Asked by Rachel Gallo on May 11, 2024
Verified
Reed needed expensive medical treatment for the injuries he suffered in a fire that ravaged his home.Lacking medical insurance and unable to obtain a bank loan,Reed turned to Lance,a local person known for his gambling prowess.Lance offered Reed $15,000 if Reed would repay him $23,000 in 36 monthly installments of $521 each.According to the laws in Reed's state,the maximum amount of annual interest that can be charged on loans is 20%.Explain whether Lance's loan was legal.
Usury
Charging of excessively high interest rates on loans, often regulated by law to protect borrowers from predatory lending practices.
Annual Interest
Annual interest refers to the percentage rate charged on a loan or earned on an investment over the course of a year.
- Examine the legal protections against unfair trade practices and predatory lending.
Verified Answer
EM
Emmanuel MesiaMay 17, 2024
Final Answer :
The agreement is illegal.Usury occurs if a lender lends money at an interest rate higher than the state's maximum rate.Since Lance did not obtain money from a small loan company or other lending agency allowed under law to charge a higher rate of interest,he cannot legally obligate Reed to pay such a high interest rate.
Learning Objectives
- Examine the legal protections against unfair trade practices and predatory lending.
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