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Usury in Banks: The Risks of Applying the Law in a Misleading and Paradoxical Way

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  • Giovanni Petrella
  • Andrea Resti

Abstract

In this note we deal with the process of verifying whether a lending rate exceeds the threshold rate set by the Italian anti-usury law, with a special focus on some methodological issues. Since some years, such a verification has been increasingly carried out on the basis of a formula for the lending rate that differs from the one dictated by the Bank of Italy. We show that such an approach - where the lending rate and the threshold rate are computed on the basis of two different procedures - proves unreliable as it is affected by significant mistakes and may lead to paradoxical results.

Suggested Citation

  • Giovanni Petrella & Andrea Resti, 2017. "Usury in Banks: The Risks of Applying the Law in a Misleading and Paradoxical Way," Banca Impresa Società, Società editrice il Mulino, issue 1, pages 123-140.
    • Handle: RePEc:mul:jqmthn:doi:10.1435/86770:y:2017:i:1:p:123-140
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    Keywords

    Usury; Lending Rates; Banks.;
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