Usury is a criminal offence, which consists of charging interest in excess of a certain statutorily specified rate, whether the credit agreement is an adhesion contract or not. Two typical usury statutes are:
"Criminal usury" means illegally charging, taking, or receiving any money or other property as interest on an extension of credit at a rate exceeding twenty-five per cent per annum or the equivalent rate for a longer or shorter period, unless either:
(1) The rate of interest is otherwise authorized by law;
(2) The creditor and the debtor, or all the creditors and all the debtors are members of the same immediate family.
O.R.C. § 2905.21(H) (making criminal usury a felony of the fourth degree)
Usury
Whoever exploits the state of duress, inexperience, lack of judgment, or substantial weakness of will of another by obtaining for himself or a third party,
1. in exchange for the rental of residential space or related accessory services,
2. in exchange for an extension of credit,
4. in exchange for obtaining one of the aforementioned services from a third party,
a promise or guarantee of pecuniary advantages that are substantially disproportionate to the service or to the obtaining of said service, shall be liable to a fine. If several persons participate as service providers, brokers, or in any other way, sentence 1 shall apply to any of such persons who exploits the state of duress or other weakness of the other for himself or a third party in order to obtain an excessive pecuniary advantage. 1
§ 291 Strafgesetzbuch (German Penal Code)
Statutes of this sort have been around for quite some time2, going back at least to the days of canon law in Western Europe. The policy they advance is quite simple: protection of debtors from predatory lending practices. Without statutes limiting the amount of interest that a creditor could charge, creditors could easily guarantee themselves a lifetime of income simply by ensuring that the interest rate charged is too high to allow for full payment of the balance. While usury laws certainly also protect debtors who do not manage their credit well, it is no more accurate to claim that this is their sole purpose and effect than it would be to claim that fraud statutes are there to protect people who are too gullible to be allowed to participate in commerce anyway.
Of course, credit card companies in the United States have had little difficulty circumventing these statutes. Many will notice that their credit card is issued by a corporation that lists its address in South Dakota or another similarly nonpopulous state. There is a rather simple reason for choosing such a less-than-prestigious place for one's headquarters: the lack of usury laws. Coupled with densely-worded "choice of law" provisions in their contracts3, credit card companies can avoid any real limits on their ability to charge usurious interest.
The main — if not sole — source of protection for credit card holders in the United States is the Truth In Lending Act (TILA), which imposes certain disclosure requirements on lenders in order to prevent lenders from hiding exorbitant fees from customers. However, enforcement of TILA is spotty at best, and many lenders violate it with abandon.
1Wucher
(1) Wer die Zwangslage, die Unerfahrenheit, den Mangel an Urteilsvermögen oder die erhebliche Willensschwäche eines anderen dadurch ausbeutet, daß er sich oder einem Dritten
1. für die Vermietung von Räumen zum Wohnen oder damit verbundene Nebenleistungen,
2. für die Gewährung eines Kredits,
3. für eine sonstige Leistung oder
4. für die Vermittlung einer der vorbezeichneten Leistungen
Vermögensvorteile versprechen oder gewähren läßt, die in einem auffälligen Mißverhältnis zu der Leistung oder deren Vermittlung stehen, wird mit Freiheitsstrafe bis zu drei Jahren oder mit Geldstrafe bestraft. Wirken mehrere Personen als Leistende, Vermittler oder in anderer Weise mit und ergibt sich dadurch ein auffälliges Mißverhältnis zwischen sämtlichen Vermögensvorteilen und sämtlichen Gegenleistungen, so gilt Satz 1 für jeden, der die Zwangslage oder sonstige Schwäche des anderen für sich oder einen Dritten zur Erzielung eines übermäßigen Vermögensvorteils ausnutzt.
(2) In besonders schweren Fällen ist die Strafe Freiheitsstrafe von sechs Monaten bis zu zehn Jahren. Ein besonders schwerer Fall liegt in der Regel vor, wenn der Täter
1. durch die Tat den anderen in wirtschaftliche Not bringt,
2. die Tat gewerbsmäßig begeht,
3. sich durch Wechsel wucherische Vermögensvorteile versprechen läßt.
2While e-hadj, above, seems to believe that usury statutes are somehow the outgrowth of the Critical Legal Studies movement, they have in fact existed for centuries, while CLS has been around for scarcely half a century.
3e-hadj also seems confused about the nature of adhesion contracts, ascribing the classification and the legal principles related to them to CLS, and (even more inexplicably) to Noam Chomsky. In fact, limits on contract terms based on notions of fairness, such as unconscionability, have been around for much longer than CLS or Noam Chomsky. Adhesion contracts are not treated differently based on a notion of "wage slavery," but because the consumer has no opportunity to negotiate with the merchant who drafted the terms, and thus must either accept the contract as written or reject the deal altogether. Because of this substantial difference from the traditional — invidiually negotiated — contract, courts and legislatures do more of what is called "policing the bargain," i.e. ensuring that neither side is exploiting the other's lack of bargaining power.