State laws limiting the amount of interest a creditor may charge usually have little impact on actual interest rates because consumers regularly waive these limits by agreeing to higher interest rates. Georgia interest rate laws state that any rate higher than 7 percent must be specified in writing, but place no limits on rates for loans between $3,000 and $250,000.
Review the following table for the main provisions of Georgia interest rate laws and read more on the subject below. See Usury Laws and Limits on Credit Card Interest Rates for additional details.
|Legal Maximum Rate of Interest||7% per year when rate not specified; higher than 7% must be in writing; maximum 16% where principal is $3000 or less; no limit on rate if loan is between $3000 and $250,000 and must be in simple interest in written contract (§7-4-2)|
|Penalty for Usury (Unlawful Interest Rate)||Forfeiture of entire interest (§7-4-10); criminal penalty (§7-4-18)|
|Interest Rates on Judgments||Prime rate determined by Federal Reserve System plus 3% (§7-4-12)|
|Exceptions||Small industrial loans (§7-3-14)|
Purpose for Interest Rate Limits
Imagine that you are short on rent one month, and only have three days to pay. You know that you need to pay on time or else you will be evicted, or your landlord will raise the rent to an amount you cannot afford. In this situation you may be tempted to take out a short loan to cover expenses until your next paycheck comes in. Lenders also know that you are in a bind, and may try to take advantage of the fact that you need quick cash. In order to protect you against predatory and exploitative lending, the Georgia legislature has enacted usury laws to prevent those lenders from charging extremely high interest rates, especially to people in need.
Georgia Interest Rate Limits
Georgia interest rate laws only apply to certain companies and individuals. They do not apply to national banks, which normally have the word "National" or "N.A" the name. Pawn brokers, and other small payday lenders may also be exempt from the interest rate laws.
For other loans, the maximum interest rate allowed is 7% if the loan contract is not in writing or if an interest rate is not specified. If the interest rate is higher than 7%, the contract and the interest amount must be in writing in order to protect the consumer. If principal loan amount is $3000 or less, the interest rate cannot be more than 16%. For loans with a principal amount more than $3000 and less than $250,000 there is no limit on interest rates.
Penalties for Violating Interest Rate Limits
Lenders who violate interest rates may be subject to civil and criminal penalties. Georgia's usury laws state that a lender who violates the interest rate limits forfeits the entire interest charged or taken. The amount of interest forfeited can be used as a payment towards the principal of the loan if the principal has not been paid off. If the principal has been paid off, the lender must repay the forfeited interest.
If you would like to know more about usury laws, and proper lending practices, there are many consumer protection attorneys throughout Georgia who may be able to help. In addition to informing you about what lenders may and may not charge in interest, they may also be able to help you recover any money you have had to pay in excess of permissible interest rates.
Contact a qualified attorney.