Pennsylvania Usury Laws
The usury laws in Pennsylvania are complicated. Through this article you will be provided with a general overview of the laws in the books in Pennsylvania that govern certain types of lending practices and that set usury limitations in the Commonwealth.
In the Commonwealth of Pennsylvania, the legal interest rate on most consumer loans in an amount below $50,000 is 6%. This also represents the general usury limit for these types of loans. In other words, if there is a personal loan in an amount below $50,000, the legally permissible interest rate cannot exceed 6%. This does represent one of the most restrictive usury limits to be found anywhere in the United States today.
If a personal loan agreement is created for an amount below $50,000 and that does have an interest rate that exceeds the 6% level, such a loan agreement will be deemed to be an illegal contract. It will be considered unenforceable in its entirety in most instances. In this situation, the borrower will have an absolute defense to performing under the terms and conditions of the loan -- in short, if the agreement ends up litigated, the borrower will be relieved of his obligation under the loan.
There are some exceptions to the limitations discussed previously in this article. For example, the 6% limitation does not come into play when a loan includes a lien on non-residential real estate. Further, the 6% limitation does not apply to loans made to corporations. However, a corporation cannot be established for the mere purpose of lending money in excess of the 6% limit. Such a corporation will be considered a sham and the 6% limitation will apply.
In any event, if any of these other types of loan situations involves interest more than 25% per annum, that interest rate runs afoul of the criminal usury laws that are on the books in the Commonwealth. (If a personal loan were to have this type of excessive interest rate, criminal usury laws would also come into play.) Criminal sanctions include fines and incarceration, depending on the circumstances of the crime.
The various statutes governing usury and usurious lending practices in the Commonwealth of Pennsylvania can be found codified in the Pennsylvania Consolidated Statutes at Title 13. Moreover, criminal usury and penalties for the same can be found in Title 19 of Pennsylvania Consolidated Statutes.
Keep in mind that while we work to keep the information in this article up to date, the usury laws in Pennsylvania do change from time to time. Further, nothing in this article should be deemed as providing to you legal advice. If you have any legal questions, please contact a qualified and experienced attorney.