Usury

Usury refers to the practice of charging interest on loans that is considered excessive, unethical, or unlawful. The word originates from Latin usura, meaning interest or fee, and in some traditions is linked to the Arabic term riba, used in Islamic law to denote prohibited excessive interest. Historically, many religious and legal systems condemned or restricted usury, and various medieval and early modern regulations sought to cap rates or regulate lending terms.

In the modern era, the term usury typically denotes interest that exceeds legal limits or involves predatory terms. Legal frameworks in many countries distinguish between lawful interest and usury by setting rate ceilings, requiring transparency in fees, or banning certain charging practices. Some jurisdictions allow market-based interest with consumer protections, while others prohibit certain kinds of lending altogether or restrict lending to specific groups. Regulatory approaches may include licensing, disclosure requirements, caps on annual percentage rates, and restrictions on compound interest or penalty charges.

Economic debates about usury focus on the balance between allowing credit, which supports investment and consumption, and preventing exploitation of borrowers. Proponents of regulated lending argue that interest compensates lenders for risk and opportunity costs and can expand access to capital. Critics contend that high or hidden rates can lead to debt traps, financial distress, and limited economic mobility. The term is often used in discussions of predatory or unfair lending practices, though definitions and thresholds vary by jurisdiction.

Related concepts include payday lending, credit cards, pawnshops, and Islamic finance, the latter banning riba and emphasizing risk-sharing and fairness. Usury laws commonly intersect with broader consumer credit regulation, anti-discrimination rules, and bankruptcy provisions.