Alabama Usury Laws
The statutes governing usury lending practices and loan rates that are legally permitted in the State of Alabama have been codified in Article 8 of the Code of Alabama. The State of Alabama has established a general usury limitation established at eight percent per annum. Rates in excess of this amount are considered to usurious in the State of Alabama.
You do need to keep in mind that the eight percent cap on interest rates in the State of Alabama presumes that there will be a written contract in place pertaining to and governing the terms and conditions of the loan itself. If there is no written agreement in place, the general usury limitation that has been established in Alabama is six percent.
If a loan is negotiated that includes an interest rate that is usurious in Alabama, and if a lender defaults on that loan, the lender will not be able to pursue legal action to collect upon the underlying debt. In Alabama, as in most states within the Union, courts in Alabama deem any loan agreement that contains a provision for usurious interest to be illegal in the first instances. Precedent has long been established in the United States in which the courts of this country will not enforce an illegal contract.
Loans that are made by federally regulated banks and savings and loans do not fall under the usury law provisions of any given state. While the United States government arguably could regulate the lending practices that currently are subject to state usury laws under the Commerce Clause of the U.S. Constitution, thus far Congress has stayed out of this arena. Therefore, states such as Alabama will continue to exert control over the regulation of usury laws at the present time and into the foreseeable future.
Please keep in mind that the statutes and regulations governing usury loan rates and lending practices in Alabama can and do change. While we make every effort to keep the information we are providing to you up to date, you do need to keep in mind that the statutes and regulations pertaining to usury loan rates and related practices in Alabama can change over time. Finally, we are not providing you with legal advice. If you have any additional questions or concerns regarding usury laws, you should contact a qualified and experienced lawyer who will be able to address your questions and concerns.