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. Massachusetts interest rate laws set the maximum rate at 6 percent unless the parties contract for another rate.
The following table lists the main provisions of Massachusetts' 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 | 6% unless contract Massachusetts General Laws Chapter 107 §3: Rate of Interest |
| Penalty for Usury (Unlawful Interest Rate) | Over 20%: criminal usury; usurious loan may be voided by Supreme Judicial or Supreme Court in equity Massachusetts General Laws Chapter 271 §49: Criminal Usury |
| Interest Rates on Judgments | 12% torts (Massachusetts General Laws Chapter 231 §6B); At the contract rate, if established, or 12% (Massachusetts General Laws Chapter 231 §6C); Sanctions defenses/counterclaims for frivolous or not in good faith actions (Massachusetts General Laws Chapter 231 §6F) |
| Exceptions | Small loans (Massachusetts General Laws Chapter 140 §96); Open-end credit transaction (Massachusetts General Laws Chapter 140 §114B); Life insurance policy loans (Massachusetts General Laws Chapter 175 §142) |
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.
For smaller payments, like a car loan, a high interest rate may not be that hard to bear if you spread out the payments. For larger loans, the interest rate may be so high that the borrower never gets out of payment no matter how much they pay in interest. Usury laws are designed to protect consumers from these high interest rates, and the perpetual indebtedness that may result.
Massachusetts Usury Laws
Massachusetts 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 Massachusetts, the maximum amount of interest a borrower can charge is 6%. This may seem low at first, and that is because Massachusetts allows borrowers and creditors to enter into written contracts for higher interest rates.
The Massachusetts legislature has made a few exceptions to interest rate limits. Some of those exceptions are small loans, open end transactions, and life insurance policy loans. As well, many national banks are exempt from usury laws too. Those national banks usually have the word "National" or "N.A." in their name.
Penalties for Violating Interest Rate Limits
The basic civil penalty for charging too high interest in Massachusetts is voiding the loan. If the loan had more than a 20% interest rate, criminal charges may result.
If you would like to know more about usury laws, or if you have questions about your specific situation, there are many attorneys throughout Massachusetts 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.
