Final answer:
A lender who charges a usurious interest rate could face forfeiture of the illegal interest, all interest, or even the entire loan amount, depending on local laws. Usury laws, like one capping rates at 35%, can impact the loan market by reducing predatory lending and influencing interest rates unless they are set above current market rates, making them nonbinding.
Step-by-step explanation:
If a lender charges a usurious rate of interest, several outcomes are possible depending on the laws in the jurisdiction where the loan is made. The consequences vary, but can include:The lender may forfeit the illegal interest charged beyond the legal limit.In some cases, the lender might forfeit all interest, thus only recovering the principal amount of the loan.In more severe situations, the lender could forfeit the entire amount of the loan, which means losing the principal in addition to any interest.Usury laws are designed to protect consumers by imposing an upper limit on the interest rate that lenders can charge. If a usury law limits interest rates to no more than 35%, the likely impact would be a reduction in predatory lending practices, possibly reducing the overall amount of loans made. It could also lead to lower interest rates as lenders stay within the legal threshold.However, if the usury law's interest rate ceiling is set above prevailing market rates, it may serve as a nonbinding constraint, which means it will not affect the current levels of loans made or the interest rates paid as long as the market rates are below the ceiling.
If a lender charges a usurious rate of interest, they may be subject to penalties and consequences. In the given options, all of them are possible outcomes for a lender who charges a usurious rate of interest.a) The lender will forfeit the illegal interest: If the lender charges an interest rate that exceeds the legal limit set by usury laws, they may be required to forfeit the excess interest they charged.b) The lender will forfeit all interest: Depending on the severity of the usury violation and applicable laws, the lender may be required to forfeit all the interest earned from the loan.c) The lender will forfeit the entire loan: In extreme cases, the lender may be required to forfeit the entire loan amount if it is deemed a predatory lending practice.