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Q.What is Usury?
A.Usury is defined as the charging of excessive interest on a loan. Many states have usury laws that cap the rate of interest an individual and private lender can charge for loans. Pursuant to California law, the maximum interest rate an individual may charge on a loan primarily for personal, family or household purposes is 10% per year on the unpaid balance owed.
The maximum interest rate an individual can charge for a loan to be used primarily for home improvement, home purchase, or for business purposes, is the higher of 10% or the amount charged by the Federal Reserve Bank of San Francisco on advances to member banks on the 25th day of the month before the loan is made plus 5%. Because the discount rate charged by the Bank of San Francisco has been extremely low, the maximum interest rate allowed is still just 10%.
Well, you may be wondering how your credit card company can charge you 33% interest. California’s usury laws do not apply to most lending institutions such as banks, credit unions, finance companies, pawn brokers, etc. In fact, in California, there is no limit on how much interest a credit card company can charge. In addition, there is also no limit on how much a credit card company can charge for: late fees, cash advances, transaction fees, stop payment fees, or ATM fees.
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