Institutional Organization of Consumer Credit

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It is a sociological truism that social institutions come into being and develop in response to social stimuli, and the many forms in which consumer credit is offered in modern society is an illustration of this truism. A complex social and economic structure elicits a variety of consumer credit institutions, the character, structure and function of which are conditioned by the legal, economic and social forces at work in the milieu in which they originate. So it was in antiquity and so it is true today. Under the realistic compulsion of business needs, usury legislation over the ages, passed from complete condemnation to reluctant acceptance of the economic justification for interest as a charge for the use of money or credit. Finally, in the reign of Henry VIII, the canonical laws in England against usury gave way to temporal legislation in which a quantitative line of demarcation was drawn between legal and illegal transactions which set a numerical pattern followed by usury legislation in the American colonies. Although the new legal distinction between interest and usury simplified business negotiations, it left unsolved the difficulties of consumer credit. Mechanization, industrialization and urbanization transformed the structure of society and raised to the proportion of a major social problem, protection for the needy borrower against his own ignorance and the pressure of his need. To save the wage earner from too harsh a bargain in which he must pay unconscionable charges for his credit, became an important goal of social action. Distinctly different conditions in England and in the United States led to characteristically nationalistic treatments and consequences in the placing of limitations on the charges for borrowing money. There came a parting of the ways when England in I854 repealed the Usury Act of Queen Anne, while usury legislation in the United States continued to impose a statutory maximum rate of interest.1 From there on, the development of usury regulation in the two countries followed divergent paths. Curiously though, the divergent paths led to equivalent destinations; and a recent change in the English viewpoint has emphasized still more the identity of the goal. Petitions to the chancery courts of England for aid against oppression slowly