Every state has a limit on how much interest can be charged on different kinds of debt, and Minnesota is no different. Collectively, these limits are referred to as usury laws, which refers to the specific practice of charging high interest rates on various types of loans. The theory behind usury laws is that we as a society agree with companies that make loans and extend credit should make a reasonable profit, but that they should not be allowed to charge so much interest that they take advantage of people. These laws fall under the umbrella of consumer protection laws, which are a combination of state and federal laws that are designed to protect individual consumers from being abused by their creditors. Usury laws differ from state to state, and Minnesota has its own guidelines.
Maximum interest rates
In Minnesota, several factors determine what the maximum interest rate a creditor can charge may be. An oral, or unwritten, contract can have an interest rate of no more than six percent. For written contracts, the cap is eight percent. However, there are exceptions to these laws, which include the following entities:
- Some banks and credit unions
- Mortgages
- Dealers under the SEC Act
- Loans secured through savings accounts
- Loans over $100,000
These entities can have the ability to charge higher interest rates. Sometimes, other exceptions exist under the law. For example, credit card companies and other creditors can follow the laws of the state in which they are incorporated. This means that, even though you are shopping with your credit card in Minnesota, the credit card company might be based in Delaware. As a result, the credit card company is subject to Delaware law, not Minnesota law. This is one way that companies can circumvent usury laws in a given state.
Bankruptcy can help
Filing for bankruptcy can help you if you are financially overwhelmed by debts with high interest rates. If you are current on your payments but the interest rates mean you aren’t paying down the balances very quickly, you might have the option of filing for Chapter 7 bankruptcy. If you decide to file, you may keep essential property like your house and car that is protected by law. An experienced bankruptcy attorney can assess whether this is an option for you, given that there are federal and state regulations to adhere to in a bankruptcy proceeding.
If you feel you are being charged an unfair or illegal interest rate by a Minnesota creditor or debt collector, there are legal resources available for you.
Hiring a Minnesota bankruptcy lawyer
The experienced bankruptcy and debt relief attorneys of Martin & Hedervare PLLC can ensure that you are being treated fairly by your lenders under the law. Our team of attorneys has been serving the Twin Cities, Minneapolis, and St. Paul communities for years, representing Minnesotans in need of debt relief. Contact us at (651) 383-4725 to schedule a free consultation today.