While most states still have laws limiting the amount of interest a creditor may charge, traditionally called "usury" laws, most consumer waive these protections by agreeing to higher rates. Delaware interest rate laws set the maximum rate at 5 percent over the Federal Reserve Discount rate.
The following table lists the main provisions of Delaware's interest rate laws, and some more in-depth information follows. See Usury Laws and Limits on Credit Card Interest Rates for a concise overview.
| Legal Maximum Rate of Interest | 5% over Federal Reserve discount rate; same maximum rate even if agreed upon in writing (Tit. 6 §2301) |
| Penalty for Usury (Unlawful Interest Rate) | Debtor not required to pay excess over legal rate; if whole debt is paid with interest over legal rate, debtor may recover 3 times amount of excess interest or $500, whichever is greater, if action brought within 1 year (Tit. 6 §2304[b]) |
| Interest Rates on Judgments | 5% over Federal Reserve discount rate; same maximum rate even if agreed upon in writing (Tit. 6 §2301) |
| Exceptions | No limit where loan exceeds $100,000 and is not secured by mortgage on borrower's personal residence (Tit.6§2301(c)) |
Purpose of Usury Laws
Imagine that finances are tight this month, and you need to make a car payment on time or else you will lose your car. If you lose your car, you won't be able to drive to work, and you may lose your job as well, and your apartment or home to follow.
Lenders are approached by people in this situation all the time, and know that they can charge very high interest rates because they know that the borrower does not have any other options. Usury laws are designed to protect consumers from these high interest rates, and the perpetual indebtedness that may result.
Delaware Usury Laws
Delaware has passed a number of laws designed to protect consumers and borrowers from exploitative lenders. These usury laws (also known as interest rate limits) are common throughout the country. In Delaware, the maximum amount of interest a borrower can charge is 5% over the Federal Reserve discount rate.
The Delaware legislature has an exception to interest rate limits: there is no limit where loan exceeds $100,000 and is not secured by a mortgage on the borrower's personal residence.
Penalties for Violating Interest Rate Limits
The basic civil penalty for charging too high interest in Delaware is that the debtor would not be required to pay the excess amount over the legal rate. Further, the debtor may recover 3 times the amount of the excess interest or $500, whichever is greater (so long as the action brought within 1 year).
If you would like to know more about usury laws, or if you have questions about your specific situation, there are many attorneys throughout Delaware with consumer protection experience who may be able to help you. In addition to answering your consumer protection questions, they may also be able to help you get back any money paid in interest that was over the legal interest limit.
