Usury Law
Also known as: usury cap, interest rate ceiling, rate ceiling
State statutes that set maximum interest rates lenders may charge on loans. Violation of usury laws can void the interest portion of a loan or, in some states, the entire loan. However, federal law and the 'exportation doctrine' allow banks chartered in certain states to export their home state's (higher) rate ceiling nationwide, which is why many national lenders effectively operate under Delaware or South Dakota rate caps.
Full definition
Usury laws predate the United States - they trace to ancient religious prohibitions on excessive interest. In modern American law, they exist at the state level, and their practical effect depends heavily on where the lender is chartered. How state usury caps work: Each state sets maximum APRs for different loan categories (consumer loans, payday loans, mortgages, etc.). For example, some states cap personal loan rates at 18-24% for unlicensed lenders, while others have no effective cap. The exportation doctrine: The Supreme Court's Marquette National Bank decision (1978) and subsequent legislation allow nationally chartered banks to charge the interest rate permitted in their home state to borrowers in any state. This is why credit card issuers and many online personal lenders are chartered in Delaware or South Dakota - those states have minimal usury restrictions, allowing the lender to charge rates that might violate the borrower's home state cap. This doctrine effectively nullified most state usury protections for nationally chartered bank products. Where state usury caps still have teeth: Non-bank lenders (state-chartered only) must comply with the borrower's state usury law. Rent-a-bank arrangements (where a fintech partners with a bank to export the bank's home-state rates) have faced increased regulatory scrutiny. State caps matter most for payday lenders, title loan companies, and small consumer finance companies. Federal preemption: The Military Lending Act (MLA) imposes a 36% MAPR cap on consumer loans to active-duty servicemembers, regardless of state law or lender charter - a federal usury cap that applies broadly. Implication for borrowers: A lender offering 95% APR on a personal loan is not necessarily breaking the law in your state if it uses a bank-partnership model. However, some states have passed newer laws specifically targeting high-rate fintech arrangements.
- Written by
- Get Advance Loan Editorial Team
- Reviewed by
- Compliance Review
- Published
- January 15, 2026
- Last reviewed
- June 15, 2026
- TILA (Truth in Lending Act)The federal law that requires lenders to disclose loan terms, APR, fees, and the schedule of payments before a borrower signs.
- FCRA (Fair Credit Reporting Act)The federal law that governs credit reports and credit-bureau practices, including your right to a free annual report and to dispute errors.
- ECOA (Equal Credit Opportunity Act)The federal law that prohibits lender discrimination based on race, religion, sex, marital status, age, national origin, or receipt of public assistance.
- MLA (Military Lending Act)Federal law capping consumer-credit APRs to active-duty service members and their dependents at 36% (the Military APR, or MAPR).
- CFPB (Consumer Financial Protection Bureau)The federal agency that supervises and enforces consumer financial-protection laws across most U.S. lenders.
- TCPA (Telephone Consumer Protection Act)The federal law governing telemarketing calls and texts, including the prior-express-written-consent requirement for autodialed marketing.
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