Massachusetts Usury Laws

The Commonwealth of Massachusetts has established a very liberal ceiling on interest rates that are permissible in the usury laws of that jurisdiction. In this regard, the general usury rate on personal loans in the Commonwealth has been set at 20%.

As a general rule, in part because of the liberality of the usury ceiling in the Commonwealth, courts in Massachusetts tend to be very restrictive in their interpretation of loan agreements that contain interest rates above the 20% mark. In the vast majority of instances, when a court in Massachusetts is faced with a situation in which in the interest rate on a personal loan agreement exceeds the 20% mark, the court will:

-- deem the loan agreement itself illegal

-- void the loan agreement

-- conclude that all provisions in that loan agreement (and not just the provision dealing with the interest rate) to be unenforceable.

In some rarer instances, depending on the facts at hand in a given situation, a court might reformat the loan agreement and thereby enforce the agreement with a lowered interest rate established by the court in conformity with the usury laws that are on the books in the Commonwealth.

There are other provisions within the Massachusetts legal framework that set interest rates for other types of financing arrangements. To this end, there is a separate scheme governing permissible interest rates in loans that are obtained from Commonwealth chartered financial institutions.

In addition, there are provisions dealing with interest rates that attach to civil judgments. The Commonwealth of Massachusetts has established a two tier system when it comes to the interest rates on judgments in civil cases:

-- 12% if it is determined that the defendant had a bona fide defense

-- 18% if the court deems the defendant’s defense to be frivolous

Keep in mind that the information that we have provided to you in this article is subject to change. While we make every effort to keep the information in this article current, the laws in the Commonwealth of Massachusetts do change from time to time.

Generally, the provisions governing usury laws and usury limitations in the Commonwealth of Massachusetts can be found at General Laws of Massachusetts Title II.

If you have any questions after reading this article regarding permissible interest rates in the Commonwealth, you should obtain legal advice from an experienced and qualified lawyer.

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