Usury laws are the legal limits on how much interest a lender can charge. Every state has some form of usury law, but the exemptions are so broad that most consumer lenders — banks, credit unions, credit card companies — operate outside state rate caps. Understanding how usury law works (and where it doesn’t protect you) is important for any borrower dealing with high-cost lending.
What Is Usury?
Historically, usury meant charging any interest on loans — a concept rooted in medieval religious prohibitions. In modern American law, usury means charging an interest rate above the legal maximum. Usury laws:
- Set maximum allowable interest rates for loans in a state
- Apply penalties for violators (voiding the loan, forfeiture of interest, or criminal charges in extreme cases)
- Contain extensive exemptions that limit their practical reach
How State Usury Laws Work
Each state sets its own usury limits, which vary widely:
| State | General Usury Limit | Notes |
|---|---|---|
| California | 10% per year | Broad exemptions for licensed lenders |
| New York | 16% civil; 25% criminal | Criminal usury is a felony |
| Texas | 10% (or 18% by contract) | Licensed lenders largely exempt |
| Florida | 18% (up to $500,000 loans) | Payday loans separately regulated |
| Illinois | 9% | Licensed lenders exempt |
| Georgia | 16% | |
| Colorado | 45% (general); 36% cap for payday | Strong payday protections |
Important caveat: These general usury limits apply to unlicensed lending. Most consumer lenders — banks, credit unions, finance companies, online lenders — are licensed entities exempt from general usury caps in virtually every state.
The Marquette Decision: Why Usury Doesn’t Cap Credit Cards
The 1978 Supreme Court case Marquette National Bank of Minneapolis v. First of Omaha Service Corp. held that national banks can charge the interest rate allowed by their home state — regardless of where the borrower lives.
Practical result: Credit card companies flocked to Delaware and South Dakota in the 1980s — states that eliminated usury caps — allowing them to charge any rate in any state. This is why a credit card issued by a Delaware bank can charge 29.99% APR to a borrower in California or New York, regardless of those states’ usury limits.
The Depository Institutions Deregulation and Monetary Control Act of 1980 and subsequent federal legislation extended similar treatment to state-chartered banks and thrifts. As a result, virtually no federally or state-chartered bank faces effective usury limits on consumer lending today.
Where Usury Laws Do Apply
Unlicensed Private Loans
If an individual or unlicensed entity charges above the state usury rate on a private loan (between friends, family, or private investors), they may be in violation of usury law. This matters for:
- Private mortgage lending
- Informal business loans
- Notes between individuals
Some State-Licensed Lenders
Some states regulate licensed consumer finance companies differently from banks. States like California, New York, and New Jersey regulate installment loan rates for licensed non-bank lenders more strictly than for banks.
Payday Loans (State-by-State)
Payday loan usury is regulated separately in many states:
States with 36% APR cap on payday loans (2026): Colorado, California, Oregon, Washington, New Mexico, Illinois, Nebraska, South Dakota (voter referendum), North Dakota partial, and others.
States with no effective payday loan rate cap: Texas, Wisconsin, Utah, Nevada, Idaho, Wyoming, and others — allowing effective APRs of 300–600%.
Military Lending Act (Federal)
The Military Lending Act (MLA), enforced by the Department of Defense, caps interest rates at 36% APR for virtually all consumer credit products extended to active-duty service members, their spouses, and dependents. This includes:
- Personal loans
- Credit cards
- Payday loans
- Auto title loans
This is one of the strongest federal usury protections in US law.
What Happens When Usury Law Is Violated?
Consequences for charging above the legal usury rate vary by state:
- Civil usury: Lender forfeits interest; borrower may sue for damages
- Criminal usury: In some states (New York charges above 25% for a loan up to $2.5M), criminal prosecution is possible
- Loan voiding: In some states, a usurious loan is void entirely — the lender cannot collect principal or interest
- Treble damages: Some states allow the borrower to recover 2–3 times the interest paid as damages
Note: Enforcement against licensed lenders is rare because they operate under federal preemption. These consequences primarily apply to unlicensed lenders.
Your Practical Takeaway as a Borrower
- Credit cards and bank personal loans are not subject to state usury limits — high rates are legal because of federal preemption
- Payday loan protections are state-specific — check your state’s payday loan APR cap
- Military borrowers are protected at 36% APR via the MLA on virtually all consumer credit
- Private, unlicensed lenders can violate usury law — if someone charges you an extraordinary rate on an informal loan, consult a consumer attorney
- No federal usury cap exists for most consumer credit — rate shopping and strong credit are your primary defenses against high rates
The Bottom Line
Usury laws exist in every state but offer limited protection to most consumer borrowers due to federal preemption of bank rate laws. The most meaningful usury protections in 2026 are state payday loan rate caps (36% in growing number of states) and the Military Lending Act’s 36% cap for service members. For everyone else, your best protection against high-rate lending is a good credit score, comparison shopping, and avoiding payday and title loan products entirely.
Related reading:
- Safe Small Dollar Loans
- Payday Loan Alternatives
- What Is an Origination Fee?
- Personal Loan Rates 2026
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