USURY LAWS BY STATE
The maximum rate of interest a lender can charge
Understanding the Maximum Rate of Interest Allowed by Law That a Lender Can Charge in the US
Usury laws play a crucial role in regulating the maximum interest rate a lender can charge in the US. They provide essential protection for borrowers and ensure fair lending practices.
Understanding these laws is important for both borrowers and lenders to navigate the financial landscape effectively.
About Usury Laws by State
- Usury laws are designed to protect borrowers from excessive interest rates.
- They set a maximum rate of interest that lenders can charge.
- These laws vary significantly across different states in the US.The Purpose of Usury Laws
- Usury laws prevent predatory lending practices.
- They ensure that consumers are not exploited by excessively high interest rates.
- By regulating interest rates, these laws promote fair lending practices.
Historical Background of Usury Laws
- Usury laws have ancient origins, tracing back to early civilizations.
- In the US, these laws have evolved significantly over the centuries.
- They reflect changing societal attitudes towards debt and lending.
How Usury Laws Work in the US
In the US, usury laws are regulated at the state level. Each state has its own maximum interest rate limits. Federal laws also provide some overarching guidelines.
Federal Regulations
Federal laws, such as the Truth in Lending Act, aim to provide transparency. They require lenders to disclose interest rates and other terms clearly. However, the federal government generally leaves specific interest rate caps to the states.
State-Specific Usury Laws
Usury Laws by State - Each state sets its own maximum interest rate limits. These limits can vary widely, with some states having very low caps and others much higher. States like Texas and New York have some of the strictest usury laws.
What is the maximum interest rate allowed by law?
USURY LAWS BY STATE - the maximum rate of interest a lender can charge in each State
Alabama - 8% for written contracts, 6% for verbal agreements. Ala. Code § 8-8-1
Alaska - For loans less than $25,000, 5% above the 12th Federal Reserve District interest rate on the day the loan was made, or 10%, whichever is greater. If the amount is more than $25,000, there is no maximum rate. Alaska Stat. § 45.45.010
Arizona - No limit for loan agreements in writing. If not in writing, the rate shall be 10% per annum. Ariz. Rev. Stat. Ann. § 44-1201
Arkansas - Rate of interest may not exceed the maximum of 17% as established in the Arkansas Constitution, Amendment 89. Ark. Code Ann. § 4-57-104
California - Rate may not exceed 10% per year on loans for personal, family, or household purposes. For other loans for other purposes, the maximum is the higher of 10% or 5% over the amount charged by Fed. Res. Bank of San Francisco at the time loan was made. Cal. Const. Article XV, § 1
Colorado - For supervised loans general usury limit is 45%, and the maximum for unsupervised loans is 12%. Colo. Rev. Stat § 5-12-103 and § 5-2-201
Connecticut - The interest rate may not exceed 12%. Conn. Gen. Stat. § 37-4
Delaware - Not in excess of 5% over the Federal Reserve discount rate at the time the loan was made. Del. Code. Ann. tit. 6, § 2301
Florida - General usury limit is 18%, 25% on loans over $500,000. Fla. Stat. § 687.03 and § 687.01
Georgia - The default is 7% if no written contract is established. For written contracts, the maximum 16% on loans below $3,000, 5% per month on loans between $3,000 and $250,000, and no limit on loans above $250,000. Ga. Code Ann. § 7-4-2 and § 7-4-18
Hawaii - The default is 10% if no written contract is established, 12% is the general usury limit, and 10% is the limit on judgments. Haw. Rev. Stat § 478-2, § 478-3, and § 478-4
Idaho - Unless stipulated in a written agreement, the legal rate is 12%. The rate of interest on money due on court judgments is 5%. Idaho Code Ann. § 28-22-104 IllinoisThe general usury limit is 9%. 815 Ill. Comp. Stat 205/4
Indiana - 8% in the absence of agreement, 25% for consumer loans other than supervised loans. Ind. Code § 24-4.6-1-102 and § 24-4.5-3-201
Iowa - The maximum interest rate is 5% unless otherwise agreed upon in writing, in which case, maximum is set by Iowa Superintendent of Banking (IA Usury Rates). Iowa Code § 535.2(3)(a)
Kansas - The legal rate of interest is 10%; the general usury limit is 15%. Kan. Stat. Ann. § 16-201 and §16-207
Kentucky - The legal rate of interest is 8%, the general usury limit is 4% greater than the Federal Reserve rate or 19%, whichever is less. Any rate may be charged when identified in a contract in writing on a loan greater than $15,000. Ky. Rev. Stat. Ann. § 360.010
Louisiana - The general usury rate is 12%. La. Rev. Stat. Ann. § 9:3500
Maine - The legal interest rate is 6% (no usury limit mentioned in statutes). Maine Rev. Stat., titl. 9-B, § 432
Maryland - The legal interest rate is 6%, a maximum of 8% if a written contract is established. Md. Code Ann., Com. Law § 12-102 – 103
Massachusetts - The legal interest rate is 6% (unless a written contract exists); even if part of a contract, an interest rate over 20% is criminally usurious. Mass. Gen. Law Ch. 107, § 3 and Ch. 271, § 49
Michigan - 7% maximum if a written contract is established. Otherwise, the legal rate is 5%. Mich. Comp. Laws § 438.31
Minnesota - The legal rate of interest is 6%. For written contracts, the usury limit is 8%, unless for an amount over $100,000, in which case there is no limit. Minn. Stat. § 334.01
Mississippi - The legal rate of interest is 8%. Parties may contract for a rate of up to 10% or 5% above the Federal Reserve discount rate, whichever is greater. Miss. Code Ann. § 75-17-1
Missouri - The maximum interest rate is 10%, unless the market rate is greater at the time. Mo. Rev. Stat. § 408.030
Montana - 15% or 6% above the rate published by the Federal Reserve System, whichever is greater. Mont. Code Ann. § 31-1-107 NebraskaThe maximum interest rate is 16%. Neb. Rev. Stat. § 45-101.03
Nevada - Parties may contract for a rate up to the lesser of 36% or the maximum rate permitted under the federal Military Lending Act. Nev. Rev. Stat. § 99.050
New Hampshire - There is no legal limit on interest rates. It is unclear whether an exorbitant rate could be considered “unfair” under the New Hampshire Consumer Protection Act and hence unlawful. N.H. Rev. Stat. Ann. § 336:1, § 358-A:2
New Jersey - 6% without a written contract, 16% maximum if a written contract is established. N.J. Stat. Ann. § 31:1-1
New Mexico - 15% maximum in the absence of a written contract. N.M. Stat. Ann. § 56-8-3
New York - The legal rate of interest is 6%, the general usury limit is 11.25% N.Y. Gen. Oblig. § 5-501 and N.Y. Banking § 14-A
North Carolina - For loans less for less than $25,000, the maximum is the amount announced on the 15th of each month by the North Carolina Commissioner of Banks. For loans greater than $25,000, the parties may agree in writing to any amount. N.C. Gen. Stat. § 24-1.1
North Dakota - For written contracts for loans less than $35,000, the maximum rate is 5.5% above the current maturity rate of Treasury Bills for the six months preceding the issuing of the loan, or 7%, whichever is greater. N.D. Cent. Code § 47-14-09
Ohio - The maximum interest for written contracts for loans of amounts less than $100,000 is 8%. Ohio Rev. Code Ann. § 1343.01
Oklahoma - The parties may agree in a written contract to any rate so long as it does not violate other applicable laws. Okla. Stat. tit. 15, §266
Oregon - The legal interest rate is 9%, but the parties may agree to different rates in a written agreement. Business and agricultural loans have a maximum of 12 percent or five percent greater than the 90-day discount rate of commercial paper. Or. Rev. Stat. § 82.010
Pennsylvania - For loans less than $50,000, the maximum rate is 6%. 41 Pa. Cons. Stat. Ann. § 201
Rhode Island - The maximum interest rate is the greater of 21%, or the domestic prime rate as published in the Wall Street Journal plus 9%. R.I. Gen. Law § 6-26-2
South Carolina - Unsupervised lenders may not charge a rate above 12%. No lender may charge a rate above 18%. S.C. Code Ann. § 37-3-201
South Dakota - No limit if a written agreement is established, 12% if no agreement exists. S.D. Codified Laws § 54-3-4 and § 54-3-16(3)
Tennessee - The maximum rate is 10% unless otherwise expressed in a written contract. Tenn. Code Ann. § 47-14-103
Texas - The parties may agree in writing to a maximum rate up to the weekly ceiling as published in the Texas Credit Letter. If no agreement exists, then the maximum is 10%. Tex. Fin. Code Ann. § 302.001(b), §303.002
Utah - The maximum rate of interest is 10% unless the parties agree to a different rate in a written contract. Utah Code Ann. § 15-1-1
Vermont - The rate of interest is 12% except in certain circumstances as provided in subsection (b) of § 41a.Vt. Stat. Ann. tit. 9, § 41a
Virginia - The legal rate of interest is 6%. With a contract in place, the maximum interest rate is 12%. Va. Code Ann. § 6.2-301 and § 6.2-303
Washington - The maximum rate of interest is 12% or 4% points above the average bill rate for 26-week treasury bills in the month before the loan was made. Wash. Rev. Code § 19.52.020
Washington D.C. - The maximum rate of interest is 24% for written contracts and 6% for verbal contracts. D.C. Code, Title 29, Chapter 33
West Virginia - The legal interest rate is 6% but parties may agree to a maximum of 8% in a written agreement. W. Va. Code § 47-6-5
Wisconsin - The legal rate of interest is 5%. Parties may agree to a different rate in a written agreement, subject to limitations that depend on the identity of the lender. Wis. Stat. § 138.04
Wyoming - The rate of interest is 7% if no agreement is established in a written contract. Otherwise, parties may agree to a higher rate.Wyo. Stat. Ann. § 40-14-1
Impact on Different Types of Loans
Usury laws apply to various types of loans, including:
Personal Loans: Interest rates on personal loans are often capped by state usury laws.
Credit Cards: Credit card interest rates are subject to different regulations and may not always fall under traditional usury laws.
Mortgages: Usury laws affect mortgage rates, though these are often influenced by additional federal regulations.
How Usury Laws Affect Borrowers and Lenders
For Borrowers
- Usury laws provide protection against exorbitant interest rates.
- They help ensure that borrowing remains affordable and fair.
For Lenders
- Lenders must comply with state-specific interest rate limits.
- This can impact their business models and profitability.
Challenges and Controversies Surrounding Usury Laws
Legal Disputes
- Usury laws often lead to legal disputes between borrowers and lenders.
- These disputes can sometimes involve complex legal interpretations.
Economic Impact
- Some argue that strict usury laws can limit access to credit.
- They believe that high rates might be necessary to compensate for risk.
Efforts to Reform Usury Laws
- There are ongoing debates about reforming usury laws.
- Reform efforts focus on balancing protection with credit availability.
FAQs About Usury Laws
What is the maximum interest rate allowed by law that a lender can charge in the US?
The maximum interest rate a lender can charge varies by state.
Each state has its own usury limits.
Some states have higher caps, while others have stricter limits.
Are there federal usury laws?
There are no specific federal usury laws that set maximum interest rates.
However, federal regulations require transparency in lending practices.
How different are usury laws by state?
Usury laws differ significantly from state to state.
Each state determines its own maximum interest rate limits.
This results in a patchwork of regulations across the country.
Can usury laws be challenged in court?
Yes, usury laws can be challenged in court.
Disputes often arise over the interpretation and application of these laws.
What types of loans are covered by usury laws?
Usury laws typically cover personal loans, payday loans, and some credit card loans.
Mortgage rates may be influenced by usury laws but are also subject to other federal regulations.
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