hell broke loose.  The economy went into the tank during the Carter administration and the financial world decided it could not lend money, take a chance on a borrower and make a profit, as long as the usury laws were in effect.

Therefore, usury laws were written off the books and the financial industry was given a blank check and total control of what it would charge borrowers.

At one time I had a business loan at 24% interest.  You can’t run fast enough and produce enough product to pay those kinds of interest rates.

Eventually the market corrected itself, competition was revived and interest rates dropped substantially.

But when interest rates dropped, there was no return of the usury laws.

The financial institutions were free to charge what they could charge and charge they did.