Under usury laws, lenders cannot charge outrageous interest rates. If you are loaned money at an exorbitant or illegally high interest rate, you may be the victim of usury.
How Are Banks Prevented from Charging Usurious Rates?
There are federal laws to prevent national banks from charging usurious rates on loans. National banks are not subject to state laws covering usury.
What Are Permissible Rates of Interest National Banks Can Charge?
National consumer banks have the option of three permissible rates of interest they can charge consumers:
- The rate of interest allowed by state laws or statutes where the bank is located
- One percent above the discount rate on 90-day commercial paper in effect at the Federal Reserve Bank in the district where the bank is located
- If state law prevents banks for charging interest, national banks in the state may charge 7% interest
How Do I Know If My Bank Is Committing Usury?
If you believe your bank is charging a usurious interest rate on a loan you must show the bank:
- Loaned the money
- Understood the money loaned would be repaid
- Knew they were going to make a profit greater than permitted by law
- Had the intent to violate the law
Your bank may also violate usury laws by charging additional fees that constitute interest payments.
Do I Have to Repay My Loan If the Bank Violated the Law?
Although your bank may be found to have violated usury laws, you will still have the obligation to repay the amount of money loaned to you. Generally a new contract will be drafted with a legal rate of interest that you and your bank agree upon. If you already paid usurious interest, you may recover from the bank twice the amount of interest paid.
Do I Need a Lawyer?
A lawyer experienced in consumer banking regulations and laws can determine if the interest your bank is charging you is against the law. Because the time limit to bring an action against a bank for usury is two years, you should contact an attorney immediately.