Credit enables consumers to buy goods and services that they could not afford to buy if they had to pay for them right away. Therefore, the extension of credit stimulates sales and economic growth. The law has always expressed a distrust of money lending, an attitude that persists today in the form of usury laws and laws regulating credit. Usury Laws Usury laws limit the amount of interest a creditor can charge a debtor.
Most states have usury laws.
If interest on the loan exceeds the usury limit, the creditor generally recovers only the principal of the loan. That is, the money lent is repaid without any interest. As a practical matter, however, state usury laws are losing their effectiveness. Federal law preempts many types of credit formerly regulated by state usury laws, and permits certain kinds of lenders to charge interest rates higher than those allowed by state usury laws. The federal Truth in Lending Act requires the disclosure of credit information to consumers.