Personal Loans in Iowa: What Licensed Lenders May Charge

How the Iowa rate limit works

Iowa does not print one flat cap for every lender. Its limits depend on what kind of lender you deal with, and each one is a ceiling stated as an annual percentage rate on the unpaid balance.

Section 536.13 tells the superintendent to classify regulated loans and fix a maximum rate for each class, after notice to licensees and a chance to be heard; a new rate cannot take effect until 30 days after notice and does not change loans already made. The statute also keeps a fallback schedule of monthly rates that falls as the balance grows. The rate is stated as an annual percentage rate figured by the actuarial method, the same way your Truth in Lending disclosure figures the APR, so the two numbers are directly comparable.

How Iowa compares with its neighbors

On the National Consumer Law Center's comparison of a $2,000 two-year loan, Nebraska caps the loan at about 30% APR and Minnesota at about 33%, while Illinois matches Iowa at 36%. Missouri sets no numeric cap. For a $10,000 five-year loan the gap is wider: Iowa allows about 32%, against about 24% in Nebraska and 22% in Minnesota. The state rules map shows every state side by side.

Who needs a license and who does not

A business that makes regulated consumer loans to Iowans needs a regulated loan license under chapter 536. Licensees apply and renew through the Nationwide Multistate Licensing System (NMLS), file an annual report and keep records the Division of Banking can examine. A licensee may lend up to the threshold amount set in the consumer credit code.

• Banks and credit unions answer to separate charters and regulators. The 21% rate in section 537.2401 applies to supervised financial organizations, and federal law lets many banks charge the rate allowed in their home state.
• Online lenders that partner with a bank may make loans through that bank, which can put the loan under the bank's rules instead of the regulated loan law. Ask who the lender of record is, and check that it is licensed or chartered.
• Payday and title loans follow separate Iowa rules. Our sister site Lendmira covers them on its Iowa lending laws page.

What happens if a lender overcharges

Iowa backs its rate limit with a strong penalty. If a licensee charges or receives more than chapter 536 allows, the loan is void as to interest and charges, so the lender cannot collect any of them. The lender also loses the right to collect principal: $2,000 or the whole principal of the loan, whichever is less.

Because chapter 537 applies to every consumer loan a licensee makes, a violation of the consumer credit code is also a violation of the regulated loan law. Keep your Truth in Lending disclosure and the loan agreement: the APR and finance charge on them are what you compare against the limit. If a lender asks for a fee before it will approve or fund a loan, treat that as a warning sign; how to verify a lender explains what to check.

Check a lender and file a complaint

1. 1 Look up the license on NMLS Consumer Access (nmlsconsumeraccess.org) or the Division of Banking's finance license verification page before you apply.
2. 2 Contact the lender first and keep the disclosure, the agreement and any messages about fees.
3. 3 Complain to the Iowa Division of Banking with its online complaint form, or call 515-281-4014. The division handles state-chartered banks and licensed finance companies; the lender usually has 10 to 20 business days to respond.
4. 4 Use the federal regulator if the lender is a national bank, a federal credit union or a bank partner, or send a complaint to the CFPB if you are unsure who regulates it.

Questions people ask