Bill Description: House Bill 649 would cap interest rates that may be charged by lenders, limiting the right of contract for both borrowers and lenders.
Rating: -2
Does it give government any new, additional, or expanded power to prohibit, restrict, or regulate activities in the free market? Conversely, does it eliminate or reduce government intervention in the market?
House Bill 649 would create Section 28-22-103, Idaho Code, to prohibit voluntary loan contracts that include interest rates greater than 30% or 10% above the prime rate, whichever is higher.
The new section would say, “Parties may agree in writing to the payment of any rate of interest and fees that do not exceed the greater of thirty percent (30%) or an amount that is ten (10) percentage points per year above the prime rate published by the federal reserve system in its statistical release, H.15 selected interest rates, for bank prime loans dated three (3) business days prior to the execution of the agreement. Interest must be allowed according to the terms of the agreement.”
It says, “A loan agreement that is not usurious when made is lawful for the duration of the loan provided that the loan agreement is not substantially changed. This subsection shall not apply to loan renewals.”
Charging any rate of interest that is clearly specified in a contract and voluntarily agreed to by all parties cannot rationally be defined as usury.
It is also worth pointing out that this law could actually harm the borrowers it is ostensibly protecting. Interest rates for loans are primarily based on the creditworthiness of the borrower. When government caps interest rates, some loans that might have made actuarial sense at a higher interest rate simply won’t be offered because lenders won’t take the risk of lending money to those with very bad credit when they can’t charge an interest rate sufficient to offset the risk.
(-1)
Does it violate the spirit or the letter of either the United States Constitution or the Idaho Constitution? Examples include restrictions on speech, public assembly, the press, privacy, private property, or firearms. Conversely, does it restore or uphold the protections guaranteed in the US Constitution or the Idaho Constitution?
House Bill 649 would prohibit voluntary contracts between borrowers and lenders that include an interest rate greater than those set in code.
(-1)
