Usury

[Lauxa]

It seems to me that maybe some of those old thyme religions had it correct and that usury (lending money at interest) is a Bad Thing. I know it is explicitly forbidden in the Koran and I think early Christians were against it as well. Well, it seems to cause all sorts of problems. Finances wars, keeps developing countries impoverished. Don't even get me started on the US paying interest to private bankers on currency production. Other loan arrangements such as profit sharing might be okay.

What do you think the world would look like without usury? What would wealthy people do with their money if they couldn't loan it out at interest?

[PianoManGidley]

Well, for one, we can pretty much say goodbye to banks, as loan interest is such a major source of income for them that I don't see how they could function without it. So without banks, we wouldn't have that first $100,000 of our money insured, should anything happen to the bank itself...

[Still Growing]

With no usury the people with the money would no longer loan money to those who needed it. They would just invest their money into businesses.

Its about Risk vs Reward. If the loaner takes all the risk with absolutely no reward then its unfair.

[SomeRandomGuy]

To me, this is an interesting concept. Not people lending money to others interest free, as I don't see that ever happening. Most likely, this would lead to a society with little or no consumer debt. It seems like the level of debt of the average US citizen is getting a lot of attention right now, so the thought of a world in which people only spend the money they have is an intriguing one.

Aside from the issues already mentioned, I also can see where a society without usury would also lead to a society without interesting bearing savings and checking accounts. The banks would have no incentive to pay you interest on your money, if they were not going to be loaning it out at a higher rate (unless they would just investing it directly into the stock market, etc.). Actually, in a way, a savings account is like you loaning the bank money at a set rate (so they can loan it at a higher rate). When you look at it like this, it is possible to argue that a savings account itself is a form of usury, so those would have to go as well.

[ThoughtAddict]

What exactly is usury? At what percentage APR does a loan become usury? Generally, usury has a pretty wide definition which involves an element of unconscionability. In the Quran, for example, usury ("Reba" in Arabic) is condemned harshly while regular money lending with interest ("Fa'eda") is not spoken of. The line between what is permissible and forbidden is never clearly demarcated, but generally a lenient policy toward debtors is favored.

There are currently statutory interest rate caps in the US for every state and the District of Columbia. They vary widely in the interest rates which are considered usury, with some going as low as 5% and others as high as 24% APR.

I think the OP meant any interest at all, and I gotta agree with StillGrowing that there would be no incentive to loan money. Why take on the expense of loan administration, the loss of value from inflation, and the serious risk of default if there isn't some incentive? Some interest rate is necessary simply to cover the expenses. The more important question is one of regulating lending practices to ensure credit is not extended in a way to make a default likely. This may include simply not lending to certain individuals...

[Apollia]

In my opinion, usury basically comes down to profiting from someone's continued misfortune. The longer a person continues to have the misfortune of being unable to pay back the loan, the more the lender profits.

(Unless the borrower is financially bled so much that their life is ruined (such as by a health issue they can't afford to pay for causing them to lose their job), resulting in them becoming incapable of making enough money to pay; or they finally decide they're tired of being an indentured servant and paying exorbitant, unfair fees and interest rates).

If the end of usury would lead to more investment happening, I think that would be OK. I haven't looked into investing too much (I'm too broke, so knowing about investing would be of little practical use to me), but, off-hand, I can't think of any major problems with investing. Unlike lenders, who profit more when an individual or business is struggling and is not yet prosperous enough to pay back their debt in full, investors profit when a business succeeds. (Unless I'm mistaken).

Loans with interest are an ongoing parasitic drain on whatever resources you have at your disposal and hence increase your chances of failure. Being in debt can also cause needless and debilitating emotional distress in the form of the ongoing fear of the consequences of not being able to pay back your debt.

Meanwhile, investments leave you free to just build your business without being plagued with the anxiety of carrying a lot of debt, and without having to deal with excessive amounts of your profits being eaten up by the necessity to pay back some greedy, already wealthy lenders who don't need the money as much as you do.

I think people should be rewarded for helping others, not for hindering others. I think investors earned and deserve the reward of sharing in the profits of the business they helped. If I'm not mistaken, investors also take greater risks than usurers, because investors can lose everything they invested without getting a cent back, and, unlike usurers, they aren't entitled to use the legal system to bully people into paying them back.

One thing that particularly annoys me is when usurers act like they're doing borrowers a favor by taking advantage of them. Sure, loans can make the lender superficially appear to be generous, but it's not really generous at all if the lender is going to get back not only what they paid you, but also large amounts of interest and fees.

Not to mention, until you pay them back, the lender is also given a lot of power over you, such as the legal right to harass you by hiring bill collectors, damaging your credit report, getting court orders against you to impose wage garnishments, bank account levies, and other seizures of assets if you can't afford to pay, etc.

Lauxa wrote:

What do you think the world would look like without usury?

Hopefully, a lot better.

What would wealthy people do with their money if they couldn't loan it out at interest?

Spend it, invest it, give it away - all of which they doubtless do now, but hopefully they'd do even more of it.

Regarding banks and savings accounts - maybe these could survive in a no-usury world if banks decided to support themselves through investing, and by branching out into providing other services truly worthy of the name "services".

Actually, I doubt the elimination of usury alone would ruin banks totally - I'm guessing banks make quite a bit of money from unfairly high bounced check fees, ATM fees, and other annoying little fees that I would much prefer that they didn't have.

Best wishes,
Apollia

[Still Growing]

Originally Posted by Apollia

In my opinion, usury basically comes down to profiting from someone's continued misfortune....

So if you want to borrow money for a home its a misfortune to have debt?

Originally Posted by Apollia

If the end of usury would lead to more investment happening, I think that would be OK. I haven't looked into investing too much (I'm too broke, so knowing about investing would be of little practical use to me), but, off-hand, I can't think of any major problems with investing.

No offense but your attitude towards money is really the reason you're broke. I'm not digging at you but what I am saying is true IMHO.

Originally Posted by Apollia

Unlike lenders, who profit more when an individual or business is struggling and is not yet prosperous enough to pay back their debt in full, investors profit when a business succeeds.....

If I'm not mistaken, investors also take greater risks than usurers, because investors can lose everything they invested without getting a cent back, and, unlike usurers, they aren't entitled to use the legal system to bully people into paying them back.

The lenders can loose it all if the borrower goes bankrupt. Actually you have it wrong. The lender has greater risk if you measure it based upon potential reward. The lender is the one taking the risk and the borrower is the one who spends his or her time and efforts to get a return.

Originally Posted by Apollia

One thing that particularly annoys me is when usurers act like they're doing borrowers a favor by taking advantage of them.

If you go to a bank to borrow money then you are asking them to do something for you. Assuming you are above 18, you're a big boy or a big girl. How is it that they are taking advantage of you?

Originally Posted by Apollia

Not to mention, until you pay them back, the lender is also given a lot of power over you, such as the legal right to harass you by hiring bill collectors, damaging your credit report, getting court orders against you to impose wage garnishments, ....

Apollia, if you win the lottery could you loan me some money please? With your attitude I couldnt' go wrong... You wouldn't even bother me when I defaulted.

It seems you have a negative experience with borrowing money and that has jaded your viewpoint. When you build your credit back up and want to borrow money for a house or car sometime you'll be glad that loans exist.

Imagine a world where there were no loans and you simply had a house or car or you didn't. With no loans the poor would stay poor.

Money is leverage. Money makes money. If you borrow money for assets you will get ahead, if you borrow money for liabilities you will fall behind. Which did you borrow money for; an asset or a liability?

Please don't see what I'm saying as argumentative; try to take what I'm saying as constructive because until you change your viewpoints you will always struggle.

[Apollia]

Originally Posted by Still Growing

So if you want to borrow money for a home its a misfortune to have debt?

Absolutely, at least for me. Though, I think for anyone without a totally reliable income, having debt and having to fret over potentially losing a house in which one has already sunk thousands or tens of thousands of dollars is likely to be harrowing.

No offense but your attitude towards money is really the reason you're broke. I'm not digging at you but what I am saying is true IMHO.

Yes, I definitely I have lots of issues with money, so it could be true. But, I still think usury is wrong.

The lenders can loose it all if the borrower goes bankrupt.

If the borrower has remained beholden to the lender long enough for the lender to get back the original debt plus extra, then, any remaining "debt" the borrower has as a result of interest and fees is just icing on the cake for the lender if the borrower continues to be willing to pay, because even if the borrower defaults at that point, the lender has still made a profit.

Actually you have it wrong. The lender has greater risk if you measure it based upon potential reward. The lender is the one taking the risk and the borrower is the one who spends his or her time and efforts to get a return.

Well, my original comparison was of the amount of risk taken on by lenders compared to investors in businesses.

But, to comment on the relative risks taken by lenders and borrowers - I think most of the time borrowers are much more at risk of losing important things like their home, health, etc. due to financial problems than lenders are if some borrowers default.

If you go to a bank to borrow money then you are asking them to do something for you. Assuming you are above 18, you're a big boy or a big girl. How is it that they are taking advantage of you?

If someone is in a bad situation, I think it's immoral to take advantage of that fact by giving that person a lousy deal they would never agree to if they weren't in such a bad situation. Like selling someone who is dying of thirst a glass of water for $5,000, when obtaining and providing the water costs you next to nothing.

Anyhow, to further answer this point, I guess I'll just link to something I wrote on this topic many months ago: Why Kiva doesn't work for me It explains my viewpoints on usury in much detail.

Though I guess one reason that link, criticizing the usurious practices of a would-be charity, might not completely apply as an answer to this point is because banks aren't charities, and maybe it's unfair to expect ethical or charitable behavior from a business.

But, in any case, I always think it's deplorable when anyone in a position of wealth and power tries to leech from people much less fortunate than themselves when they're already quite wealthy enough.

Apollia, if you win the lottery could you loan me some money please?

Nah, I'll give it to you for free.

With your attitude I couldnt' go wrong... You wouldn't even bother me when I defaulted.

Correct.

It seems you have a negative experience with borrowing money and that has jaded your viewpoint.

Definitely.

When you build your credit back up and want to borrow money for a house or car sometime you'll be glad that loans exist.

Well, if that ever happens, I'll admit you won.

Imagine a world where there were no loans and you simply had a house or car or you didn't. With no loans the poor would stay poor.

Maybe. Hard to say. At least anyone who already had a home would have the peace of mind of knowing they couldn't lose their home due to foreclosure from being unable to pay their mortgage.

Money is leverage. Money makes money.

Yes. I'm wholly in favor of money with no strings of indentured servitude (aka usury) attached.

If you borrow money for assets you will get ahead, if you borrow money for liabilities you will fall behind. Which did you borrow money for; an asset or a liability?

To start with, a computer. It didn't do me as much good as it ought to have, though, because I was so stressed out just trying to figure out how to pay for it in spite of various limitations such as lack of transportation, crippling shyness (at that time; fortunately I've gotten over that to an extent), and just plain hating to be forced to even think about money at all.

Please don't see what I'm saying as argumentative; try to take what I'm saying as constructive

Thanks, I appreciate it.

because until you change your viewpoints you will always struggle.

Could be true. But, I like the challenge of trying to persuade the world to see things my way instead of pretending I agree with various unethical practices and just accepting debt as my and most everyone else's inevitable lot in life.

Best wishes,
Apollia

[SomeRandomGuy]

Originally Posted by Still Growing

Imagine a world where there were no loans and you simply had a house or car or you didn't. With no loans the poor would stay poor.

I would be very interested in hearing some elaboration on this topic. I don't see how owning a house or car can cause someone to not be poor. In fact, it seems much more likely that giving credit to those without the means to pay is more likely to keep them poor. Of course, the individual has the option to not borrow money. Very often, though, people who are poor are not good with money and as long as credit is available to them are more likely to keeping going farther into debt (and therefore staying poor). The individual is to blame, not the lender, in these cases. But as a society, it would be very interesting to see how things would be if we did not have this view that everyone has to go into debt to get a car or a house. Personally, I think people would be much better off if they lived off of what they made, and went into debt only as an absolute last option.

[Lauxa]

Thanks for all the responses!

I just want to comment that I do not have problems with money yet... although I am taking some financial risks that could change that.

Okay, so let's say we are in a world where you either have a house or you don't... either have a car or you don't... What are we looking at? More rental property and leases on vehicles? Is that so bad?

Now usually people live in smaller dwellings when renting because they know they are not getting any return on the money they put into the rent. Maybe there would be less suburban sprawl. Suburban sprawl seems to be a fairly wasteful use of land and resources to me.

Stopping usury would probably have the most impact on consumer debt, so maybe a decline in the economy as far as producing consumer goods. Less sweatshops in third world countries pumping out crap that most people can't afford but buy on credit anyways.

Investing in assets would be still encouraged if profit-sharing is still allowed, so maybe more people would borrow money to produce goods of value and then use the profits on that to finance their consumption. That sounds pretty good.

What about student loans, since these are mostly financed through usury? Maybe more people would start their education at community colleges and pay their way through school, or more grant programs would be developed by industries that need highly-trained specialists. I'm not sure, but I know that many students come out of college with some BS degree with little earning potential and crippling debt. Many more never graduate, but still have the debt to repay.

Maybe banks would cease to exist. Not sure. Also not sure this would be a bad thing. When the ponzi scheme we call the banking system finally collapses people will see banks differently. If the banking system collapses, there is no way the FDIC can cover the losses, there is just not enough money. They could print more, but not without seriously devaluing the currency.

[SomeRandomGuy]

Originally Posted by Lauxa

Okay, so let's say we are in a world where you either have a house or you don't... either have a car or you don't... What are we looking at? More rental property and leases on vehicles? Is that so bad?

I don't think that a world without lending would necessarily mean you either have a house (or a car) or you don't. I think more likely it would mean a lot of people would be driving a $1,000 or $2,000 car instead of a $20,000 or $30,000 car. Maybe people would care for their cars better, because they would be thinking of them as very long term investments, not something they are going to trade in in 3 to 5 years. As for houses, maybe people would be more likely to be a house that fits what they need instead of what they want. Maybe more people would buy a house as a home instead of as an investment. Those things may or may not happen, but I believe they would be very beneficial changes to see take place.

[Brutha]

For people who don't have any money to start with some form of credit is important to start a capital intensive business.

People who take a mortage to pay for a house that they can't afford are responsible for the result of taking that mortage.

People who can't loan out their money in some way will probably use it less effectivly than people who can search for the highest return on their investment.

[SomeRandomGuy]

Brutha, you make a good point. I had been thinking along the lines of personal debt, and was not considering the impacts to business development of a society without debt and lending.

[Lauxa]

@Brutha: what I am considering is the impact of lending based on profit-sharing instead of lending based on interest. So if you would like to start a business, you must convince someone that you will be able to make a profit on the original investment and will give them a share of the profits. If the business does not make a profit, then the investor doesn't get any profit (the borrower could still pay back the amount of the investment). People who are loaning out their money to finance consumer debt are probably not making the best use of their capital.

@SomeRandomGuy: yes, I wonder if there would be more economical housing and transportation options if it weren't just culturally expected that everyone should go into debt to finance these purchases.

[Still Growing]

Originally Posted by Lauxa

Okay, so let's say we are in a world where you either have a house or you don't... either have a car or you don't... What are we looking at? More rental property and leases on vehicles? Is that so bad?

In the case of a vehicle it is better financially to just buy a $1500 car however in the case of a house you would simply pay rent because only the wealthy could afford houses.

Is it so bad?
Well no but not being able to loan money it keeps the rich rich and the poor poor.

Here's what it comes down to:

Society with Loans: Some people use money as leverage to become wealthy. In their case its better to have a system whereby loans exist.

Society without Loans: Some people can't resist themselves and have no control over their spending. These people may do better in a society whereby there are no loans. However overall the rich will stay rich and the poor will stay poor. The same person who used leverage to build a house or expand his business would never make it without loans.

If you think the answer is to have those with money simply to invest money into companies this is a horrible idea. Imagine a world where you are forced to take on money partners who meddle in your life. I much prefer borrowing from the bank than having to go to a loan shark who would become my partner by force. Think of what you people are recommending here.

I see the posts made by everyone that they don't believe that doing away with loans would simply mean that you wouldn't have a house or that it wouldn't be such a bad thing. Well LEVERAGE is the key to growing wealth.

But as long as we're dreaming, OK then, I wish we lived in a society where we could have houses but no debt, have businesses that require no loans and that money was free with borrow with no interest and available to all.

[Apollia]

Originally Posted by Lauxa

I just want to comment that I do not have problems with money yet...

That's good!

although I am taking some financial risks that could change that.

Good luck with that.

Okay, so let's say we are in a world where you either have a house or you don't... either have a car or you don't... What are we looking at? More rental property and leases on vehicles? Is that so bad?

Maybe it is. Having a landlord is pretty annoying. I doubt having a carlord would be much fun either. Especially since vehicles seem to _inevitably_ break down, and then if you had an obnoxious carlord, they'd probably give you grief about it. Even people who haven't fully paid off their car loans don't have to put up with that, at least.

I'm not sure, but I know that many students come out of college with some BS degree with little earning potential and crippling debt. Many more never graduate, but still have the debt to repay.

At least that's one peril I had the wisdom to avoid.

Maybe banks would cease to exist. Not sure. Also not sure this would be a bad thing.

Same here. However, even though I dislike banks, if there's any way to keep something so disruptive as bank collapses from happening, I'd find that preferable, since a lot of innocent people would probably be hurt by bank collapses.

Originally Posted by SomeRandomGuy

I don't think that a world without lending would necessarily mean you either have a house (or a car) or you don't. I think more likely it would mean a lot of people would be driving a $1,000 or $2,000 car instead of a $20,000 or $30,000 car.

Yes, I also think prices might drop, because otherwise very few cars and houses would be sold. Hopefully a lot of currently overpriced things would drop to price levels which are affordable for people who can't borrow. It would be a disaster if they didn't.

Originally Posted by Brutha

For people who don't have any money to start with some form of credit is important to start a capital intensive business.

I agree they need some form of capital, but I don't think it has to take the form of "credit" (which implies debt).

People who take a mortage to pay for a house that they can't afford are responsible for the result of taking that mortage.

Of course, another way to look at it is:

Callous, uncaring, predatory lenders who have no moral qualms about foreclosing on someone's house and throwing entire families with small children out on the streets are responsible for the results of being so mean.

But perhaps a more fair way to look at it is:

It's not completely the fault of any single person. Predatory lenders shouldn't do what they do, but, on the other hand, no one should trust or make deals with predatory lenders.

Originally Posted by Lauxa

@Brutha: what I am considering is the impact of lending based on profit-sharing instead of lending based on interest. So if you would like to start a business, you must convince someone that you will be able to make a profit on the original investment and will give them a share of the profits. If the business does not make a profit, then the investor doesn't get any profit (the borrower could still pay back the amount of the investment).

Ahh, so that's what you mean by profit-sharing. This is precisely what I meant by investment in businesses - assuming the recipient of the investment isn't forced to pay back the investor, but can do so optionally. (Since being forced to pay back an investment would be little better than a loan).

People who are loaning out their money to finance consumer debt are probably not making the best use of their capital.

I definitely agree with this - someone with a permanent right to share in the profits of a big company like Microsoft or even a much smaller company could probably make a lot more money with much less work than they ever could by loaning to average financially struggling people who have a chance of defaulting eventually even despite doing their very best to pay.

@SomeRandomGuy: yes, I wonder if there would be more economical housing and transportation options if it weren't just culturally expected that everyone should go into debt to finance these purchases.

So do I. Or maybe if everyone simply refused to make deals with the people offering houses at much too high prices, prices would fall.

Originally Posted by Still Growing

Here's what it comes down to:

Society with Loans: Some people use money as leverage to become wealthy. In their case its better to have a system whereby loans exist.

Society without Loans: Some people can't resist themselves and have no control over their spending. These people may do better in a society whereby there are no loans. However overall the rich will stay rich and the poor will stay poor. The same person who used leverage to build a house or expand his business would never make it without loans.

Could be - there might have to be a lot of other changes besides forbidding usury for things to work out much better than they are currently.

If you think the answer is to have those with money simply to invest money into companies this is a horrible idea. Imagine a world where you are forced to take on money partners who meddle in your life. I much prefer borrowing from the bank than having to go to a loan shark who would become my partner by force. Think of what you people are recommending here.

Hmm, I didn't think mere stock owners were capable of being that meddlesome, at least if the primary owners still had 51% of the stock - but, on the other hand, I don't know about investing, so, you could very well be right.

I'm simply going by the fact that a relative of mine had a business, and unless I'm misrecalling, she was careful to have 51% of the company in order to have final authority over various decisions.

But, come to think of it, her partners did indeed turn out to be very meddlesome anyhow despite this. One was just annoying, terrified of failure; but the other violated a contract and tried to sue my relative unfairly, which is the main thing that caused the business to fail.

Perhaps, though, things would be better if there was a firm restriction that investors can't meddle, can't sue, and can only just sit there and wait for the profits to start rolling in.

Or maybe not. Probably not - unscrupulous, immoral, opportunistic, mean people will probably mess things up no matter what the rules are.

Actually, I suppose even the act of banning usury could lead to trouble. The enforcement of it could lead to unfair infringements of freedom - actually, banning it could even itself be an unfair infringement of freedom, since there are probably people who truly feel completely OK with accepting such deals.

Maybe usury being banned would lead to infringements of privacy to see if people are secretly making usurious deals with one another, the possibility of false accusations of usury, etc., and maybe it would also lead to a black market, or cause the existing black market of loan sharks (I assume there is one) to thrive more than it is now. Perhaps the results of banning usury would overall end up being something like the results of prohibition of alcohol, or the War on Drugs.

Maybe what we already have now is a lesser evil.

But as long as we're dreaming, OK then, I wish we lived in a society where we could have houses but no debt, have businesses that require no loans and that money was free with borrow with no interest and available to all.

Me too. I wish charity was more common, that more wealthy people would just give stuff away with no strings attached to people who need it, instead of having the selfish attitude of "what's in it for me?" and only investing, hiring people, or lending.

Best wishes,
Apollia

[ThoughtAddict]

Originally Posted by Apollia

Hmm, I didn't think mere stock owners were capable of being that meddlesome, at least if the primary owners still had 51% of the stock - but, on the other hand, I don't know about investing, so, you could very well be right.

. . .

Perhaps, though, things would be better if there was a firm restriction that investors can't meddle, can't sue, and can only just sit there and wait for the profits to start rolling in.

Well, it depends. One can set up a corporation or LLC in such a way that it is impossible to lose control of the company. The question is whether investors would accept shares in those companies, knowing that they have extremely limited rights. In many cases, I think that investors would be cautious before making such investments.

The change would probably lead to new, adaptive laws being written which provide more protection to minority stakeholders... the whole face of business organizations would change, probably preventing non-profit driven motives even in companies that try to be socially responsible.

Originally Posted by Apollia

Actually, I suppose even the act of banning usury could lead to trouble. The enforcement of it could lead to unfair infringements of freedom - actually, banning it could even itself be an unfair infringement of freedom, since there are people who are truly completely OK with accepting such deals.

. . .

Perhaps the results of banning usury would overall end up being something like the results of prohibition of alcohol, or the War on Drugs.

Maybe what we already have now is a lesser evil.

Exorbitant interest rates are already illegal. They still occur. Just ask the mob.
The current laws against usury (unconscionable rates) and allowing bankruptcy are designed to protect borrowers. There will probably be new regulations soon designed to prevent the subprime practices which have hurt many borrowers. The system isn't perfect... but the alternative is probably worse.

[Apollia]

Interesting, thanks for your reply. (Thanks everyone else too - I'm enjoying this thread).

Originally Posted by ThoughtAddict

Well, it depends. One can set up a corporation or LLC in such a way that it is impossible to lose control of the company. The question is whether investors would accept shares in those companies, knowing that they have extremely limited rights. In many cases, I think that investors would be cautious before making such investments.

Yes, I guess investors might need some recourse just in case some unscrupulous business owners withheld the profits that rightfully belong to the investors.

The change would probably lead to new, adaptive laws being written which provide more protection to minority stakeholders... the whole face of business organizations would change, probably preventing non-profit driven motives even in companies that try to be socially responsible.

Hmm, I guess you're probably right. It always seems like corruption somehow works its way into any given system.

Exorbitant interest rates are already illegal. They still occur. Just ask the mob.

Hmm... the mob scares me, so I guess I won't discuss the mob.

I think payday loan places somehow manage to get away with outrageous usury as well. Unless I'm mistaken (or unless things have changed recently), I think the loophole they exploit is charging immense fees, and not referring to it as interest, so it's not covered by the usury law.

Most or all credit card companies do something similar when they charge massive $39 late and overlimit fees, and on top of that, add those fees to the principal balance and charge interest on that - among other dirty tricks.

The current laws against usury (unconscionable rates) and allowing bankruptcy are designed to protect borrowers. There will probably be new regulations soon designed to prevent the subprime practices which have hurt many borrowers. The system isn't perfect... but the alternative is probably worse.

Yes, I guess either extreme (no restrictions or total restriction) would likely be bad for various reasons.

Best wishes,
Apollia

[Apollia]

I think payday loan places somehow manage to get away with outrageous usury as well. Unless I'm mistaken (or unless things have changed recently), I think the loophole they exploit is charging immense fees, and not referring to it as interest, so it's not covered by the usury law.

Actually, I'd like to clarify that I really don't know if that's the way they get away with that. I really don't know how payday loans work for sure, but someone I know once got I think a $400 loan for something like $60, so, I'm just assuming the payday loan sharks get away with it by calling it a fee rather than interest.

Best wishes,
Apollia

[ThoughtAddict]

Originally Posted by Apollia

Actually, I'd like to clarify that I really don't know if that's the way they get away with that. I really don't know how payday loans work for sure, but someone I know once got I think a $400 loan for something like $60, so, I'm just assuming the payday loan sharks get away with it by calling it a fee rather than interest.

Best wishes,
Apollia

Sticky issue. The federal Truth in Lending Act makes it difficult to disguise fees, though I'm not sure if they're factored in to usury caps. My gut guess, based on the federalism of the US system, is that each state figures fees differently. I do know that there were overtures a few years back to crack down on interest rate exporting (i.e. having choice of law provisions which put a loan made in a usury cap state governed by the laws of a state with higher caps) but I'm not sure what came of it.

[Apollia]

Originally Posted by ThoughtAddict

Sticky issue.

Definitely.

The federal Truth in Lending Act makes it difficult to disguise fees, though I'm not sure if they're factored in to usury caps. My gut guess, based on the federalism of the US system, is that each state figures fees differently. I do know that there were overtures a few years back to crack down on interest rate exporting (i.e. having choice of law provisions which put a loan made in a usury cap state governed by the laws of a state with higher caps) but I'm not sure what came of it.

Interesting, thanks for this info. It's nice to know that there were at least some overtures. Not sure if the law would do much good or not but at least it's nice to know that lawmakers are taking an interest in the topic.

Best wishes,
Apollia

[Still Growing]

I can't believe we are debating about whether "charging interest" should be allowed or not?!

To me the very notion of the gov't outlawing this would be like communism. Lets not forget that money is nothing more than a representation of STORED TIME. You use money to buy the time from somebody or some company. Your agreement is to repay the borrowed time with your future time at a premium. Now if you are smart you use the money to make more money but if you are a consumer you consume the borrowed time for pleasure now. In essence, when you borrow money you are cashing in your future for today. Now, the person or company loaning you their stored time deserves a return. You wouldn't pay interest on a car you didn't drive so why is it fair for you to ask for someone else to loose interest on money that you spend?!

If you borrow somebody else's STORED TIME then its taking their time even to give you the money. Obviously in a free market if someone chooses to make a legal business out of loaning money there is a value in the service they are providing or nobody would borrow the money. You simply shouldn't expect to take someone else's STORED TIME without having to pay something for it. If you personally disagree with loans then simply do not borrow it. The last time I checked loans were for consenting adults. Its YOU the consumer stealing from your own future earnings not the banks.

Some of the comments made in this thread simply show how little the average person understand the purpose of money and how money works. Its sickening to hear people say "They should do this" or "The gov't should do that". Sometimes I even hear people say "Do we really need another fast food restaurant here..." Well its not the gov't putting in McDonalds, its business people meeting a demand. Its like people think that every thing should be controlled or regulated.

I know that the market is not truly free but why would we discuss making it less free. I'll tell you why, its socialistic thinking that big brother should police us from ourselves. If you don't like the idea of paying interest then stop buying so much crap! Typically new wealth is created by those who stop consuming and find ways to STORE TIME. The people loaning money are the ones who understand what I'm saying above and the people who are consuming are the ones complaining about the interest. If YOU are complaining about interest then its YOU who should change, not the system.

[Apollia]

Oops, sorry for any confusion - maybe I didn't state it clearly enough before, but, I do think too much regulation is bad.

Some of my perspectives have actually been changed by this discussion - originally I came into this discussion thinking a world without usury might not be so bad.

But, when it finally occurred to me to wonder about what exactly it would take on a practical level to implement that idea, I realized there is probably no realistic way to do it that wouldn't involve a lot of things I find unacceptable.

As I mentioned above somewhere, I think banning usury entirely could lead to terrible results similar to the results of prohibition of alcohol, etc.

However, I'm still not sure total lack of regulation of usury would have good results either.

Just wanted to clarify my position.

Best wishes,
Apollia

[SomeRandomGuy]

Originally Posted by Lauxa

It seems to me that maybe some of those old thyme religions had it correct and that usury (lending money at interest) is a Bad Thing. I know it is explicitly forbidden in the Koran and I think early Christians were against it as well. Well, it seems to cause all sorts of problems. Finances wars, keeps developing countries impoverished. Don't even get me started on the US paying interest to private bankers on currency production. Other loan arrangements such as profit sharing might be okay.

What do you think the world would look like without usury? What would wealthy people do with their money if they couldn't loan it out at interest?

Still Growing, based on the wording in the OP I was looking at this discussion in terms of what the world would be without usury. The OP mentions religious teachings against usury, but not government regulations. So I have been thinking of this in terms of what the world would be like if individuals chose not to take part in the traditional lending system, due to their beliefs (religious or otherwise). I agree that adding more government regulation is not a good thing. I do think, however, that we have developed into a debt-hungry society and I am very interested in considering the impacts of seeing a reversal of this trend. Like you said with your McDonald's example, consumer demand drives the market. The only good way to have a world without usury is for individuals to refuse to take part in the system. I don't think that will ever happen, but it makes for interesting discussion.

[Still Growing]

Apollia, I'm glad to see you changing your opinion on consumer lending.

I will say that I am against usury when it pertains to the US printing money. As you all know, the Federal Reserve is a private organization and when we print money they get interest out of thin air. This has be debated by our forefathers, argued over by many US Presidents and Congress for some time.

Now here is usury that you can truly have a case about!
Federal Reserve Act - Wikipedia, the free encyclopedia

[Apollia]

I agree. I don't know if there's any valid way at all to justify that particular type of usury.

I can't deny that consumer debt is technically agreed to, even though many people (like myself) really didn't want it and only agreed because their circumstances were so unpleasant that debt seemed like a lesser evil.

In contrast, however, the interest paid on the U.S.'s currency was not agreed to by the American people, and yet we all have to pay for it.

Originally Posted by SomeRandomGuy

I do think, however, that we have developed into a debt-hungry society and I am very interested in considering the impacts of seeing a reversal of this trend. Like you said with your McDonald's example, consumer demand drives the market. The only good way to have a world without usury is for individuals to refuse to take part in the system. I don't think that will ever happen, but it makes for interesting discussion.

I agree.

I realized recently I overlooked one good possible way to discourage usury that wouldn't involve using force like government regulation. (I actually thought of it a long time ago, but simply forgot about it when I wrote my last post.)

Charity on a large enough scale would probably reduce the demand for consumer debt. If grants were a realistic possibility for more people, I'm guessing fewer people would go into debt. If charity/grants were widespread enough, usury could perhaps be totally eliminated through peaceful means.

Best wishes,
Apollia

[Brutha]

Why do you target the people who give out the loans and blame them but not the people who take loans?

[Apollia]

Originally Posted by Brutha

Why do you target the people who give out the loans and blame them but not the people who take loans?

I blame both to an extent, but, I'm more sympathetic to those who take loans because, even though they would likely be better off avoiding loans, I can understand people panicking and taking a loan when faced with a financial crisis, such as a threat of losing one's house due to suddenly losing one's job, or a threat of themselves or a loved one being thrown into jail due to being unable to afford to pay child support.

Many people don't make perfect decisions when they're in such a situation, so I don't like to be too hard on them.

Best wishes,
Apollia

[Lauxa]

Originally Posted by Brutha

Why do you target the people who give out the loans and blame them but not the people who take loans?

For the most part, the people giving out the loans are acting from a position of strength whereas the people accepting the loans are acting from a position of weakness. I think there should be a higher moral standard for the strong than for the weak. To him whom much is given, much is expected.

As far as limiting freedom goes, this stuff is more in the realm of contract law. As in which clauses in contracts will be enforced by the government and how. So the government wouldn't have to go out and actively stop people from entering into usurous contracts, but the collectors wouldn't have government authority to back up the collection of the monies.

It IS very nice to be able to get a loan without acquiring "partners" who will be all up in your business. For instance, I was able to get a home equity loan at a pretty good rate because I can leverage my house as collateral. Of course, I could end up losing my house in case of catastrophic financial failure, but that could have happened anyways just with the initial bank loan.

But really I am most concerned by the theory that usury is a cause of wars, perhaps the main cause. I would be willing to sacrifice some amount of ease of borrowing money if the result were a more peaceful world.

Finally, even if lending REAL money at interest is justified, this (fractional reserve) system of banks creating money out of thin air and lending this money at interest is just so wrong...

[fountainAtlas]

Apollia,

Honestly Apollia I am amazed at your view of the world, maybe it is because my view is nearly the exact opposite. Would your life have been better if there was no debt? You yourself have admitted that you only took on debt because it was the lesser of two evils, meaning that debt, which crippled you later on, saved you at one point. Why do you refuse to take responsibility for your actions? It seems like you came from some difficult life circumstances, but are you sure that you don't have a few too many "wants" that you used debt to finance. And what is it with your idea that the wealthy should give there money away to charity, why? Why should they give away money that they have worked for earned or inherited to you? At the very least a wealthy person has managed to hold on to their worth, that isn’t as easy as it sounds. A great man once said that the easiest way to become a millionaire is to start with a billion and lose 999 million. You should be grateful for how loose lending is; at least there aren’t any debtors’ prisons.

There are certain types of charity that is good, those that promote education and facilities more members of society to become productive. But pure charity only allows people to continue to not work and perpetuates an entitlement sentiment. I am still trying to get over how someone who writes well and is apparently capable of intelligent discourse can have views that are so disturbing.