Question

Tony obtains a five-year loan through Rip-Off Financing Company for $3,000 at a 35% annual interest rate.The state attorney general files a lawsuit against Rip-Off on behalf of Tony and other Rip-Off borrowers. If the attorney general wins and the loan agreement is found to have violated the applicable usury statute, Rip-Off may have to forfeit what amount?

Answer 1

If a usury law limits interest rates to no more than 35%, there would likely be a decrease in the amount of loans made and a decrease in interest rates paid.

Step-by-step explanation:

If a usury law limits interest rates to no more than 35%, the likely impact would be a decrease in the amount of loans made and a decrease in interest rates paid. This is because lenders would be less willing to lend money due to the lower potential for profit with the capped interest rate, and borrowers may be hesitant to borrow at higher rates. As a result, the overall availability of loans may decrease and interest rates may become more competitive within the allowable limit.