Understanding Usury Laws & Interest Rate Regulations
Usury laws protect consumers from predatory lending by setting maximum interest rates that lenders can charge. These laws vary significantly by state and loan type, creating a complex regulatory landscape for both lenders and borrowers.
The United States operates under a dual system where both federal and state governments regulate lending practices. While federal laws provide baseline protections, states often impose stricter limits on interest rates and lending practices.
Key Concepts
Usury Laws
State laws that set maximum allowable interest rates for different types of loans, designed to protect consumers from predatory lending practices.
APR vs Interest Rate
Annual Percentage Rate (APR) includes interest plus fees, while interest rate refers only to the cost of borrowing the principal amount.
Consumer Protection
Regulations designed to ensure fair lending practices, transparent terms, and protection from deceptive or abusive lending.
National Banks
Federally chartered banks may "export" interest rates from their home state to other states, creating complex jurisdictional issues.
Regulation Summary
50
States + DC15+
Federal Agencies6-36%
Typical Range1968
Truth in LendingRate Variation Factors
- Loan Type: Payday, installment, mortgage, auto
- Loan Amount: Higher amounts may have different caps
- Borrower Type: Consumer vs commercial lending
- Lender Type: Bank, credit union, or non-bank
- Security: Secured vs unsecured loans
- Term Length: Short-term vs long-term loans
Federal vs. State Regulation Framework
Federal Regulations
Federal laws provide baseline consumer protections that apply nationwide, regardless of state laws.
Key Federal Laws:
- Truth in Lending Act (TILA): Requires disclosure of loan terms and APR
- Fair Credit Reporting Act (FCRA): Regulates credit reporting and consumer rights
- Equal Credit Opportunity Act (ECOA): Prohibits lending discrimination
- Fair Debt Collection Practices Act: Regulates debt collection practices
- Military Lending Act: 36% APR cap for service members
Federal Agency Oversight:
- CFPB: Consumer Financial Protection Bureau
- FDIC: Federal Deposit Insurance Corporation
- OCC: Office of the Comptroller of the Currency
- Fed: Federal Reserve System
- NCUA: National Credit Union Administration
State Regulations
States can impose stricter requirements than federal law, including lower interest rate caps and additional consumer protections.
State Authority Includes:
- Interest Rate Caps: Maximum allowable rates by loan type
- Licensing Requirements: Lender registration and oversight
- Fee Limitations: Caps on origination, late, and other fees
- Loan Terms: Maximum loan amounts and repayment periods
- Collection Practices: Additional debt collection restrictions
State Enforcement:
- Banking Departments: State banking regulators
- Attorney General: Consumer protection enforcement
- Financial Regulators: State-specific oversight agencies
- Consumer Protection: State consumer affairs departments
- Court Systems: State courts handle violations
Interstate Banking & Rate Exportation
National banks (federally chartered) can often "export" the interest rate laws from their home state to customers in other states. This creates complex situations where:
- A bank chartered in Delaware (no usury cap) may charge higher rates to borrowers in states with strict caps
- Credit card companies often incorporate in states with favorable lending laws
- Online lenders may operate under different state regulations than local lenders
- State-chartered banks and credit unions are generally subject to their home state's usury laws
Interest Rate Regulations by Loan Type
Mortgage Loans
Typical Regulations
- Generally exempt from state usury laws
- Regulated primarily by federal agencies
- QM (Qualified Mortgage) rules apply
- HOEPA protections for high-cost loans
State Variations
- Some states regulate mortgage broker fees
- Predatory lending laws vary by state
- Foreclosure processes differ significantly
- First-time buyer programs vary
Auto Loans
Typical Rate Caps
- Most States: 12-25% APR maximum
- Credit Unions: Often 18% max
- Dealer Financing: May have higher caps
- Used Cars: Sometimes higher rates allowed
Examples by State
- New York: 16% max for most auto loans
- North Carolina: 15% max annual rate
- Arkansas: 17% max for auto loans
- Delaware: No specific auto loan cap
Personal Loans & Credit Cards
Personal Loan Caps
- Range: 6% - 36% depending on state
- Amount-based: Some states vary by loan size
- Installment loans: Often have specific regulations
- Online lenders: Complex jurisdictional issues
Credit Card Rates
- Most States: Limited regulation due to federal preemption
- National Banks: Can export rates from home state
- State Banks: Subject to state usury laws
- Credit Unions: 18% federal max, states may be lower
Payday & Short-Term Loans
Prohibited States
- Arizona
- Arkansas
- Connecticut
- Georgia
- Maryland
- Massachusetts
- New Jersey
- New York
- North Carolina
- Pennsylvania
- Vermont
- West Virginia
Regulated States
- Colorado: 36% APR cap
- Illinois: 36% APR cap
- New Hampshire: 36% APR cap
- Virginia: 36% APR cap
- California: 36% APR cap (2025)
- Hawaii: 36% APR cap
- Montana: 36% APR cap
- Nevada: 36% APR cap
- Oregon: 36% APR cap
Minimal Regulation
- Delaware: No specific cap
- Idaho: Limited regulation
- Missouri: 1,950% APR allowed
- South Dakota: No rate cap
- Texas: High rates permitted
- Utah: No specific cap
- Wisconsin: 652.5% APR allowed
State-by-State Interest Rate Directory
Alabama
8-36%- General Usury: 8% (some exceptions)
- Small Loans: Up to 36% APR
- Payday Loans: Permitted with restrictions
- Regulator: Alabama Banking Department
Alaska
10.5-36%- General Usury: 10.5% or 5% above Federal Reserve rate
- Small Loans: 36% APR maximum
- Payday Loans: Permitted but regulated
- Regulator: Alaska Division of Banking
Arizona
36%- General Usury: 10% per year
- Consumer Loans: 36% APR maximum
- Payday Loans: Prohibited since 2010
- Regulator: Arizona Department of Financial Institutions
Arkansas
17%- General Usury: 17% per year maximum
- Consumer Protection: Strong enforcement
- Payday Loans: Prohibited
- Regulator: Arkansas Securities Department
California
36%- General Usury: 10% (12% for non-exempt entities)
- Consumer Loans: 36% APR cap (2025)
- Strong Regulations: Comprehensive consumer protection
- Regulator: California Department of Financial Protection
Colorado
36%- General Usury: 12% per year
- Consumer Loans: 36% APR maximum
- Payday Reform: 36% cap implemented 2019
- Regulator: Colorado Division of Banking
Connecticut
12-36%- General Usury: 12% per year
- Small Loans: 36% APR maximum
- Payday Loans: Prohibited
- Regulator: Connecticut Banking Department
Delaware
No Cap*- General Usury: 9% over Federal Reserve rate
- Licensed Lenders: No specific rate cap
- Credit Card Hub: Many banks incorporate here
- Regulator: Delaware Office of State Bank Commissioner
Florida
18-30%- General Usury: 18% per year
- Consumer Finance: Up to 30% APR
- Payday Loans: Permitted with regulations
- Regulator: Florida Office of Financial Regulation
Georgia
7-60%- General Usury: 7% per year
- Industrial Loans: Up to 60% APR
- Payday Loans: Effectively prohibited
- Regulator: Georgia Department of Banking and Finance
Compliance & Consumer Protection
For Borrowers: Know Your Rights
Consumer Protection Steps
- Research Your State's Laws: Understand maximum allowable rates in your state
- Compare Multiple Lenders: Rates can vary significantly between lenders
- Read All Disclosures: Review APR, fees, and terms carefully
- Report Violations: Contact state regulators if you suspect usury law violations
- Seek Alternatives: Consider credit unions, community banks, or payment plans
- Document Everything: Keep records of all loan communications and payments
Red Flags & Warning Signs
Potential Usury Law Violations
- Interest rates significantly above state maximums
- Hidden fees that increase effective APR
- Pressure to sign without reading terms
- Rollovers or renewals with additional fees
- Lack of required state licensing
- Refusal to provide written loan terms
- Requirements to waive legal rights
- Threats or harassment for payment
Where to Report Violations
State Agencies
- State Banking Department
- Attorney General's Office
- Consumer Protection Division
- State Financial Regulators
Federal Agencies
- Consumer Financial Protection Bureau (CFPB)
- Federal Trade Commission (FTC)
- Better Business Bureau (BBB)
- State Consumer Protection Agencies
Emergency Resources
If You're Being Harassed:
- Document: Keep records of all communications
- Report: Contact your state AG immediately
- Legal Aid: Seek free legal assistance
- CFPB: File complaint at consumerfinance.gov
Financial Counseling:
- National Foundation for Credit Counseling
- HUD-approved housing counselors
- Non-profit credit counseling services
- Financial assistance programs
Key Federal Contacts
- CFPB: (855) 411-2372
- FTC: 1-877-FTC-HELP
- BBB: Local office or bbb.org
- Legal Aid: lawhelp.org
Frequently Asked Questions
Can a lender charge more than my state's usury limit?
It depends on the type of lender and loan. National banks may be able to "export" interest rates from their home state. However, many types of loans and lenders are subject to state usury laws. If you believe you're being charged illegally high rates, contact your state's banking regulator or attorney general.
What's the difference between interest rate and APR?
Interest rate is the cost of borrowing the principal amount. APR (Annual Percentage Rate) includes the interest rate plus other costs like origination fees, making it a more comprehensive measure of the loan's total cost. Usury laws may apply to either the interest rate, APR, or both, depending on your state.
Are payday loans legal in my state?
Payday loan legality varies dramatically by state. Some states completely prohibit them, others cap rates at 36% APR, and some allow very high rates. Check your state's banking department website or attorney general's office for current regulations. Even where legal, payday loans often carry extremely high interest rates.
Do credit unions have different rate limits?
Federal credit unions are subject to an 18% APR maximum rate (with some exceptions), which is often lower than state usury limits. State-chartered credit unions are subject to their state's usury laws, but many voluntarily follow the federal 18% limit. Credit unions often offer more favorable rates than other lenders.
What should I do if I think I'm a victim of usury?
First, gather all loan documentation and calculate the true APR. Then contact your state's banking regulator, attorney general's office, or the CFPB to file a complaint. Consider consulting with a consumer protection attorney, as violations of usury laws may entitle you to damages or loan cancellation.
Protecting Yourself in the Lending Marketplace
Understanding interest rate regulations empowers you to make informed borrowing decisions and recognize when lenders may be violating consumer protection laws.