Usury

### What is usury? - [ ] The practice of charging any interest on a loan. - [ ] The maximum allowable interest rate set by lenders. - [x] Charging a rate of interest greater than that permitted by state law. - [ ] Avoiding the payment of any interest on borrowed money. > **Explanation:** Usury refers to the charging of an interest rate on a loan that is higher than what is legally allowed by state law. ### Do all states have the same usury limit? - [ ] Yes, all states have identical usury limits. - [x] No, each state has its own usury limits. - [ ] Usury limits are defined only by federal law. - [ ] Usury does not depend on state regulation. > **Explanation:** Usury limits vary from state to state and can differ based on the type of lender and the type of loan. ### What can happen to a loan if it is found to be usurious? - [x] Severe penalties including loss of the principal. - [ ] The loan gets refinanced. - [ ] Nothing, as interest rates are negotiable. - [ ] The borrower must pay the loan in full immediately. > **Explanation:** Penalties for usurious loans can include the loss of principal and interest, and lenders may also face further legal repercussions. ### Can federal laws override state usury limits? - [x] Yes, under certain conditions federal laws can preempt state limits. - [ ] No, state laws always take precedence over federal laws. - [ ] Only in cases involving personal loans. - [ ] Federal laws can be ignored by states if they choose. > **Explanation:** Federal laws can preempt state usury limits under certain conditions, allowing federally chartered banks to follow federal guidelines. ### Usury primarily protects which parties? - [ ] Lenders from high-risk borrowers. - [x] Borrowers from excessively high interest rates. - [ ] Banks from losing money on loans. - [ ] Investors from bad loan deals. > **Explanation:** Usury laws protect borrowers by ensuring they are not subjected to excessively high interest rates on loans. ### In addition to personal loans, to which other loan types can usury laws apply? - [x] Business Loans - [ ] Only personal loans. - [ ] Child education loans - [ ] Only mortgages. > **Explanation:** Usury laws can apply to various types of loans, including business loans and sometimes credit card interest rates. ### How are penalties determined for usurious loans? - [ ] By the local community boards. - [x] According to state and federal laws. - [ ] Based on the borrower's agreement with the lender. - [ ] Through arbitration with the lender. > **Explanation:** Penalties for usurious loans are determined according to state and federal laws regulating interest rates. ### What is 'Principal' in the context of loans? - [ ] The total amount of interest paid. - [ ] The interest rate charged on the loan. - [x] The initial amount of the loan before interest. - [ ] The monthly payment amount. > **Explanation:** The principal is the original amount borrowed, excluding any interest or fees. ### Can lenders be relieved of excess interest in a usury case? - [x] Yes, borrowers may be relieved from paying excess interest. - [ ] No, excess interest must always be paid. - [ ] Only in federal cases. - [ ] Only if the loan is repaid fully. > **Explanation:** In a usury case, borrowers may not have to pay the excess interest and, in some cases, the entire loan may be nullified. ### Which federal body provides guidelines on interest rates through Regulation Z? - [x] The Federal Reserve - [ ] The Federal Trade Commission - [ ] The Consumer Financial Protection Bureau - [ ] The Securities and Exchange Commission > **Explanation:** The Federal Reserve provides guidelines on interest rates through Regulation Z, also known as the Truth in Lending Act.