There is no general federal usury law capping interest rates on consumer loans in the United States. Federal usury rules exist only in narrow places: a 15% ceiling on federal credit union loans (temporarily raised to 18%), a 36% cap for active-duty service members under the Military Lending Act, and a statutory formula for federal student loans. Everywhere else, federal law does the opposite of capping rates — it preempts state limits and lets banks lend nationwide at the rate of whatever state they’re chartered in.
Why State Caps Often Don’t Protect You
Every state sets its own ceiling on consumer loan interest, with general caps ranging roughly from 5% to 45% depending on loan size, term, and collateral. On paper, that should mean a lender in your state can’t charge more than your state allows. In practice, federal law has hollowed out those caps for most mainstream lenders.
The core mechanism is rate exportation. Under Section 85 of the National Bank Act, a national bank may charge interest at the rate allowed by the state where the bank is located, not where the borrower lives.1Office of the Law Revision Counsel. 12 US Code 85 – Rate of Interest on Loans, Discounts and Purchases The Supreme Court confirmed this in Marquette National Bank v. First of Omaha Service Corp. (1978), holding that a Nebraska-based national bank could charge Minnesota credit card customers Nebraska’s higher rate.2Legal Information Institute (LII). Marquette National Bank of Minneapolis v First of Omaha Service Corp
That’s why most major credit card issuers are chartered in Delaware and South Dakota. Your state’s 18% or 24% usury cap doesn’t reach a card issuer located in a state with no cap. More than any statute, Marquette explains why credit card interest rates routinely exceed what state usury laws would otherwise allow.
The Federal Credit Union Interest Rate Cap
Federally chartered credit unions are one of the few lender categories subject to a direct federal rate ceiling. The Federal Credit Union Act caps the rate at 15% per year on the unpaid balance, inclusive of all finance charges.3Office of the Law Revision Counsel. 12 US Code 1757 – Powers
The NCUA Board can temporarily raise the ceiling to 18% when money-market conditions threaten credit union stability, and it has done so repeatedly. As of February 2026, the 18% ceiling is extended through September 10, 2027.4National Credit Union Administration. Permissible Loan Interest Rate Ceiling Extended Payday alternative loans issued by federal credit unions may go up to 28% under separate NCUA rules.
This cap applies only to federally chartered credit unions. State-chartered credit unions follow their state’s lending laws.
The Military Lending Act: 36% for Service Members
The Military Lending Act (MLA) is the strongest federal rate cap in force. It limits the Military Annual Percentage Rate to 36% on covered consumer credit extended to active-duty service members, their spouses, and certain dependents.5Office of the Law Revision Counsel. 10 US Code 987 – Terms of Consumer Credit Extended to Members and Dependents: Limitations
The MAPR is a broader calculation than a standard APR. It folds in finance charges, credit insurance premiums, fees for add-on products sold with the loan, and application or participation fees, so lenders can’t shift costs into side fees to slip under the cap.6Consumer Financial Protection Bureau. Military Lending Act (MLA) The MLA also bars mandatory arbitration clauses, allotments of military pay to repay the loan, and prepayment penalties.5Office of the Law Revision Counsel. 10 US Code 987 – Terms of Consumer Credit Extended to Members and Dependents: Limitations
The MLA has real limits. It does not cover residential mortgages, vehicle purchase loans secured by the vehicle being bought, or loans secured by the personal property being purchased.6Consumer Financial Protection Bureau. Military Lending Act (MLA) The law targets unsecured credit, payday loans, and similar products where predatory pricing tends to concentrate. If you’re a civilian, the MLA doesn’t apply to you at all.
Federal Student Loan Rates Are Set by Formula
Federal student loans carry interest rates set by a statutory formula rather than by market negotiation. The rate for each academic year equals the high yield of the 10-year Treasury note at the final auction before June 1, plus a fixed add-on that varies by loan type. Once set, the rate is fixed for the life of the loan.
For loans first disbursed between July 1, 2025 and June 30, 2026, the rates are 6.39% for Direct Subsidized and Unsubsidized Loans to undergraduates, 7.94% for Direct Unsubsidized Loans to graduate and professional students, and 8.94% for Direct PLUS Loans to parents and graduate students. Those figures come from a 10-year Treasury yield of 4.342%.7Federal Student Aid (FSA) Knowledge Center. Interest Rates for Direct Loans First Disbursed Between July 1, 2025 and June 30, 2026
The law also imposes hard ceilings the formula can’t exceed: 8.25% on undergraduate loans, 9.50% on graduate unsubsidized loans, and 10.50% on PLUS loans.7Federal Student Aid (FSA) Knowledge Center. Interest Rates for Direct Loans First Disbursed Between July 1, 2025 and June 30, 2026 Private student loans are not subject to this formula.
Mortgages: Federal Law Preempts State Caps Entirely
If you’re expecting federal law to cap mortgage rates, it does the reverse. The Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) preempts any state constitution or statute capping interest on a federally related first-lien residential mortgage originated after March 31, 1980.8eCFR. 12 CFR Part 190 – Preemption of State Usury Laws The preemption displaces both civil and criminal state usury laws for these loans and applies to any lender whose deposits are federally insured, which covers essentially every bank and savings institution.
States could reassert their limits by opting out within a set window, and a small number did. Colorado opted out most recently, in 2023. Everywhere else, mortgage lenders face no state usury ceiling.
Fintech Lenders and the True Lender Question
Rate exportation opened a door for non-bank lenders. A fintech company that couldn’t legally charge 30% in a given state can partner with a national bank chartered in a permissive state: the bank originates the loan, then sells it to the fintech, which services it. The loan carries the bank’s home-state rate. These arrangements are sometimes called “rent-a-bank” partnerships.
Two federal rules support them. The OCC’s 2020 “valid-when-made” rule confirmed that when a national bank sells or assigns a loan, the interest rate that was permissible before the transfer stays permissible afterward.9Office of the Comptroller of the Currency (OCC). Permissible Interest on Loans That Are Sold, Assigned, or Otherwise Transferred: Final Rule The FDIC issued a parallel rule for banks it supervises.
Courts have pushed back through the “true lender” doctrine. If the non-bank partner does the underwriting, bears the risk of default, services the loans, and keeps nearly all the profit, a court may find the bank was never the real lender. When that happens, the bank’s preemption rights don’t apply, and the loan must comply with the borrower’s home state cap. Courts weigh the totality of the circumstances — funding, risk, underwriting, profit — and no single factor decides the outcome. No published test has settled the question.
Disclosure Rules Are Not Rate Caps
Federal law heavily regulates how lenders communicate the cost of credit, but this is a separate system from rate limits. The Truth in Lending Act (TILA) requires every creditor to disclose the annual percentage rate and total finance charge in a standardized format so offers can be compared.10Office of the Law Revision Counsel. 15 US Code 1601 – Congressional Findings and Declaration of Purpose TILA does not tell lenders how much interest they can charge or whether they must lend at all.11Office of the Comptroller of the Currency (OCC). Truth in Lending
The Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) added protections that go past disclosure for credit cards. Issuers must give 45 days’ advance notice before raising the rate on an existing balance, and the cardholder can cancel the account during that window. Issuers generally cannot raise rates during the first year an account is open. These rules limit surprise increases on existing debt; they do not cap what an issuer can charge on new purchases.
What Happens When a Federal Rate Limit Is Broken
Where federal rate limits do apply, the penalties are substantial. When a national bank charges more than Section 85 allows, the bank forfeits the entire interest on the loan, not just the excess. A borrower who already paid the illegal interest can sue to recover double the amount paid, and the suit must be filed within two years of the usurious transaction.12Office of the Law Revision Counsel. 12 USC 86 – Usurious Interest; Penalty for Taking; Limitations
At the extreme end, federal criminal law reaches predatory lending through the Racketeer Influenced and Corrupt Organizations Act (RICO). A loan qualifies as an “unlawful debt” under RICO when the interest rate is at least twice the enforceable rate under state or federal law.13Treasury.gov. Title 18 United States Code – Chapter 96 – Racketeer Influenced and Corrupt Organizations Collecting on unlawful debts as part of a pattern of racketeering activity carries up to 20 years in prison. The provision targets loan sharking, not mainstream lenders, but it remains the harshest federal response to usury on the books.
State usury penalties vary. Some states void only the excess interest; others void the entire loan, meaning the lender loses both principal and interest. A few impose criminal penalties, though prosecution for ordinary usury is rare.