Final answer:
Usury laws are regulations that determine the maximum interest rate a lender can charge, acting as a price ceiling to protect consumers. These laws are often nonbinding unless the market interest rate exceeds the set limit. Companies justify high rates due to losses from defaults but remind that timely payments can avoid interest charges.
Step-by-step explanation:
These laws set a price ceiling on interest rates to protect consumers from excessively high charges. In the context of credit card companies and financial institutions, usury laws might set a limit, for example, at 30% per year, but this upper limit is often above the market interest rate. Such a price ceiling can be nonbinding, meaning it will not affect lending rates unless market conditions cause interest rates to increase significantly beyond this limit. It's also important to recognize that some companies argue higher rates are necessary to cover losses from non-repaying borrowers and that individuals can avoid paying these interest rates by settling their credit balances promptly.