Usury; Or, Interest, Premium and Discount

by S. H. Crittenden

As to preventing prodigality: does not every one know that so long as a person has money, or property of any sort, with which it is possible for him to display prodigality, no Usury laws will stop him from expending it; and, that after his property is gone and he has no more to expend, none are more ready to promise the largest Interest, providing he can thereby obtain additional money to spend? for what he gets is clear gain, he having nothing to lose. This, it would seem is a hopeless class, for whose protection or advantage to legislate.

Besides prodigals, there are three other classes, to whose benefit such restrictive laws are supposed by their authors to insure. They are the indigent, the rashly enterprising, and the simple. That is to say, those whose pecuniary necessities are so pressing, as to render them willing to pay an Interest, above the ordinary rate, rather than not to have the money; those who from rashness, may be disposed to venture upon the giving such a rate without duly considering the consequence; and those whose natural carelessness combined with ignorance would lead them to acquiesce in it.

Let us look at the conditions of these classes a few moments. Here is a small trader we will say, whose stock in trade consists of only a small amount of property, combined with an, as yet, perfectly untarnished reputation for punctuality in payments. This last, all who know anything of business, will at once admit to be the principal, and most important item of his stock. For with such a character, no merchant will refuse to credit him for articles needful to carry on his business; and thus all goes well with him.

But now his carefully cherished credit is in danger. He has been disappointed in his expectations of a ready sale for some part of his goods, or in obtaining money promised him for a debt, and finds himself without the means to promptly meet an obligation falling due to-morrow.

His position is such in the matter of property as not to render it worth anybody’s while to lend him at the legal rate; in short he cannot raise money to meet this obligation at that rate, and must do one of two things—either lose his credit, which will ruin utterly his prospects of making a comfortable subsistence for his family; or he must obtain the means of saving this cherished treasure intact, by paying somewhat more for the use of the money. We can at once see what he, who has every motive and means for judging rightly in the matter, would decide to be the wisest course, and the one nearest the path of rectitude. As a matter of course, if he could obtain the money at a low rate, he would not pay the higher one. But now the legislator who knows nothing of any of these circumstances, but whose heart overflows with prudence, and loving kindness for the poor man, steps in, and says: “It signifies nothing; you shall not have the money, for it would be doing you a mischief to allow you to borrow on such terms.” There might be worse cruelty, but not easily greater folly.

Next, in regard to the ignorant and simple, for whose protection from imposition or fraud, these laws are enacted. First, could any degree of simplicity or want of tact be greater or more evident than that displayed in such a case as we have just spoken of; where a legislator could confine a man under such circumstances, to a given rate of Interest?

Second, suppose the wisdom of the legislator to be never so much greater than that of the individual, no matter how weak that may be, how useless is the exertion of it in this case only, while there remains so many other occasions where the simplicity of the sufferer would make him the victim of injustice, and where the legislator cannot interpose to protect him. In every day affairs, in the matter of buying and selling, whether with money, or on credit, such persons are liable to be overreached; and yet none have thought that for this reason, a legal price ought to be set upon all goods, of whatever description. Nor, supposing that even this endless undertaking were accomplished by the legislator, would it avail anything unless he also should regulate the exact amount of each article which each man should buy.

When matters arrive at this point, we find the person in the position of those for whom the law provides entirely, as not being fit to take care of themselves: such are usually denominated idiots.

And now, as we have considered at some length the needlessness and inefficiency of such legislation, let us for a few moments, look at some of its evil results.

We will speak at first of those who are by this means virtually prohibited from obtaining money on loans. Consider for a moment, what distress and inconvenience it would produce were the privilege of borrowing denied to everybody. Just that inconvenience is occasioned to those people whose security would, if they were allowed to add a little of the rate of Interest, be sufficient to obtain the needed funds, but is not sufficient for that purpose when such liberty is denied. Thus the misfortune of not happening to be possessed of that amount of property which is considered a sufficient security, is made the ground, under such legislation, of inflicting hardships upon a man, which those who are so fortunate as to have such security do not suffer.