Banking Interpretations

NYSBL 108.4

August 13, 2009


Re: Maximum Rate of Interest – Auto Loans

Dear Mr. [---]:

Your April 2, 2009 letter to the New York State Banking Department has been forwarded to me for reply. In this letter, you state that you write in order to obtain clarification as to what the maximum rate of interest your bank, a New York state chartered savings bank can charge for auto loans. You explain that your bank currently offers tiered rates for auto loans based on a customer's credit score.  You state that if allowable, your bank would like to charge a rate of interest above 16% to customers with low credit scores.

Article VI, Savings Banks, Section 235.8-b of New York State Banking Law provides that "a saving bank may operate a personal loan department under the same terms and conditions as are provided under the provisions of subdivisions four and five of Section 108 of this chapter." Section 190.40 of the Penal Law provides that loans exceeding 25% per annum constitute criminal usury, but an exception is found in Section 5-501(6)(b) of the General Obligations Law for loans of $2.5 million or more. Section 108.4(b) of the Banking Law states that an institution "which operates a personal loan department may make loans and charge interest thereon, at the rate or rates agreed to" by the institution and the borrower.  Therefore, the maximum rate that your bank may charge to customers is 25 %.

I trust that this is responsive to your inquiry.


Christine M. Tomczak
Assistant Counsel