What constitutes an illegal interest rate?
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What constitutes an illegal interest rate?
I live in RI and took out 3 payday loans. I was wondering if you could advise me on the interest rates? 1 loan was for $600 interest rate 701.92%; I am making my final payment of $587.50 tomorrow; the total paid back for that loan was $1,305. The other 2 I have I have only been paying the interest 6 weeks; nothing has gone towards the loan. The second loan amount was $200 and the interest rate is 644.12%. The third loan was for $300; I do not have the loan documents for that. Are the interest rates actually legal?
Asked on July 28, 2011 Rhode Island
Answers:
FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney
Answered 13 years ago | Contributor
An interest rate is illegal (usurious) if it exceeds the your state's statute on what the maximum amount that can be charged by a lender on the loan. Each state has diffent laws on the subject, usually under their "Constitutional Code".
In California, the maximum interest rate on a loan not brokered by a real estate broker where land is the security is prime rate then existing under certain set indexes plus 5%.
The interest rates being charged you are excessive. You should contact your county's district attorney's office about what you are paying to see if they want to investigate a possible unfair trade practice.
Go online and do research about the rate of interest your state allows. You might considering contacting the county bar association to see if it has a hotline to help people like you.
Good luck.
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