Is it ethical to charge such high rates of interest

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Merchants selling goods on credit to low-income customers often charge a very high rate of interest. The reasoning is that because low-income individuals are statistically more likely to default on loans, creditors must charge a high interest rate to protect themselves against the increased risk of default. If sellers are not allowed to charge high interest rates on credit purchases, low-income buyers will not be able to buy goods on credit.

How should a manager balance the need of low-income individuals to buy goods on credit with the need of businesses to make a profit? Is it ethical to charge such high rates of interest? Should there be a limit to what a seller can charge for credit purchases?

Reference no: EM13940020

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