We had our meeting on usury Wednesday evening. It was a lively discussion.
Rafi started off by explaining that usury is more than just a loan but a loan with a high interest rate and generally applied to people who have no other options. Usury generally imply an exploitative situation even though it may be an agreement by both parties.
Dan had taken the trouble of obtaining a brochure from a Payday Loan store and showed it to the group. It advertise the cost of the loan in dollar terms for two weeks without ever referencing to the standard annual interest rate which would be in the hundreds or thousands of percent.
Dan's point is that the society would be more efficient if everything is measured in standardized terms. Therefore, all loans, including credit card loans and payday loans need to be quoted in annualized percentage points so that we do not have to make conversions to know how high the interests are.
Richard pulled out a $20 note and said that he consider lending a loan like renting out a house. In lending the $20, he is renting it out to the borrower because the lender do not get to use that money while it is lent (rented) out and the interest is equivalent to the rent paid.
Therefore interest, like rent, compensate for loss of use while the money was lent out.
Richard also mentioned that even though the loan arrangement may be a contract agreed to by both parties, there is always the question as to whether both parties completely know what it is they are agreeing to. The knowledge level of the parties are not always up to what is required and who is making sure one party is not taking advantage of the other?
Shula mentioned that the business ethics course she is teaching is based on full disclosure in doing business. However, it is difficult to determine whether the brochure from the Payday Loans company measures up to the full disclosure yardstick. It clearly state what the cost is. Is it obliged to also show what its competitor's price is as well?
The discussion naturally flowed to the frustration with the financial system in general and how money is no longer based on anything concrete other than trust in the government issuing it that they will not make it worthless by printing more and more of it.
There were also comments about lenders like monetary fund that force debtor countries to meet austerity conditions after lending the money. Rafi saw it as a way for the developed countries to keep the financially strapped countries from defaulting, preventing poor people from rioting and possibly creating future consumers for the developed countries.
All in all, a wide ranging discussion and we did not get close to discussing honeymoon loans at all!
ReplyDeleteMost Canadians have a few dollars to spare to help other countries. Too bad there's not more of a tax break for Canadians to give to other countries. Maybe it would create more incentive if that were so. More incentives for corperations to be ethical would help too.
Money isn't really the root of all evil, afterall, and there is a solution...