If you are shopping for a loan in Utah—whether it’s for a car, a personal emergency, or a payday advance—you might assume there is a legal ceiling on how much interest a company can charge you. After all, “usury laws” (laws that prevent excessive interest) exist in many parts of the country to protect consumers from predatory rates.
But in Utah, the reality is starkly different.
If you are asking, “Is there a limit on the interest rate a company can charge me in Utah?” the short answer is: Technically yes, but practically no.
Here is the breakdown of how Utah’s lending laws work and why they might leave your wallet vulnerable.
1. The “10% Rule” (And the Massive Loophole)
Utah law technically states that the legal rate of interest is 10% per year.
However, there is a massive “unless” attached to that law. The statute says the limit is 10% unless the parties agree to a different rate in a contract.
In other words, if you sign a piece of paper (or click “I Agree” online) that states the interest rate is 50%, 100%, or even 500%, that becomes the interest rate. The “limit” only applies if you borrow money without ever discussing or writing down an interest rate, which generally does not happens in a commercial transaction.
2. Payday Loans: The Sky is the Limit
Because Utah allows lenders and borrowers to “contract” for any rate, the state has become a haven for high-interest lenders, particularly payday loan companies.
- No Cap: Unlike many other states that cap payday loan interest, Utah has no cap on the Annual Percentage Rate (APR) for payday loans.
- Triple-Digit Rates: It is not uncommon to see APRs in Utah exceeding 300% to 600% on short-term loans.
- Registration Requirement: While they can charge what they want, these lenders must be registered with the state. If an unregistered lender tries to collect a high-interest loan from you, the loan might be void.
3. Are There Any Protections?
While the state law is very “pro-business” regarding contracts, there are a few safety nets, though they are limited:
- Unconscionability: If a contract is so unfairly one-sided that it “shocks the conscience,” a court might rule it unenforceable. However, this is a difficult legal standard to meet. Simply having a high interest rate is usually not enough to prove this; there usually must be proof that the lender exploited someone who couldn’t understand the contract (e.g., due to literacy or language barriers).
- The Military Lending Act (Federal): If you are an active-duty member of the military or a dependent, federal law trumps state law. Lenders cannot charge you more than 36% MAPR (Military Annual Percentage Rate) for many types of consumer loans.
- Truth in Lending: Lenders are required by federal law to clearly disclose the APR before you sign. They cannot hide the rate, even if the rate is astronomical.
4. What This Means for You
Because Utah relies on the principle of “freedom of contract,” the burden is almost entirely on you, the borrower, to spot a bad deal.
- Read the APR, not just the monthly payment: A lender might tell you, “It’s only $20 a month,” but if you are paying that for five years on a small loan, you could end up paying double or triple what you borrowed.
- Don’t assume the state protects you: In some states, if a rate looks illegally high, it probably is. In Utah, if a rate looks illegally high, it is likely perfectly legal if it was in the fine print and the court does not find it unconsumable.
- Check for registration: Before taking a loan from a payday or title lender, check if they are registered with the Utah Department of Financial Institutions.
The Bottom Line
Utah is one of the few states where the law essentially says, “If you signed it, you owe it,” regardless of how high the interest rate is with few exceptions. While this offers flexibility for lenders, it creates a dangerous environment for borrowers who are in a pinch. Always read fine print, and if a rate seems astronomical, walk away—because the law likely won’t stop them from charging it.
Need Legal Help? Contact David Head
Navigating debt and high-interest loans can be overwhelming, especially when the laws seem stacked against you. If you are drowning in debt, facing a lawsuit from a lender, or simply need guidance on your financial rights, you don’t have to face it alone.
David Head, Attorney at Law David Head is an experienced attorney ready to help you understand your options and protect your rights.
Call today: 801-691-7511