Personal Loans in New York: What Licensed Lenders May Charge

How the New York limits work

New York does not publish a single rate table for personal loans. Three statutes work together. Banking Law 14-a sets the maximum rate under General Obligations Law 5-501 at 16% a year, which is the civil usury limit for ordinary lenders. Banking Law 351 lets a licensed lender charge the rate agreed with the borrower. Penal Law 190.40 makes it criminal usury in the second degree, a class E felony, to charge interest above 25% a year.

Section 351 also says how interest is figured: on the unpaid principal by an actuarial method, or precomputed, and never compounded. A variable rate may change no more than once in three months, based on an approved index. If a licensee knowingly charges more than the law allows, it forfeits the interest and you may recover twice the interest paid.

How New York compares with its neighbors

On the National Consumer Law Center's comparison of a $2,000 two-year loan, New York's 25% is among the lower limits in the country. Pennsylvania and Massachusetts sit near 24% and Vermont at about 21%, while New Jersey allows about 30% and Connecticut about 36%. The rules that apply follow the lender's license and your state of residence. The state rules map shows every state side by side.

Who needs a license and who does not

Banking Law 340 bars anyone from the business of making consumer loans of $25,000 or less, or business loans of $50,000 or less, at a higher rate than it could charge without a license, unless it holds a license from the superintendent. A lender counts as doing business in New York if it solicits such loans in the state and lends to New York residents, so online lenders are covered too.

• Banks and credit unions answer to their own charters and banking regulators instead, and a bank may charge the rates its home state allows.
• Online lenders that partner with a bank may make loans through that bank, which can put the loan outside the New York limits. Ask who the lender of record is.
• Occasional lenders making isolated, incidental loans are not in the business of lending and do not need the license.
• Payday and title loans are subject to the same usury statutes. Our sister site Lendmira covers them on its New York lending laws page.

Late fees, prepayment and insurance

A licensed lender may charge a default fee only after an installment is more than ten days late, and the fee may not exceed 5% of the installment in default (Banking Law 351). If you repay a precomputed loan early, you get a refund of the unearned interest. Credit insurance may be sold only as section 357 allows, and if the loan is prepaid you get back the part of the insurance charge above the lender's actual cost. Read late fees and returned payments for how to spot these charges in your agreement.

Check a lender and file a complaint

1. 1 Ask for the license before you apply: a non-bank lender charging more than 16% on a loan of $25,000 or less must be licensed by the Department of Financial Services. The department's Who We Supervise page explains what it oversees.
2. 2 Keep the loan papers: the Truth in Lending disclosure, the agreement and any messages about fees.
3. 3 File a complaint with DFS through its Consumer Complaint portal at https://www.dfs.ny.gov/complaint if a lender charges too much or is not licensed.
4. 4 Send a complaint to the CFPB as well if the lender is a bank or a bank partner. Our guide on how to verify a lender lists the warning signs.

Questions people ask