Hawaii Usury Laws

The State of Hawaii has established 12% as the usury limit on consumer loan transactions. Keep in mind that the usury rate that has been established at the 12% level applies only to consumer and personal transaction. There are separate provisions in the law in the State of Hawaii governing the interest rate that can be charged on different types of loans and transactions.

By way of example, financing for the purchase of consumer goods and products is governed in Hawaii by the explicit provisions of the Uniform Commercial Code. In a similar vein, the interest rate charged on financing and loans from banks, savings and loans, and credit unions is established on two fronts. First, if such a financial institution is state chartered, the laws of the State of Hawaii govern the transaction. Second, if such a financial institution is federally chartered, federal law itself governs interest rates and other matters related to the lending transaction.

Blackstone’s “Commentaries on the Laws of England” has long set forth the general principle underpinning the prohibition against usury and usurious lending practices. Specifically, Blackstone’s established:

"When money is lent on a contract to receive not only the principal sum again, but also an increase by way of compensation for the use, the increase is called interest by those who think it lawful, and usury by those who do not."

In Hawaii, the statutory provisions governing lending restrictions and usury laws can be found at Hawaii Revised Statutes and Bills in the title governing commercial transactions and lending practices in the state.

Further, when courts are confronted with dealing with a personal, consumer loan agreement that runs counter to what is permissible in the Hawaii Revised Statutes and Bills, the court typically will void the entire contract. The typical court will tend to take the position that because an illegal interest rate is included within the loan agreement, the loan agreement itself is an illegal contract. In most cases, a court will not enforce an illegal contract in Hawaii in the absence of some compelling equitable reason to do so.

Do keep in mind that this article is not designed to provide you with legal advice. If you have questions or concerns about usury laws, you should contact a qualified attorney. Moreover, because usury laws change from time to time, we cannot absolutely guarantee the accuracy of the information in this article. We do make every effort to keep the information in this article completely up to date, however.

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