state usury laws

Prompt

state usury laws

DeepSeekDeepSeek

state usury laws

Of course. Here is a detailed explanation of state usury laws in the United States.

Executive Summary

State usury laws are regulations that set the maximum allowable interest rate that can be charged on a loan. There is no single "US usury law"; instead, each state sets its own rules, leading to a complex patchwork of regulations. These laws are designed to protect consumers from predatory lending practices.

Key Characteristics of State Usury Laws

State-Specific: The maximum interest rate, the types of loans covered, and the penalties for violation differ significantly from state to state.

Different Rates for Different Loans: A state often has multiple usury limits. For example, it may have one rate for personal loans, a much higher one for payday loans, and a separate set of rules for credit cards.

Exemptions: Many states have laws that exempt certain types of lenders or loans from their general usury statutes. The most important federal exemption is for national banks.

The National Bank Preemption: A Critical Factor

A cornerstone of modern lending is the principle that a national bank can "export" the interest rate from its home state to borrowers in any other state.

This was established by the U.S. Supreme Court in Marquette National Bank v. First of Omaha Service Corp. (1978). In practice, this means:

A bank headquartered in a state with no interest rate cap (e.g., South Dakota or Delaware) can charge a borrower in a state with a strict usury cap (e.g., 12%) the higher, permissible rate of its home state.

This is why major credit card issuers are based in states like South Dakota and Delaware, which have liberal lending laws. It allows them to charge high interest rates nationwide.

Common Structures and Examples

Usury limits can be structured in several ways:

Absolute Fixed Rate: A simple, fixed maximum percentage (e.g., 8% per year).

Tied to a Index: The rate is pegged to a fluctuating index, such as a certain percentage points above the Federal Reserve discount rate or a Treasury index. This allows the usury limit to adjust with the market.

Contract Rate: Some states allow any rate that is explicitly agreed upon in writing by the parties.

Here are a few diverse examples to illustrate the variation:

New York: General civil usury rate is 16% per annum. Criminal usury rate is 25% per annum.

California: The general usury limit is 10% per annum for consumer loans, but there are numerous exceptions for licensed lenders, retail installment contracts, and more.

Arkansas: Constitutionally sets a maximum rate of 5% above the Federal Reserve Discount Rate.

South Dakota: Has no maximum interest rate cap for many types of loans, which is why many credit card banks are located there.

Special Categories with Different Rules

Many states create special, higher usury limits for specific, often high-risk, loan products:

Payday Loans: These are typically exempt from general usury laws and are governed by their own statutes. The interest rates are extremely high, often amounting to an Annual Percentage Rate (APR) of 400% or more. States regulate these through fee structures rather than interest rates.

Credit Cards: As explained under the national bank preemption, credit card rates are generally set by the bank's home state law, not the borrower's state law.

Pawnbroker Loans: Regulated under separate statutes that allow for high fees and interest rates for these secured, short-term loans.

Penalties for Violation

Penalties for charging a usurious rate vary by state but can be severe:

Forfeiture of all interest on the loan.

Forfeiture of double or triple the interest charged.

In some cases, forfeiture of the entire principal amount of the loan.

Criminal penalties (fines or imprisonment) in states with criminal usury statutes.

How to Find the Specific Law for a State

State Legislature Website: Search for the state's "Code" or "Revised Statutes." Look for titles like "Commerce and Trade," "Financial Institutions," or "Interest and Usury."

State Banking Department/Regulator: The state agency that regulates financial institutions often provides summaries or guidance on usury limits.

Legal Databases: Services like Westlaw or LexisNexis provide direct access to the statutes.

Disclaimer: This information is for general educational purposes only and does not constitute legal advice. Lending laws are complex and constantly changing. Always consult with a qualified legal professional for advice on a specific situation.

13:58

GeminiGoogle

state usury laws

Usury laws are state laws that limit the amount of interest a lender can charge on a loan. These laws vary significantly from state to state and can be complex. Here's a general overview, but remember to consult with legal counsel or research the specific laws in your state for accurate and up-to-date information.

Key Aspects of State Usury Laws:

Interest Rate Limits: The primary function of usury laws is to set maximum interest rates. These limits differ depending on the type of loan (e.g., personal loans, mortgages, credit cards, payday loans). Some states have one general usury rate, while others have different rates for different loan categories.

Types of Loans Covered: Usury laws typically apply to various types of loans, but there are often exceptions. Common loan types covered include:

Personal loans

Mortgages

Credit cards

Payday loans

Vehicle loans

Business loans (sometimes)

Exemptions: Many states have exemptions to usury laws. Common exemptions include:

Federally insured banks and credit unions: Federal law often preempts state usury laws for these institutions.

Certain types of lenders: Some states exempt specific lenders, such as licensed financial institutions, pawn brokers or title lenders, from general usury laws, but often regulate them under separate legislation.

Large loans to corporations or businesses: Loans above a certain dollar amount to corporations or businesses may be exempt. This is because businesses are often considered more sophisticated borrowers.

Real estate transactions: Mortgages and other real estate-secured loans sometimes have different usury limits or are exempt.

Loans made under specific state or federal programs: Some loans guaranteed or subsidized by government programs are exempt.

Penalties for Violation: If a lender violates usury laws, the penalties can vary. Common penalties include:

Forfeiture of interest: The lender may be required to forfeit all or part of the interest charged.

Forfeiture of principal: In some cases, the borrower may not have to repay the principal amount of the loan.

Civil lawsuits: Borrowers may be able to sue lenders for damages.

Criminal charges: In some extreme cases, usury can be a criminal offense.

Calculating Interest: State laws often define how interest is calculated for usury purposes. This can include factors like:

Fees: Some fees charged by the lender may be considered interest.

Points: Loan origination fees (points) may be included in the interest calculation.

Other charges: Any other charges the borrower is required to pay as a condition of the loan might be considered interest.

"Choice of Law" Provisions: Loan agreements sometimes include a "choice of law" provision, specifying which state's laws govern the agreement. However, a state may refuse to enforce a choice of law provision if it finds that the provision was designed to evade its own usury laws.

How to Find Your State's Usury Laws:

State Government Websites: Look for your state's banking department, attorney general's office, or department of financial institutions. These agencies often have information on usury laws.

State Statutes: Look up your state's statutes online through a legal research service or your state's legislative website. Search for terms like "usury," "interest rates," "loan limits," or "consumer credit."

Legal Professionals: Consult with an attorney who specializes in consumer finance or lending laws in your state.

Important Considerations:

Payday Loans and Title Loans: Many states have specific laws regulating payday loans and title loans, which often involve very high interest rates. These laws may impose stricter limits and regulations than general usury laws.

Federal Preemption: As mentioned, federal law can sometimes preempt state usury laws, particularly for national banks and credit unions.

Evolving Laws: Usury laws can change, so it's essential to stay updated on the current laws in your state.

Online Lending: The rise of online lending has created new challenges for enforcing usury laws, as lenders may operate across state lines.

Disclaimer: I am an AI chatbot and cannot provide legal advice. The information provided here is for general informational purposes only and should not be considered a substitute for advice from a qualified legal professional. You should consult with an attorney in your state to get specific legal advice about usury laws or any other legal issue.

13:58

MistralMistral AI

state usury laws

Usury laws vary by state in the United States and are designed to protect consumers from excessively high interest rates on loans. These laws set maximum interest rates that lenders can charge. Here are some examples of usury laws in different states:

California:

For consumer loans: The maximum interest rate is 10% per year.

For loans over $2,500: The rate can be higher if the loan is not secured by real property.

New York:

For consumer loans: The maximum interest rate is 16% per year.

For loans over $250,000: The rate can be higher.

Texas:

For consumer loans: The maximum interest rate is 18% per year.

For loans over $250,000: The rate can be higher.

Florida:

For consumer loans: The maximum interest rate is 18% per year.

For loans over $500,000: The rate can be higher.

Illinois:

For consumer loans: The maximum interest rate is 9% per year.

For loans over $25,000: The rate can be higher.

Massachusetts:

For consumer loans: The maximum interest rate is 20% per year.

For loans over $50,000: The rate can be higher.

Pennsylvania:

For consumer loans: The maximum interest rate is 6% per year.

For loans over $50,000: The rate can be higher.

Colorado:

For consumer loans: The maximum interest rate is 12% per year.

For loans over $50,000: The rate can be higher.

Ohio:

For consumer loans: The maximum interest rate is 8% per year.

For loans over $100,000: The rate can be higher.

Washington:

For consumer loans: The maximum interest rate is 12% per year.

For loans over $25,000: The rate can be higher.

These are general guidelines and can vary based on the type of loan, the amount, and other factors. It's important to check the specific laws in your state or consult with a legal professional for the most accurate and up-to-date information.

13:58

Analysis

This comparison demonstrates the different approaches each AI model takes when responding to the same prompt. Here are the key differences observed:

Response Characteristics

DeepSeek: Provides a direct response with 59 sentences.

Gemini: Provides a detailed response with 43 sentences.

Mistral: Provides a direct response with 34 sentences.

Key Takeaways

Each model brings unique strengths to this type of query
Response styles vary significantly between models
Consider your specific use case when choosing between these models

Try This Comparison Yourself

Want to test these models with your own prompts? Visit SNEOS.com to compare AI responses side-by-side in real-time.

This comparison was generated using the SNEOS AI Comparison ToolPublished: October 02, 2025 | Models: DeepSeek, Gemini, Mistral