New York Interest Rate Laws at a Glance
While many jurisdictions set statutory limits on interest rates, they are not always enforceable. Why? Consumers often agree to rates higher than the limit and in doing so, waive the protections. This often renders legal interest rate limits to little more than general guidelines. In any event, New York's interest rate limit is 16 percent.
How Do Creditors Get Around Statutory Interest Rate Limits?
The answer is in the fine print, quite literally. Consumers may be required to pay higher interest rates if agreeing to do so is a condition of getting a credit card or loan. Additionally, depending on the terms of the contract, borrowers often agree to give credit card issuers the green light to raise rates at a later date. This may be a lengthy paper contract for a car loan or a simple click of the mouse when agreeing to the terms of a credit card application.
A Brief History of Usury Laws
Statutory limits on the amount of interest a lender may charge are sometimes called "usury" laws. While formal usury charges typically are reserved for so-called loan sharks and certain payday lenders, usury is a term dating back to the Middle Ages. At that time, usury referred to the charging of interest in general, which was largely frowned upon.
When reasonable interest charges became more common, the term was used to describe particularly excessive interest rates. Interest has become relatively universal, but is still looked upon unfavorably by some.
The basics of New York interest rates laws are listed in the table below. See Consumer Protection Resources for more information.
| Legal Maximum Rate of Interest | 16% (Gen. Oblig. §5-501(1)); Banking §14-a) |
| Penalty for Usury (Unlawful Interest Rate) | Usurious notes void (Gen. Oblig. (§5-511(1)); borrower may recover any amount in excess over legal rate (Gen. Oblig. §5-513); if bank, savings and loan, or trust company, interest forfeited and recovery of twice interest paid (Gen. Oblig. §5-511(1)) |
| Interest Rates on Judgments | 9% (Civ. Prac. L. & R. §§5003, 5004) |
| Exceptions | See Gen. Oblig. §§5-501, et seq.; debit balance on customer accounts with a broker or dealer (Gen. Oblig. §5-525) |
Note: State laws are constantly changing -- contact a New York consumer protection attorney or conduct your own legal research to verify the state law(s) you are researching.
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