The amount of interest a creditor may charge is limited by state laws, but there's a big catch: consumers often agree to pay a higher interest rate by agreeing to the terms offered, thus waiting any statutory limits. Additionally, most state laws limiting interest rates have exceptions. In Tennessee, for instance, the legal amount of interest a creditor may charge is 10 percent -- however, this does not apply to loans under $1,000. And if you agree to a credit card with an 18 percent APR, for example, statutory limits don't apply.
Additional details about Tennessee's laws limiting interest rates, and links to relevant code sections, can be found in the following table.
| Legal Maximum Rate of Interest | 10% (§47-14-103) |
| Penalty for Usury (Unlawful Interest Rate) | Contract unenforceable; if found unconscionable, lender must refund charges, fees, and commission fees and successful plaintiff may recover reasonable attorney's fees (§47-14-117); willful collection is a Class A misdemeanor (§47-14-112) |
| Interest Rates on Judgments | 10% or at contract rate (§47-14-121) |
| Exceptions | Installment loans (§45-2-1106); loans under $1000; (§47-14-104); savings and loans (§45-3-705); single payment loans §(47-14-104) |
Note: State laws are constantly changing -- contact a Tennessee consumer protection attorney or conduct your own legal research to verify the state law(s) you are researching.
What Are Usury Laws?
Laws that limit interest rates or even prohibit the charging of interest altogether have historically been referred to as usury laws. The term "usury" dates back to the Middle Ages, where it was used in negatively to refer to any kind of interest-bearing loan. Gradually, as interest became more accepted, the term usury was just used in reference to excessively high interest rates. In the U.S., federal law generally does not focus on usury, leaving it largely to the states.
How Do I File a Complaint in Tennessee?
If you have reason to believe a financial institution in Tennessee has violated state law with respect to interest rates, you may file a complaint with the Tennessee Department of Financial Institutions.
Research the Law
Tennessee Interest Rate Laws: Related Resources
