Ursury Laws

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Usury laws are set to cap the interest rates on loans. Elizabeth Warren argues that we should we should return to using these laws. Both Consequentialism and the social contract theory can provide similar viewpoints on this issue. Each one provides strengths and weaknesses in regards to these laws.

Usury laws are regulations governing the amount of interest that can be charged on a loan. They specifically target the practice of charging excessively high rates on loans by setting caps on the maximum amount of interest that can be levied. These laws are designed to protect consumers. Consequentialism is the normative ethical theory that says that an act is morally right just because it produces the best actual or expected results. Social contract theory is a view in political philosophy that says that governmental power is legitimate if and only if it would be accepted by free, equal, and rational people intent on selecting principles of cooperative living. Also, a view in normative ethical theory that says that actions are morally right if and only if they are permitted by rules that free, equal, and rational people would agree to live by, on the condition that others obey these rules as well. (Shafer-Landau, 2012)

Elizabeth Warren states that we've had usury laws in the United States since colonial times, but in the early 1990s, we just very quietly got rid of them. Lenders are out there competing for customers who are already in financial trouble; only the way they're competing is competing to get them in, and then hit them with 29, 35, 40 percent interest rates; $29 fees, $49 fees, $79 fees. ... Those people are like machines that just keep turning out money for the credit cards. Once they're trapped, they can't get out of it. (Warren, 2004) This in turns causes those who cannot repay their debts to go into bankruptcy. Consumer protection such as the Usury laws should be in place to protect those consumers from unjust interest gouging.

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