Is the interest rate in our Maine contract capped?
Generally no, but the authority for that is thinner than it looks. The Law Court said Maine has no general usury statute once, in 1972, in Maine Merchants Association, Inc. v. Campbell: "The very narrow issue we have for decision is: Are revolving charge accounts intended to be regulated by 9 M.R.S.A. § 3086? Maine does not have a general usury statute." The Court held the Bank Commissioner had misread that section, and remanded for a permanent injunction against enforcing his ruling. The section it construed, 9 M.R.S. § 3086, was repealed the following year by the act that created the Consumer Credit Code, and no later Maine opinion restates the proposition. A rate is capped where a specific lending statute reaches the transaction. The Consumer Credit Code does so for consumer loans: 9-A M.R.S. § 2-401(2) lets a lender contract for a finance charge not exceeding 30% per year on the part of the unpaid balance that is $2,000 or less, 24% on the part over $2,000 but not over $4,000, and 18% on the part over $4,000; and "[n]otwithstanding paragraph A, with respect to a consumer loan in which the amount financed exceeds $8,000, a lender may not contract for and receive a finance charge ... in excess of 18% per year on the entire amount of the loan". Two further caps sit in the same section: a minimum charge of $5, $15 or $25 by loan size under subsection 7, and an 18%-or-federal-rate ceiling for manufactured-housing finance under subsection 8. For a financial institution, 9-B M.R.S. § 432(1) supplies only a default: "[t]he maximum legal rate of interest on a loan made by a financial institution, in the absence of an agreement in writing establishing a different rate, shall be 6 percent per year."
The trap
"No general usury statute" is not "no rate risk", and the phrase itself rests on a single sentence from 1972 about a section repealed in 1973, so treat it as the absence of a general cap rather than as a holding you can cite for a modern loan. Three things still bite. First, 9-B M.R.S. § 432(2)(A) routes a NONCOMMERCIAL OR CONSUMER loan by a financial institution back into Title 9-A's limits regardless of what the writing says; its only carve-out is that "[a] loan made by a financial institution which is secured by a first mortgage on real estate shall not be within the interest limitations set forth in Title 9-A; provided that the security interest in real estate is not given for purpose of evading said Title 9-A", so labelling a consumer loan commercial is not a fix, and neither is taking a first mortgage for that purpose. Second, the Title 9-A ceilings are written with their own overrides: subsection 2's tiered rates are capped at a flat 18% once the amount financed exceeds $8,000, subsection 7 permits a minimum charge "[n]otwithstanding subsection 2", and subsection 8 displaces every other subsection for manufactured housing. Read the subsection that applies, not the headline rate. Third, an excessive charge dressed as a fee gets tested as a liquidated-damages clause: "[i]f a late charge amounts to liquidated damages, we will affirm it; if it is an excessive or usurious penalty, we will not uphold the provision" (Raisin Memorial Trust v. Casey), so a per-diem late charge plus a default rate plus acceleration is a penalty question in Maine even where no rate cap applies.
11 authorities
The words that state the rule
The very narrow issue we have for decision is: Are revolving charge accounts intended to be regulated by 9 M.R.S.A. § 3086? Maine does not have a general usury statute.
- case287 A.2d 430Maine Merchants Association, Inc. v. Campbellme-medecided 1972read it at the source ↗
The words that state the rule
We are satisfied that the Bank Commissioner erroneously interpreted this statute when he issued Ruling 1971-1. The entry must be, Remanded to the Superior Court for the entry of Permanent Injunction Restraining the Bank Commissioner and all persons in active concert or participation with him from enforcing or taking any steps to enforce Bank Commissioner’s Ruling 1971-1.
- statute9 M.R.S. § 3086enactment date not established
The words that state the rule
§3086. Maximum interest; evasions (REPEALED) SECTION HISTORY PL 1965, c. 205, §2 (AMD). PL 1967, c. 474, §6 (AMD). PL 1973, c. 762, §2 (RP).
- statute9-A M.R.S. § 2-401enactment date not established
The words that state the rule
With respect to a consumer loan, other than a loan pursuant to open-end credit, a lender may contract for and receive a finance charge calculated according to the actuarial method, not exceeding the equivalent of the following:
- statute9-A M.R.S. § 2-401enactment date not established
The words that state the rule
Notwithstanding paragraph A , with respect to a consumer loan in which the amount financed exceeds $8,000, a lender may not contract for and receive a finance charge calculated according to the actuarial method in excess of 18% per year on the entire amount of the loan.
- statute9-B M.R.S. § 432enactment date not established
The words that state the rule
The maximum legal rate of interest on a loan made by a financial institution, in the absence of an agreement in writing establishing a different rate, shall be 6 percent per year.
The words that state the rule
If a late charge amounts to liquidated damages, we will affirm it; if it is an excessive or usurious penalty, we will not uphold the provision.
- statute9-A M.R.S. § 2-401enactment date not established
The words that state the rule
A. The total of: (i) 30% per year on that part of the unpaid balances of the amount financed that is $2,000 or less; (ii) 24% per year on that part of the unpaid balances of the amount financed that is more than $2,000 but does not exceed $4,000; and (iii) 18% per year on that part of the unpaid balances of the amount financed that is more than $4,000.
- statute9-A M.R.S. § 2-401enactment date not established
The words that state the rule
Notwithstanding subsection 2 , the lender may contract for and receive a minimum charge of not more than: A. Five dollars when the amount financed does not exceed $75; [PL 1975, c. 298, §2 (NEW).] B. Fifteen dollars when the amount financed exceeds $75, but is less than $250; or [PL 1999, c. 184, §3 (AMD).] C. Twenty-five dollars when the amount financed is $250 or more.
- statute9-A M.R.S. § 2-401enactment date not established
The words that state the rule
Notwithstanding any other subsection, the finance charge on a transaction to finance or refinance the acquisition of, or secured by, manufactured housing, not involving a security interest in real estate, may not exceed the greater of the following: A. A rate 2% greater than the maximum rate established by federal regulations pursuant to the United States Code, Title 38, Section 1819(f), Veterans Housing Act of 1970, as amended, and published from time to time in the Federal Register, 38 Code of Federal Regulations, Part 36; or [PL 1987, c. 129, §43 (AMD).] B. 18% per year.
- statute9-B M.R.S. § 432enactment date not established
The words that state the rule
The legal rate of interest, whether set forth in writing or not, on a noncommercial or consumer loan, shall be established in accordance with and subject to the limitations set forth in Title 9-A . A loan made by a financial institution which is secured by a first mortgage on real estate shall not be within the interest limitations set forth in Title 9-A ; provided that the security interest in real estate is not given for purpose of evading said Title 9-A .
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.