Delaware Usury Laws
Title Six of the Delaware Code establishes the statutory regulations that pertain to consumer lending practices, usury laws and permissible interest rates on personal loans in the state. Generally speaking, Delaware has put in place one of the more restrictive laws to be found anywhere in the United States when it comes to interest rate limitations on personal loans.
The usury laws in the State of Delaware provide for a cap of 5% over the Federal Reserve Prime rate when it comes to personal consumer loans in that state. There is very little room for variation when it comes to this type of financing and associated interest rates in Delaware. Generally speaking, Delaware has taken a view towards a strict construction of its statutes and regulations pertaining to lending practices and usurious interest rates.
Consistently, the courts in Delaware have declared that agreements for financing that do not comply and comport with the interest rate requirements that have been established by statute are illegal contracts. Because the courts of Delaware do consider these contracts to be illegal, these judicial bodies normally conclude that these contracts are unenforceable across the board. In other words, if a court in Delaware is confronted with resolving issues pertaining to a loan agreement or contract that contains a provision for a statutorily impermissible interest rate, such a court will strike down such a loan agreement in its entirety. Even if the other provisions of such a loan agreement meet statutory muster, and even if the variation of permissible interest is slight or accidental, the entire loan agreement normally will be deemed illegal and struck down. Again, there is little “wiggle room” in Delaware -- an illegal contract simply is not enforceable on any level.
Banks, savings and loans, and credit unions that are state-chartered are not subject to the usury laws that are on the books in Delaware for other types of person, non-commercial loans. Likewise, loans that are made by federally chartered financial institutions are not subjected to the statutory provisions in Delaware that pertain to usurious interest rates and related lending practices and procedures.
The materials presented to you and for you in this article are for informational purposes online. Nothing in this article is intended to be construed as legal advise. If after reading this article you’ve additional questions or concerns pertaining to the usury laws in the State of Delaware, you should contact a qualified and experienced attorney or law firm to extend to you the assistance that you may require.