A bill to authorize on a temporary basis certain business and agricultural loans, notwithstanding interest limitations in state constitutions or statutes, and for other purposes.
PL 96-104 (H.R.2515), enacted 11/05/1979

PUBLIC LAW 96-104—NOV. 5, 1979 
93 STAT. 789 
Public Law 96-104 
96th Congress 
An Act 
To authorize on a temporary basis certain business and agricultural loans, notwith-
standing interest limitations in State constitutions or statutes, and for other 
purposes. 
Be it enacted by the Senate and House of Representatives of the 
United States of 
America in Congress assembled. That titles II and III 
of the Act entitled "An Act to authorize the regulation of interest 
rates payable on obligations issued by affiliates of certain depository 
institutions, and for other purposes", approved October 29, 1974 
(Public Law 93-501; 88 Stat. 1557), are hereby repealed, except that— 
(1) the amendments made by title II of such Act and the 
provisions of such title shall apply to any loan made in any State 
during the period specified in section 206 of such Act; and 
(2) the amendments made by title III of such Act shall apply to 
any deposit made or obligation issued in any State during the 
period specified in section 304 of such Act. 
TITLE I—INTEREST RATE AMENDMENTS REGARDING 
STATE USURY CEILINGS ON CERTAIN LOANS 
SEC. 101. Section 5197 of the Revised Statutes, as amended (12 
U.S.C. 85), is amended by inserting in the first and second sentences 
before the phrase "whichever may be the greater", the following: "or 
in the case of business or agricultural loans in the amount of $25,000 
or more, at a rate of 5 per centum in excess of the discount rate on 
ninety-day commercial paper in effect at the Federal Reserve bank in 
the Federal Reserve district where the bank is located,". 
SEC. 102. The Federal Deposit Insurance Act (12 U.S.C. 1811-1831) 
is amended by inserting after section 23 the following new section: 
"SEC. 24. (a) In order to prevent discrimination against State-
chartered insured banks with respect to interest rates, if the applica-
ble rate prescribed in this subsection exceeds the rate such State 
bank would be permitted to charge in the absence of this subsection, a 
State bank may in the case of business or agricultural loans in the 
amount of $25,000 or more, notwithstanding any State constitution or 
statute, which is hereby preempted for the purposes of this section, 
take, receive, reserve, and charge on any loan or discount made, or 
upon any note, bill of exchange, or other evidence of debt, interest at 
a rate of not more than 5 per centum in excess of the discount rate on 
ninety-day commercial paper in effect at the Federal Reserve bank in 
the Federal Reserve district where the bank is located, and such 
interest may be taken in advance, reckoning the days for which the 
note, bill, or other evidence of 
debt has to run. 
"(b) If the rate prescribed in subsection (a) exceeds the rate such 
State bank would be permitted to charge in the absence of this 
paragraph, and such State fixed rate is thereby preempted by the rate 
described in subsection (a), the taking, receiving, reserving, or charg-
ing a greater rate of interest than is allowed by subsection (a) when 
knowingly done, shall be deemed a forfeiture of the entire interest 
which the note, bill, or other evidence of debt carries with it, or which 
Nov. 5, 1979 
[H.R. 2515] 
Business and 
agricultural 
loans, temporary 
exemption from 
State usury 
ceilings. 
Repeal. 
12 use 85, 
371b-l, 371b-l 
note, 1425b, 
1730e, 1828, 
1831a, 1831a 
notes; 15 USC 
687. 
12 USC 85 note. 
12 USC 85 note. 
State-chartered 
insured banks, 
interest rate 
charges, 
limitation. 
12 USC 1831a. 
Interest 
overcharge, 
forfeiture. 
93 STAT. 790 
PUBLIC LAW 96-104—NOV. 5, 1979 
Interest 
payment, 
recovery. 
Insured 
institutions, 
interest rate 
charges, 
limitation. 
12 u s e 1730e. 
Interest 
overcharge, 
forfeiture. 
15 u s e 687. 
Long-term. 
Loans and equity 
funds. 
Small business 
investment 
company, 
interest rate 
charges, 
limitation. 
"Federal 
Reserve rate." 
has been agreed to be paid thereon. If such greater rate of interest has 
been paid, the person who paid it may recover in a civil action 
commenced in a court of appropriate jurisdiction not later than two 
years after the date of such payment, an amount equal to twice the 
amount of the interest paid from the State bank taking or receiving 
such interest.". 
SEC. 103. Title IV of the National Housing Act (12 U.S.C. 
1724-1730f) is amended by inserting after section 411 the following 
new section: 
"SEC. 412. (a) If the applicable rate prescribed in this section 
exceeds the rate an insured institution would be permitted to charge 
in the absence of this section, such institution may in the case of 
business or agricultural loans in the amount of $25,000 or more, 
notwithstanding any State constitution or statute, which is hereby 
preempted for the purposes of this section, take, receive, reserve, and 
charge on any loan or discount made, or upon any note, bill of 
exchange, or other evidence of debt, interest at a rate of not more 
than 5 per centum in excess of the discount rate on ninety-day 
commercial paper in effect at the Federal Reserve bank in the 
Federal Reserve district where the institution is located, and such 
interest may be taken in advance, reckoning the days for which the 
note, bill, or other evidence of debt has to run. 
"Ob) If the rate prescribed in subsection (a) exceeds the rate such 
institution would be permitted to charge in the absence of this 
section, and such State fixed rate is thereby preempted by the rate 
described in subsection (a), the taking, receiving, reserving, or charg-
ing a greater rate of interest than that prescribed by subsection (a), 
when knowingly done, shall be deemed a forfeiture of the entire 
interest which the note, bill, or other evidence of debt carries with it, 
or which has been agreed to be paid thereon. If such greater rate of 
interest has been paid, the person who paid it may recover, in a civil 
action commenced in a court of appropriate jurisdiction not later 
than two years after the date of such payment, an amount equal to 
twice the amount of the interest paid from the institution taking or 
receiving such interest.". 
SEC. 104. Subsection (h) of section 308 of the Small Business 
Investment Act of 1958 is amended to read as follows: 
"(h)(1) The purpose of this subsection is to facilitate the orderly and 
necessary flow of long-term loans and equity funds from small 
business investment companies to small business concerns. 
"(2) In the case of a business loan the principal amount of which is 
$25,000 or more, the small business investment company making 
such loan may charge interest on such loan at a rate which does not 
exceed the lowest of the rates described in subparagraphs (A), (B), and 
(C). 
"(A) The rate described in this subparagraph is the maximum 
rate prescribed by regulation by the Small Business Administra-
tion for loans made by any small business investment company 
(determined without regard to any State rate incorporated by 
such regulation). 
"(B) The rate described in this subparagraph is the maximum 
rate authorized by an applicable State law which is not 
preempted for purposes of this subsection. 
"(CXi) The rate described in this subparagraph is the higher of 
the Federal Reserve rate or the maximum rate authorized by 
applicable State law (determined without regard to the preemp-
tion of 
such State law). 
"(ii) For purposes of clause (i), the term 'Federal Reserve rate' 
means the rate equal to the sum of 5 percentage points plus the 
PUBLIC LAW 96-104—NOV. 5, 1979 
93 STAT. 791 
discount rate on 90-day commercial paper in effect at the Federal 
Reserve bank in the Federal Reserve district in which the 
principal office of the small business investment company is 
located. 
"(iii) The rate described in this subparagraph shall not apply to 
loans made in a State if there is no maximum rate authorized by 
applicable State law for such loans or there is a maximum rate 
authorized by an applicable State law which is not preempted for 
purposes of this subsection. 
"(3) A State law shall be preempted for purposes of paragraph (2)(B) 
with respect to any loan if such loan is made before the earliest o
f
— 
"(A)July 1,1981; 
"(B) the date, after the date of the enactment of this para-
graph, on which such State adopts a law stating in substance that 
such State does not want this subsection to apply with respect to 
loans made in such State; or 
"(C) the date on which such State certifies that the voters of 
such State, after the date of the enactment of this paragraph, 
have voted in favor of, or to retain, any law, provision of the 
constitution of such State, or amendment to the constitution of 
such State which prohibits the charging of interest at the rates 
provided in this subsection. 
"(4)(A) If the maximum rate of interest authorized under para-
graph (2) on any loan made by a small business investment company 
exceeds the rate which would be authorized by applicable State law if 
such State law were not preempted for purposes of this subsection, 
the charging of interest at any rate in excess of the rate authorized by 
paragraph (2) shall be deemed a forfeiture of the greater of (i) all 
interest which the loan carries with it, or (ii) all interest which has 
been agreed to be paid thereon. 
"(B) In the case of any loan with respect to which there is a 
forfeiture of interest under subparagraph (A), the person who paid 
the interest may recover from a small business investment company 
making such loan an amount equal to twice the amount of the 
interest paid on such loan. Such interest may be recovered in a civil 
action commenced in a court of appropriate jurisdiction not later 
than 2 years after the most recent payment of interest.". 
SEC. 105. (a) In order to prevent discrimination against any finan-
cial institution chartered pursuant to the statutes of the United 
States with respect to interest rates, if the applicable rate prescribed 
in this section exceeds the rate such federally chartered financial 
institution would be permitted to charge in the absence of this 
section, the federally chartered financial institution may in the case 
of business or agricultural loans in the amount of $25,000 or more, 
notwithstanding any State constitution or statute, which is hereby 
preempted for the purposes of this section, take, receive, reserve, and 
charge on any loan, interest at a rate of not more than 5 per centum 
in excess of the discount rate on ninety-day commercial paper in 
effect at the Federal Reserve bank in the Federal Reserve district 
where the federally chartered financial institution is located. 
(b) If the rate prescribed in subsection (a) exceeds the rate such 
federally chartered financial institution would be permitted to 
charge in the absence of this section, and such State fijced rate is 
thereby preempted by the rate described in subsection (a), the taking, 
receiving, reserving, or charging a greater rate than is allowed by 
subsection (a), when knowingly done, shall be deemed a forfeiture of 
the entire interest which the loan carries with it, or which has been 
agreed to be paid thereon. If such greater rate of interest has been 
paid, the person who paid it may recover, in a civil action commenced 
Effective dates. 
Interest 
overcharge, 
forfeiture. 
Interest 
payment 
recovery. 
Business or 
agricultural 
loans, rate 
limitation. 
12 u s e 86a. 
Interest 
overcharge, 
forfeiture. 
Interest 
payment 
recovery. 
93 STAT. 792 
PUBLIC LAW 96-104—NOV. 5, 1979 
12 use 1831a 
note. 
Effective dates. 
12 use 1831a 
note. 
12 use 371b-l. 
in a court of appropriate jurisdiction not later than two years after 
the date of such payment, an amount equal to twice the amount of 
interest paid from the federally chartered financial institution taking 
or receiving such interest. 
SEC. 106. If any provision of this title or the application of such 
provision to any person or circumstance shall be held invalid, the 
remainder of the title and the application of such provision to any 
person or circumstance other than that as to which it is held invalid 
shall not be affected thereby. 
SEC. 107. The amendments made by this title and the provisions of 
this title shall apply onl^ with respect to loans made in £iny State 
during the period beginnmg on the date of the enactment of this Act 
and ending on the earlier o
f
— 
(1) July 1,1981; 
(2) the date, after the date of the enactment of this Act, on 
which such State adopts a law stating in substance that such 
State does not want the amendments made by this title and the 
provisions of 
this title to apply with respect to loans made in such 
State; or 
(3) the date on which such State certifies that the voters of such 
State, after the date of the enactment of this Act, have voted in 
favor of, or to retain, any law, provision of the constitution of 
such State, or amendment to the constitution of such State which 
prohibits the charging of interest at the rates provided in the 
amendments made by this title and the provisions of this title. 
TITLE n—APPLICABILITY OF STATE USURY CEILINGS TO 
CERTAIN 
OBLIGATIONS 
ISSUED 
BY 
BANKS 
AND 
AFFILLVTES 
SEC. 201. Section 19 of the Federal Reserve Act (12 U.S.C. 461 et 
seq.) is amended by inserting after subsection (j) the following new 
subsection: 
"(k) No member bank or affiliate thereof, or any successor or 
assignee of such member bank or affiliate or any endorser, guarantor, 
or surety of such member bank or affiJliate may plead, raise, or claim 
directly or by counterclaim, setoff, or otherwise, with respect to any 
deposit or obligation of such member bank or affiliate, any defense, 
right, or benefit under any provision of a statute or constitution of a 
State or of a territory of the United States, or of any law of the 
District of Columbia, regulating or limiting the rate of interest which 
may be charged, taken, received, or reserved, and any such provision 
is hereby preempted, and no civil or criminal penalty which would 
otherwise be applicable under such provision shall apply to such 
member bank or affiliate or to any other person.". 
SEC. 202. Section 18 of the Federal Deposit Insurance Act (12 U.S.C. 
1828) is amended by inserting after subsection (j) the following new 
subsection: 
"(k) No insured nonmember bank or affiliate thereof, or any 
successor or assignee of such bank or affiliate or any endorser, 
guarantor, or surety of such bank or affiliate may plead, raise, or 
cledm, directly or by counterclaim, setoff, or otherwise, with respect 
to any deposit or obligation of such bank or affiliate, any defense, 
right, or benefit under any provision of a statute or constitution of a 
State or of a territory of tne United States, or of any law of the 
District of Columbia, regulating or limiting the rate of interest which 
may be charged, taken, received, or reserved, and any such provision 
is hereby preempted, and no civil or criminal penalty which would 
PUBLIC LAW 96-104—NOV. 5, 1979 
93 STAT. 793 
otherwise be applicable under such provision shall apply to such bank 
or affiliate or to any other person.". 
SEC. 203. Section 5B of the Federal Home Loan Bank Act (12 U.S.C. 
1425b) is amended by inserting after subsection (d) the following new 
subsection: 
"(e) No member or nonmember association, institution, or bank or 
affiliate thereof, or any successor or assignee, or any endorser, 
guarantor, or surety thereof majr plead, raise, or claim, directly or by 
counterclaim, setoff, or otherwise, with respect to any deposit or 
obligation of such member or nonmember association, institution, 
bank, or affiliate, any defense, right, or benefit under any provision of 
a statute or constitution of a State or of a territory of the United 
States, or of any law of the District of Columbia, regulating or 
limiting the rate of 
interest which may be charged, taken, received, or 
reserved, and any such provision is hereby preempted, and no civil or 
criminal penalty which would otherwise be applicable under such 
provision shall apply to such member or nonmember association, 
institution, bank, or affiliate or to any other person.". 
SEC. 204. The amendments made by this title shall apply only with Effective dates. 
respect to deposits made or obhgations issued in an)^ State during the 1
2 use 37ib-i 
period beginning on the date of the enactment of this Act and ending ^°^-
on the earlier o
f
— 
(1) July 1,1981; 
(2) the date, after the date of the enactment of this Act, on 
which such State adopts a law stating in substance that such 
State does not want the amendments made by this title to apply 
with respect to such deposits and obligations; or 
(3) the date on which such State certifies that the voters of such 
State, after the date of the enactment of this Act, have voted in 
favor of, or to retain, any law, provision of the constitution of 
such State, or amendment to the constitution of such State which 
limits the amount of interest which may be charged in connec-
tion with such deposits and obhgations. 
TITLE m-LIMITATION 
SEC. 301. This Act shall apply only in those States having a 1
2 use 86a note. 
constitutional provision which provides that all contracts for a 
greater rate of interest than 10 per centum per annum shall be void, 
as to principal and interest. 
Approved November 5, 1979. 
LEGISLATIVE HISTORY: 
SENATE REPORT No. 96-364 (eomm. on Banking, Housing, and Urban Affairs). 
CONGRESSIONAL RECORD, Vol. 125 (1979): 
Sept. 24, considered and passed House. 
Oct. 12, considered and passed Senate, amended. 
Nov. 1, House concurred in Senate amendment.