You may not know it, but Pennsylvania law has capped the legal rate of interest in the state. Unforunately consumers regularly pay higher interest rates than what is legally allowed. They effectively waive these protections in order to agree to a loan's terms. So while they're relatively meaningless in most situations, most states have laws capping the amount of interest allowed. Pennsylvania interest rates laws, for instance, cap interest at 6 percent.
Laws limiting the amount of interest often are called "usury" laws. Usury is a term dating back to the Middle Ages, when it was used negatively to describe any lending that required payment of interest. After reasonable interest charges became more common, the term usury was used to describe excessive interest charges. The charging of interest is still looked down upon in certain cultures, but is generally used all around the world.
So if there are limits on the amount of interest that may be charged, why do we often pay higher rates? As they say, the devil's in the details -- more to the point, consumers can be required to pay higher rates of interest if they agree to do so. However, consumers also regularly agree to terms that allow credit card issuers to raise rates even higher after the card is issued.
The main details of Pennsylvania's interest rate laws are highlighted in the following chart. See Usury Laws and Limits on Credit Card Interest Rates for more details.
|Legal Maximum Rate of Interest||6% (Tit. 41 §§201, 202)|
|Penalty for Usury (Unlawful Interest Rate)||Borrower not required to pay amount over legal rate and may recover triple the amount in excess; attorney's fees may be awarded and an intentional violation is 3rd degree misdemeanor (Tit. 41 §§501, et seq.)|
|Interest Rates on Judgments||Interest at lawful rate (Tit. 42 §8101)|
|Exceptions||Federal Housing Administration, Veteran's Administration or other department/agency of U.S. government (Tit. 41 §§301, 302); business loans in excess of $10,000; unsecured; noncollaterialized loan in excess of $35,000; obligation to pay a sum of money in an original bona fide principal amount more than $50,000 (41 §301)|
Note: State laws are constantly changing -- contact an Pennsylvania consumer protection attorney or conduct your own legal research to verify the state law(s) you are researching.
Pennsylvania Interest Rates Laws: Related Resources
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