American Loan Sharks
American Loan Sharks
Throughout history, Americans have worked hard and saved their money to achieve the
American dream. In spite of these core values, something significant happened to the American culture
that effected the financial position of half of American consumers. Charles R. Geisst, author of
Collateral Damaged explains that, “Since banks and finance companies developed and began to provide
the necessary means or credit to achieve the American dream, debt has been the way of attaining it”
(Geisst 207). The invention of the credit card enabled Americans to live beyond their means, but at a
high cost. The termination of the usury laws meant the banking industry would no longer have a limit on
the amount of interest they could charge for use of their credit cards. Without federal usury laws in place
to protect the consumer, credit card companies launched and were essentially given a license to steal,
inevitably drowning American consumers in debt.
Twenty-five years ago, the banking industry successfully eliminated a critical restriction: the limit on the interest rate a lender can charge a borrower (“Do You Know What You”). These restrictions were known as usury laws. These laws were in effect for centuries prior to the 20th century (Geisst 2). Usury laws were established to protect the borrower from predatory behavior (Geisst 3). “Prior to the 20th century, charging interest on loans was considered heresy by the church. Anyone caught charging excessive interest was excommunicated and often punished” (Geisst 3). Banks fought for restrictions to be lifted arguing the usury laws were standing in the way of progress (“Do You Know What You”). Banks won the battle over consumers. The deregulation of the usury laws occurred in the early 1980’s and created a whole new invention, the unsecured credit card. Past generations believed deeply in hard work, saving money and living within ones means. They lived by
Throughout history, Americans have worked hard and saved their money to achieve the
American dream. In spite of these core values, something significant happened to the American culture
that effected the financial position of half of American consumers. Charles R. Geisst, author of
Collateral Damaged explains that, “Since banks and finance companies developed and began to provide
the necessary means or credit to achieve the American dream, debt has been the way of attaining it”
(Geisst 207). The invention of the credit card enabled Americans to live beyond their means, but at a
high cost. The termination of the usury laws meant the banking industry would no longer have a limit on
the amount of interest they could charge for use of their credit cards. Without federal usury laws in place
to protect the consumer, credit card companies launched and were essentially given a license to steal,
inevitably drowning American consumers in debt.
Twenty-five years ago, the banking industry successfully eliminated a critical restriction: the limit on the interest rate a lender can charge a borrower (“Do You Know What You”). These restrictions were known as usury laws. These laws were in effect for centuries prior to the 20th century (Geisst 2). Usury laws were established to protect the borrower from predatory behavior (Geisst 3). “Prior to the 20th century, charging interest on loans was considered heresy by the church. Anyone caught charging excessive interest was excommunicated and often punished” (Geisst 3). Banks fought for restrictions to be lifted arguing the usury laws were standing in the way of progress (“Do You Know What You”). Banks won the battle over consumers. The deregulation of the usury laws occurred in the early 1980’s and created a whole new invention, the unsecured credit card. Past generations believed deeply in hard work, saving money and living within ones means. They lived by
Cited: Geisst, Charles R. Collateral Damaged. New York: Bloomberg Press, 2009. Print.