Usury laws result in banks making less credit available to lower-income households because
A) higher-income households will pay a higher interest rate than lower-income households.
B) loans made to higher-income households have no risk.
C) loans to lower-income households are riskier than loans to higher-income households.
D) the regulated interest rate does not adequately compensate the bank for the risk of the loan to a lower-income household.

Question

Quizplus · Accepted Answer

Usury laws set a maximum interest rate that a bank can charge on loans. For loans to lower-income households, the regulated interest rate may not adequately compensate the bank for the risk of default on the loan, as these households may have lower credit scores and less financial stability. As a result, banks may make less credit available to these households as they are unable to charge a higher interest rate to compensate for the added risk. Conversely, banks may be more willing to lend to higher-income households, who are seen as less risky and may have more financial stability.

Usury Laws Result in Banks Making Less Credit Available to Lower-Income