I remember back when Jimmy Carter was in office that Minnesota had to change its usury laws.
It had defined usury as 8% or higher interest.
Then, with “double-digit inflation” they went to 11% so MasterCard would not abandon the states card users.
Now, of course, interest rates of 24% are common for credit cards.
Check cashing services can take a huge chunk out of a paycheck.
And those formerly illegal practices of “payday loans” and “instant tax refunds” are common.
At the end of Jimmy Carter’s reign, when the prime rate went over 20%, the banks could not loan money, because it was against the law to charge what they would need to have charged. Most if not all usuary laws were done away with then. This falls under state law, so it probably varies from state to state. It seems reasonable that they should take a look at it and perhaps issue new laws with more flexibility.
The state of Georgia passed predatory lending law primarily designed to keep scummy loan companies from offering second mortgages with incredible interest rates so they can obtain houses on the cheap and resell them for profit. The law had actual teeth, so the big banks threatened to abandon Georgia’s mortgage markets. So the state leg folded and wrote something a bit more toothless.
So, there’s a reason there are no usury laws … banks don’t like 'em.
Minnesota’s usury law is still on the books, generally limiting interest to 8 percent annually, with some exceptions. Minn. Stat. ch. 334. One major exception allows credit-card interest up to 18 percent annually:
About 1979 or 1980, a US law,statute or regulation trumped state usury laws relative to first mortgages. If individual states had usury laws relative to credit cards, it would have generally been under a different law than mortgages and usually at a higher rate.
Maximum interest rates in the U.S. are governed by a patchwork of state and federal laws. Most states have usury laws that cover some types of transactions but not others. For instance, in New York, most commercial transactions are exempt from usury laws, but many consumer transactions will be subject to interest rate limits. When transactions involve parties in different states, a whole new level of complexity can be added.
As a practice, most detailed loan documents that I see have a clause that will reduce the interest rate to the statuory maximum in the event that the agreed rate exceeds the maximum (though some states have laws voiding such clauses).
In short there’s no simple answer. If you have specific questions, see an attorney in the jurisdiction at issue.