Final answer:
A usury law becomes a binding ceiling when the market interest rate rises to meet or exceed the legal limit set by the law. If the market rate is below this legal ceiling, the law is considered non-binding and does not affect current lending practices.
Step-by-step explanation:
Usury laws serve as a regulatory measure in many states, setting caps on the interest rates lenders can charge. The question, "When is a usury law a binding ceiling?", refers to the situation where a usury law impacts the lending market. Specifically, a usury law becomes a binding ceiling when the market interest rate approaches or exceeds the established legal limit.
For instance, if a usury law sets a maximum interest rate of 30% per annum, it becomes binding when market conditions would naturally push interest rates above this threshold. If market rates are significantly lower than the legal ceiling—as they often are—the usury law is non-binding and exerts no practical influence on lending practices. When the market interest rates are high due to economic factors like high demand for credit or increased risk, that's when the usury laws act as a true ceiling, preventing lenders from charging rates that exceed the legal maximum.