What term describes the act of charging an illegal rate of interest?

The term that describes the act of charging an illegal rate of interest is usury. Usury laws are designed to protect borrowers by limiting the interest rates that lenders can legally charge. When a lender imposes an interest rate that exceeds the legal threshold set by state law, it is considered usury. This practice is illegal and can lead to significant repercussions for the lender, including the potential for the loan to be rendered unenforceable.

Understanding usury is crucial for both borrowers and lenders, as it helps ensure fair lending practices and protects individuals from being exploited through excessively high interest rates. This concept serves as a safeguard against predatory lending practices, where lenders may take advantage of borrowers' financial situations.