What interest rate can a Washington contract charge, and who can raise usury?
Any rate is legal so long as it does not exceed the higher of twelve percent per annum or four percentage points above the average bill rate for twenty-six week treasury bills at the first auction of the calendar month before the rate is set by written agreement (or adjusted under a written agreement permitting adjustment); the same subsection then states the prohibition the ceiling implies: "No person shall directly or indirectly take or receive in money, goods, or things in action, or in any other way, any greater interest for the loan or forbearance of any money, goods, or things in action" (RCW 19.52.020(1)). On a loan of five hundred dollars or less a setup charge is not interest, capped at four percent of the funds advanced or fifteen dollars, whichever is less, with "a minimum not exceeding four dollars" chargeable on loans of under one hundred dollars (RCW 19.52.020(2)). A contract for a greater rate is usurious but not void: the creditor is entitled only to principal less the interest accruing at the contract rate; if interest has been paid, principal less twice the interest paid and less accrued unpaid interest; and the debtor recovers costs and reasonable attorneys' fees plus the amount paid over what the creditor is entitled to, with "[t]he reduction in principal ... applied to diminish pro rata each future installment of principal payable under the terms of the contract" (RCW 19.52.030(1)). Entering into or transacting a usurious contract is also declared "an unfair act or practice in the conduct of commerce for the purpose of the application of the consumer protection act found in chapter 19.86 RCW": a per se unfair act under the Consumer Protection Act (RCW 19.52.036). A lender cannot put the problem on its broker: "[t]he acts and dealings of an agent in loaning money shall bind the principal", a person acting for both sides "shall be deemed the agent of the lender", and an agent who transacts a usurious loan for a commission is liable to its principal for the fee and to the lender for the loss the chapter causes (RCW 19.52.030(2)). Corporations, trusts, associations, partnerships, joint ventures, governments and others may not plead usury, and no person may plead it if the transaction was primarily for agricultural, commercial, investment or business purposes, except a consumer transaction (personal, family or household purposes) of any amount (RCW 19.52.080). Where no rate is agreed in writing, the loan bears twelve percent by default, but the writing requirement is easily met, because an agreement in writing that "provides for the payment of money at the end of an agreed period of time or in installments over an agreed period of time" is itself "a writing for purposes of this section", and the discounting of commercial paper on which the borrower is maker, guarantor or indorser counts as a loan under the chapter (RCW 19.52.010(1)). Two safe harbours sit in § 19.52.020(3): a loan made under a commitment to lend at a rate lawful when the commitment was made is not usurious, and open-end credit is not usurious if on any one day in the billing cycle the rate charged was lawful. And prejudgment interest charged or collected on medical debt may not exceed nine percent, with the same cap written into RCW 19.52.010(2): for medical debt on which prejudgment interest had accrued or was accruing "as of July 28, 2019, no prejudgment interest in excess of nine percent shall accrue thereafter" (RCW 19.52.020(4)).
The trap
The business-purpose bar is what removes usury from most commercial contracts: even an individual borrower cannot plead it if the loan was primarily for business. And the ceiling itself may not be checkable on the day you need it: the alternative limb is four points over a treasury-bill yield "as published by the Board of Governors of the Federal Reserve System", a figure that lives outside the code, so the twelve percent floor is the only number the law we hold can give you with certainty, though the resulting ceiling is published: each month the state treasurer must compute "the highest rate of interest permissible under RCW 19.52.020(1)" for the next calendar month and file it with the code reviser "for publication in the next available issue of the Washington State Register" (RCW 19.52.025). And a debtor may not sue under 19.52.030 on a loan to a corporation engaged in business for business purposes unless there is also personal liability of a natural person for more than principal plus lawful interest. The chapter also does not apply at all to a retail installment transaction as defined in RCW 63.14.010, "whether or not it is construed to be a loan or forbearance" (RCW 19.52.100), so the financed sale of goods is priced under chapter 63.14, not this one, and a consumer lease, a lease-purchase agreement, or a lease that would be a consumer lease but for the lessee being an entity, the purpose being commercial, or the obligation exceeding $25,000 is not a loan or forbearance for this chapter (RCW 19.52.010(3)). A deferred-payment sale sits outside the chapter entirely: "A sales contract for goods or services providing for the deferred payment of the purchase price shall not be subject to this chapter, regardless of who seeks to enforce the contract" (RCW 19.52.120), and the eight financing arrangements the section lists do not change that. Going out of state does not escape the chapter, though: where "a loan or forbearance is made outside Washington state to a person then residing in this state", the chapter applies "in all courts of this state to the same extent such usury laws would be applicable if the loan or forbearance was made in this state" (RCW 19.52.034).
9 authorities
- statuteRCW 19.52.020enactment date not established
The words that state the rule
(1) Except as provided in subsection (4) of this section, any rate of interest shall be legal so long as the rate of interest does not exceed the higher of: (a) Twelve percent per annum; or (b) four percentage points above the equivalent coupon issue yield (as published by the Board of Governors of the Federal Reserve System) of the average bill rate for twenty-six week treasury bills as determined at the first bill market auction conducted during the calendar month immediately preceding the later of (i) the establishment of the interest rate by written agreement of the parties to the contract, or (ii) any adjustment in the interest rate in the case of a written agreement permitting an adjustment in the interest rate. No person shall directly or indirectly take or receive in money, goods, or things in action, or in any other way, any greater interest for the loan or forbearance of any money, goods, or things in action. (2)(a) In any loan of money in which the funds advanced do not exceed the sum of five hundred dollars, a setup charge may be charged and collected by the lender, and such setup charge shall not be considered interest hereunder. (b) The setup charge shall not exceed four percent of the amount of funds advanced, or fifteen dollars, whichever is the lesser, except that on loans of under one hundred dollars a minimum not exceeding four dollars may be so charged. (3) Any loan made pursuant to a commitment to lend at an interest rate permitted at the time the commitment is made shall not be usurious. Credit extended pursuant to an open-end credit agreement upon which interest is computed on the basis of a balance or balances outstanding during a billing cycle shall not be usurious if on any one day during the billing cycle the rate at which interest is charged for the billing cycle is not usurious. (4)(a) Prejudgment interest charged or collected on medical debt, as defined in RCW 19.16.100, must not exceed nine percent. (b) For any medical debt for which prejudgment interest has accrued or may be accruing as of July 28, 2019, no prejudgment interest in excess of nine percent shall accrue thereafter. [ 2019 c 227 s 6; 1989 c 14 s 3; 1985 c 224 s 1; 1981 c 78 s 1; 1967 ex.s. c 23 s 4; 1899 c 80 s 2; RRS s 7300. Prior: 1895 c 136 s 2; 1893 c 20 s 3; Code 1881 s 2369; 1863 p 433 s 2; 1854 p 380 s 2.]
- statuteRCW 19.52.030enactment date not established
The words that state the rule
(1) If a greater rate of interest than is allowed by statute shall be contracted for or received or reserved, the contract shall be usurious, but shall not, therefore, be void. If in any action on such contract proof be made that greater rate of interest has been directly or indirectly contracted for or taken or reserved, the creditor shall only be entitled to the principal, less the amount of interest accruing thereon at the rate contracted for; and if interest shall have been paid, the creditor shall only be entitled to the principal less twice the amount of the interest paid, and less the amount of all accrued and unpaid interest; and the debtor shall be entitled to costs and reasonable attorneys' fees plus the amount by which the amount the debtor has paid under the contract exceeds the amount to which the creditor is entitled: PROVIDED, That the debtor may not commence an action on the contract to apply the provisions of this section if a loan or forbearance is made to a corporation engaged in a trade or business for the purposes of carrying on said trade or business unless there is also, in connection with such loan or forbearance, the creation of liability on the part of a natural person or that person's property for an amount in excess of the principal plus interest allowed pursuant to RCW 19.52.020. The reduction in principal shall be applied to diminish pro rata each future installment of principal payable under the terms of the contract. (2) The acts and dealings of an agent in loaning money shall bind the principal, and in all cases where there is usurious interest contracted for by the transaction of any agent the principal shall be held thereby to the same extent as though the principal had acted in person. Where the same person acts as agent of the borrower and lender, that person shall be deemed the agent of the lender for the purposes of this chapter. If the agent of both the borrower and lender, or of the lender only, transacts a usurious loan for a commission or fee, such agent shall be liable to the principal for the amount of the commission or fee received or reserved by the agent, and liable to the lender for the loss suffered by the lender as a result of the application of this chapter. [ 1989 c 14 s 7; 1967 ex.s. c 23 s 5; 1899 c 80 s 7; RRS s 7304. Prior: 1895 c 136 s 5; 1893 c 20 s 3. Formerly RCW 19.52.030 through 19.52.050.]
- statuteRCW 19.52.080enactment date not established
The words that state the rule
Profit and nonprofit corporations, Massachusetts trusts, associations, trusts, general partnerships, joint ventures, limited partnerships, and governments and governmental subdivisions, agencies, or instrumentalities may not plead the defense of usury nor maintain any action thereon or therefor, and persons may not plead the defense of usury nor maintain any action thereon or therefor if the transaction was primarily for agricultural, commercial, investment, or business purposes: PROVIDED, HOWEVER, That this section shall not apply to a consumer transaction of any amount. Consumer transactions, as used in this section, shall mean transactions primarily for personal, family, or household purposes. [ 1981 c 78 s 2; 1975 1st ex.s. c 180 s 1; 1970 ex.s. c 97 s 2; 1969 ex.s. c 142 s 1.]
- statuteRCW 19.52.100enactment date not established
The words that state the rule
This chapter shall not apply to a retail installment transaction, as defined by RCW 63.14.010, whether or not it is construed to be a loan or forbearance of any money, goods, or things in action. [ 1981 c 78 s 3.]
- statuteRCW 19.52.010enactment date not established
The words that state the rule
(1) Except as provided in subsection (2) of this section, every loan or forbearance of money, goods, or thing in action shall bear interest at the rate of twelve percent per annum where no different rate is agreed to in writing between the parties: PROVIDED, That with regard to any transaction heretofore or hereafter entered into subject to this section, if an agreement in writing between the parties evidencing such transaction provides for the payment of money at the end of an agreed period of time or in installments over an agreed period of time, then such agreement shall constitute a writing for purposes of this section and satisfy the requirements thereof. The discounting of commercial paper, where the borrower makes himself or herself liable as maker, guarantor, or indorser, shall be considered as a loan for the purposes of this chapter. (2)(a) Prejudgment interest charged or collected on medical debt, as defined in RCW 19.16.100, must not exceed nine percent. (b) For any medical debt for which prejudgment interest has accrued or may be accruing as of July 28, 2019, no prejudgment interest in excess of nine percent shall accrue thereafter. (3) A lease shall not be considered a loan or forbearance for the purposes of this chapter if: (a) It constitutes a "consumer lease" as defined in RCW 63.10.020; (b) It constitutes a lease-purchase agreement under chapter 63.19 RCW; or (c) It would constitute such "consumer lease" but for the fact that: (i) The lessee was not a natural person; (ii) The lease was not primarily for personal, family, or household purposes; or (iii) The total contractual obligation exceeded twenty-five thousand dollars. [ 2019 c 227 s 5; 2011 c 336 s 542; 1992 c 134 s 13. Prior: 1983 c 309 s 1; 1983 c 158 s 6; 1981 c 80 s 1; 1899 c 80 s 1; RRS s 7299; prior: 1895 c 136 s 1; 1893 c 20 s 1; Code 1881 s 2368; 1863 p 433 s 1; 1854 p 380 s 1.]
- statuteRCW 19.52.036enactment date not established
The words that state the rule
Entering into or transacting a usurious contract is hereby declared to be an unfair act or practice in the conduct of commerce for the purpose of the application of the consumer protection act found in chapter 19.86 RCW. [ 1967 ex.s. c 23 s 7.]
- statuteRCW 19.52.034enactment date not established
The words that state the rule
Whenever a loan or forbearance is made outside Washington state to a person then residing in this state the usury laws found in chapter 19.52 RCW, as now or hereafter amended, shall be applicable in all courts of this state to the same extent such usury laws would be applicable if the loan or forbearance was made in this state. [ 1967 ex.s. c 23 s 3.]
- statuteRCW 19.52.120enactment date not established
The words that state the rule
A sales contract for goods or services providing for the deferred payment of the purchase price shall not be subject to this chapter, regardless of who seeks to enforce the contract, notwithstanding the existence or occurrence of any one or more of the following events: (1) That the seller may have arranged to sell, pledge, indorse, negotiate, assign, or transfer the obligations thereof to any person, including a financing organization, prior to or subsequent to or concurrently with the making of the sales transaction; (2) That the amount of the finance charge, however denominated, is determined by reference to charts, computations or information supplied by such person; (3) That the form or forms of instruments used to evidence the sales transaction have been supplied or prepared by such person; (4) That the credit standing of the purchaser is or may have been evaluated by such person; (5) That the sales transaction and the execution of any instrument evidencing the same is negotiated in the presence or with the assistance of a representative of such person; (6) That the instrument or instruments used to evidence the sales transaction are pledged, indorsed, negotiated, assigned, or transferred by the seller to such person; (7) That there is an underlying agreement between the seller and such person concerning the pledging, indorsing, negotiation, assigning, or transferring of sales contracts; or (8) That the financing organization or its affiliates also provide franchising, financing, or other services to the seller-assignor. [ 1981 c 77 s 7.]
- statuteRCW 19.52.025enactment date not established
The words that state the rule
Each month the state treasurer shall compute the highest rate of interest permissible under RCW 19.52.020(1), and the rate of interest required by RCW 4.56.110(3) and 4.56.115, for the succeeding calendar month. The treasurer shall file these rates with the state code reviser for publication in the next available issue of the Washington State Register in compliance with RCW 34.08.020(8). [ 2004 c 185 s 4; 1986 c 60 s 1.]
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.