Washington Usury Laws

The State of Washington vests the regulation of usury interest rates in the State Treasurer. The State Treasurer will announce, from time to time, what will be the acceptable, maximum interest rate on personal loans in the State of Washington.

In determining what will be the permitted, maximum interest rate on personal loans, the State Treasurer will make the determination based on two considerations. In short, the State Treasurer will set the usury cap in Washington at either 12% or at four points above the average T-Bill rate for the past 26 weeks, whichever number is greater. Therefore, the State Treasurer in theory can announce a new usury cap on a weekly basis. As a result, if a person is interested in making a personal loan, it is imperative to know the interest rate that has been established by the State Treasurer on the day the loan agreement is executed.

Judgments on civil cases in the State of Washington bear an interest rate of 12% or any lawful rate that might be included in the contract itself -- whichever is higher at the time the entry of judgment in the litigation is had.

There are other statutory provisions in Washington that establish the interest rates that can be charged by state chartered financial institutions such as banks, savings and loans or credit unions. Additionally, there are provisions of the Uniform Commercial Code that govern the interest rates that can attach to financing arrangements involving the sale and purchase of goods with a value over $500.

Generally, a personal loan agreement that does contain a provision requiring interest to be paid above and beyond the usury cap as established by the State Treasurer will be considered to be an illegal contract. Being illegal, in most instances, the entire loan agreement will be struck down and considered unenforceable. In other words, the borrower can use the usurious interest rate provision as a perfect defense to any action brought to force satisfaction of the loan.

The statutory provisions governing legal rates of interest on personal loans and usury caps can be found in the Revised Code of Washington in Titles 6, 30 and 62A.

Nothing contained in this article should be construed as legal advice. If you have concerns about lending rules and regulations, you should consult with a lawyer.

Keep in mind that we do work to keep the information in this article up to date. However, do bear in mind that the laws pertaining to loans, lending practices and interest rates do change from time to time.

How to Get Out of Debt in Five Steps

To get yourself out of debt you need a plan, and this article will help you create that plan. It won't always be easy, or very fun, but the reward pays you back ten-fold with less stress, and more discretionary income. (read How to Get Out of Debt)