Wednesday, April 09, 2008

State Usury Laws

State Usury Laws could have saved a lot of grief for hundreds of thousands of families during the current mortgage and other consumer loans problems facing America. I am no lawyer, so you must discuss this further with someone trained and experienced in the law.

Each state can set the maximum rate of interest for consumers where any rate higher is classified as usury and illegal.

When I needed my mortgage in 1979, New Jersey raised their usury rate to above 9% per year but New York did not raise their usury rate and I obtained one there for 6.5% per year and I even received a .5% discount because I worked for the New York Bank as an employee.

From what I understand your state can set the maximum rate that can be charged for not only mortgages, but credit cards, car loans, second mortgages, personal loans, home improvement loans, unsecured loans, and even the vicious payday loans that many states allow to charge high interest. In other words they can and I think most states do set the usury rates for all consumer loans where lenders can charge up to the usury rate but not above it.

The fees charged by lending institutions can be limited by state law also.

The dilemma is that legislators want credit and the lending institutions to be successful in their state, and for the lenders to provide jobs in their state, and to receive political contributions, while serving the consumer public.

But most states side on the lenders, enabling them to charge high interest and fees, while allowing their state residents to suffer with high interest rates and fees. Some states facilitate the torture of their citizens with excessive interest rates, fees, and penalties. Some states allow interest rate increases over the duration of a loan.

Some states have requirements on banks on their state resident's deposits, such as they must be processed within the state and they must be earmarked for loans within that state at least to some degree.

There are states that are more consumer friendly keeping interest rates lower than other states and some even provide forfeiture as a penalty to the usurers. If you department store was a usurer, the court could allow the merchandise you purchased on that card to be yours without repayment in some states. What kind of state do you live in: a business friendly state or a consumer friendly state? Does your state allow for interest only loans on homes? What do they think about balloon mortgages?

Does your state allow home mortgage interest rates above 9%, or credit card interest above 12%,
or check return fees above $10 per check, or car loans above 10%, or student loans above 6%? Maybe each of us should contact our state elected officials and find out about usury laws in our state and to sound off about excessive rates and fees.

If there were some lower rates set by the states for home mortgages and other consumer loans
then fewer people would be in foreclosure. If other rates, fees, and penalties were set lower then
then more people would be able to pay their credit card, car loan, student loan, and other loans.

I think we would all like to see forfeiture on a loan for usurers. More states should be more consumer friendly instead of being business friendly.