Forum: money.stackexchange.com
Tags: <credit-card><interest><regulation><law>
Title: Is there a law or regulation that governs the maximum allowable interest amount that can be charged on credit cards or in agreements where credit is extended?
Question: When I worked in the corporate world, I remember dealing with a company from the U.K. who cited a U.K. regulation on maximum interest/finance charges that necessitated a change in their contract.  What are those maximums, and do all countries have them?

Answers:
sents: text: The word you're looking for is usury - the crime of lending money at rates above an amount set by law.
answer_details: author: money.stackexchange.com/users/186/Shawaron
score: 9
sents: text: In Canada section 347 of the Canadian Criminal Code makes it illegal to charge more than 60% annually.
text: Since most Canadian credit card annual interest fee is below this they are within that legal limit.
text: However this is limited only to the rate and not necessarily a cap on the absolute interest charges.
answer_details: author: money.stackexchange.com/users/19/Zephyr
score: 6
sents: text: In the U.S., each state has its own local usury law.
text: This website has a separate page for each state summarizing the local usury law and provides a reference to the local statute.
text: The rules aren't simple: some set absolute limits, some appear to be pegged to something like the Prime Rate, some states don't have a general usury limit, the rules don't apply to certain loans because of the type of loan or lender, etc.
text: There are US Federal laws dealing with usury, primarily in the context of racketeering -- the RICO Act lets the Feds go after racketeers that violate local usury laws beyond certain parameters.
answer_details: author: money.stackexchange.com/users/855/bstpierre
score: 2
sents: text: In the US, usury is complicated and depends on the type of account, the bank charter and the where the bank makes credit decisions.
text: Most major US credit cards are issued by entities in Utah, South Dakota and Delaware.
text: None of these states have usury limits.
text: Many states have usury limits.
text: In New York, for example a loan may not exceed 16% interest, if the institution is supervised by the State.
text: Credit card issuers are usually chartered as "National Associations" (ie Federally chartered banks regulated by the Comptroller of the Currency).
text: There is no Federal usury statute, and Federally chartered banks are allowed to "export" many of the regulations of the state where credit decisions are made.
text: Small states like South Dakota basically design their banking regulations to meet the needs of the banks, which are major employers.
answer_details: author: money.stackexchange.com/users/1288/duffbeer703
score: 2
sents: text: What are those maximums, and do all countries have them?
text: Usury, lending money for any interest at all, used to be anti-biblical: it wasn't a Christian thing to do, and so in Christian countries it was Jews who did it (Jews who were money-lenders).
text: Asking for interest on loans is still anti-Koranic: so Islamic banks don't lend money for interest.
text: Instead of your getting a mortgage from the bank to buy a house, the bank will buy the house, which you then buy from bank on a rent-to-own basis.
text: Further details: http://en.wikipedia.org/wiki/Usury
text: http://en.wikipedia.org/wiki/Islamic_banking
answer_details: author: money.stackexchange.com/users/3443/ChrisW
score: 1
sents: text: In the EU, you might be looking for Directive 2000/35/EC (Late Payment Directive).
text: There was a statutory rate, 7% above the European Central Bank main rate.
text: However, this Directive was recently repealed by Directive 2011/7/EU, which sets the statutory rate at ECB + 8%.
text: (Under EU regulations, Directives must be turned into laws by national governments, which often takes several months.
text: So in some EU countries the local laws may still reflect the old Directive.
text: Also, the UK doesn't participate in the Euro, and doesn't follow the ECB rate)
answer_details: author: money.stackexchange.com/users/3367/MSalters
score: 1

Summary of the answers:
Canada has a law making it illegal to charge more than 60% annually. In the US, each state has its own law, in New York it is 16%.
Such legislation is known as 'usury legislation' and is governed on a state-by-state basis in the USA and varies between countries.