Future Business Leaders of America (FBLA) Business Law Practice Exam

What is usury law designed to restrict?

1. The ability to charge fees for late payments

2. The amount of interest that can be charged on loans

3. The requirements for loan documentation

4. The terms of credit agreements

The correct answer is: The amount of interest that can be charged on loans

Usury law is designed to restrict the amount of interest that can be charged on loans. These laws vary by jurisdiction but serve the primary purpose of protecting consumers and borrowers from excessively high interest rates that can lead to financial hardship. By placing a cap on interest rates, usury laws aim to ensure that lending practices are fair and that borrowers are not exploited by lenders charging exorbitant rates. The other options focus on aspects of lending and borrowing but do not pertain to the core function of usury laws. For instance, while charging fees for late payments and the requirements for loan documentation are important elements of loan agreements, they are not directly impacted by usury laws. Similarly, the terms of credit agreements include various conditions set by lenders, but such terms are not the primary concern of usury laws. Thus, "the amount of interest that can be charged on loans" accurately reflects the main objective of usury regulations.