Ursury Laws Essay

696 Words Feb 7th, 2013 3 Pages
Usury laws are set to cap the interest rates on loans. Elizabeth Warren argues that we should we should return to using these laws. Both Consequentialism and the social contract theory can provide similar viewpoints on this issue. Each one provides strengths and weaknesses in regards to these laws. Usury laws are regulations governing the amount of interest that can be charged on a loan. They specifically target the practice of charging excessively high rates on loans by setting caps on the maximum amount of interest that can be levied. These laws are designed to protect consumers. Consequentialism is the normative ethical theory that says that an act is morally right just because it produces the best actual or expected results. Social …show more content…
Since there would be a cap on interest, they would not be able to raise the interest rates for those with bad credit or those who cannot make their payments on time. As for a consumer, implementing these laws would greatly help them out. By capping the interest, the fear for going in debt or filing for bankruptcy would greatly decrease. From a social contract theory standpoint, enforcing these laws would have to make lenders agree to put caps on their interest rates. I believe that this would also reduce the competition of lenders trying to get those that are financially troubled. For the consumer, when they enter into a lending contract it would benefit them as well giving them peace of mind knowing that they can get a loan without interest gouging. However social contract theory recognizes that people are rational, so consumer would have to understand the fact they would have to pay their debts on time etc. The only really weakness that I see between the two is the fact that Social contract theory relies on people to be rational across the board. When money is concerned, people tend to be irrational and not make morally right decisions. This can be with both the lender and the consumer. I would have to whole heartedly agree with Elizabeth Warren on the fact that Usury laws should be brought back. Consequentialism would be the best option on this topic. I

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