2021 Georgia Code
Title 7 - Banking and Finance
Chapter 4 - Interest and Usury
Article 1 - In General
§ 7-4-2. Legal Rate of Interest; Maximum Rate of Interest Generally; Certain Items Not Considered Interest

1. 1. 1. The legal rate of interest shall be 7 percent per annum simple interest where the rate percent is not established by written contract. Notwithstanding the provisions of other laws to the contrary, except Code Section 7-4-18, the parties may establish by written contract any rate of interest, expressed in simple interest terms as of the date of the evidence of the indebtedness, and charges and any manner of repayment, prepayment, or, subject to the provisions of paragraph (1) of subsection (b) of this Code section, acceleration, where the principal amount involved is more than $3,000.00 but less than $250,000.00 or where the lender or creditor has committed to lend, advance, or forbear with respect to any loan, advance, or forbearance to enforce the collection of more than $3,000.00 but less than $250,000.00.
      2. Where the principal amount is $250,000.00 or more, or the lender or creditor has committed to lend, advance, or forbear with respect to any loan, advance, or forbearance to enforce the collection of $250,000.00 or more, the parties may establish by written contract any rate of interest, expressed in simple interest terms or otherwise, and charges to be paid by the borrower or debtor.
      3. Nothing contained in this subsection shall be construed to prohibit the computation and collection of interest at a variable rate or on a negative amortization basis or on an equity participation basis or on an appreciation basis.
   2. Where the principal amount involved is $3,000.00 or less, such rate shall not exceed 16 percent per annum simple interest on any loan, advance, or forbearance to enforce the collection of any sum of money unless the loan, advance, or forbearance to enforce the collection of any sum of money is made pursuant to another law.
   3. As used in this Code section, the term "interest" means a charge for the use of money computed over the term of the contract at the rate stated in the contract or precomputed at a stated rate on the scheduled principal balance or computed in any other way or any other form. Principal includes such charges to which the parties may agree under paragraph (1) of this subsection. Amounts paid or contracted to be paid as either an origination fee or discount points, or both, on any loan secured by an interest in real estate shall not be considered interest and shall not be taken into consideration in the calculation of interest and shall not be subject to rebate as provided in paragraph (1) of subsection (b) of this Code section.
2. 1. Upon acceleration of the maturity of any loan, advance of money, or forbearance to enforce the collection of any sum of money upon which interest has been precomputed, unearned interest shall be rebated to the debtor in such amount as would result in the rate of interest earned being no greater than the rate of interest established by the original contract. In the case of a loan in which the principal and the interest for the entire term of the loan are included in the face amount of the loan and the loan is to be paid back in weekly, monthly, quarterly, semiannual, or yearly installments, with the interest and principal portions of each installment determined under the pro rata method, any such rebate shall be determined on the pro rata method.
   2. Unless stipulated in the contract, there shall be no prepayment penalty.
3. Nothing contained in this Code section shall be construed to amend or modify the provisions of Chapter 3 of this title, the "Georgia Installment Loan Act," Article 1 of Chapter 1 of Title 10, the "Retail Installment and Home Solicitation Sales Act," Chapter 5 of this title, "The Credit Card and Credit Card Bank Act," Chapter 22 of Title 33, the "Insurance Premium Finance Company Act," Part 5 of Article 3 of Chapter 12 of Title 44, relating to pawnbrokers, and, except as provided in Code Section 7-4-3, Article 2 of Chapter 1 of Title 10, the "Motor Vehicle Sales Finance Act."
4. Notwithstanding the foregoing, fees and other charges agreed upon by a financial institution and depositor, as defined in Code Section 7-1-4, in a written agreement governing a deposit, share, or other account, including, but not limited to, overdraft and nonsufficient funds, delinquency or default charges, returned payment charges, stop payment charges, or automated teller machine charges, shall not be considered interest.

(Laws 1822, Cobb's 1851 Digest, p. 393; Laws 1845, Cobb's 1851 Digest, p. 393; Code 1863, § 2022; Code 1868, § 2023; Ga. L. 1873, p. 52, §§ 2-4; Code 1873, § 2050; Ga. L. 1878-79, p. 184, § 3; Code 1882, §§ 2050, 2057a; Civil Code 1895, §§ 2876, 2886; Civil Code 1910, §§ 3426, 3436; Code 1933, § 57-101; Ga. L. 1975, p. 370, § 1; Ga. L. 1979, p. 355, § 1; Ga. L. 1983, p. 1146, § 1; Ga. L. 1984, p. 22, § 7; Ga. L. 1987, p. 268, § 2; Ga. L. 1988, p. 534, § 1; Ga. L. 1997, p. 143, § 7; Ga. L. 2014, p. 213, § 1/HB 824; Ga. L. 2020, p. 156, § 9/SB 462.)

The 2020 amendment, effective June 30, 2020, substituted "Georgia Installment Loan Act" for "Georgia Industrial Loan Act" in subsection (c).

- Credit Card and Credit Card Bank Act, § 7-5-1 et seq.

Georgia Industrial Loan Act, § 7-3-1 et seq.

Insurance Premium Finance Company Act, § 33-22-1 et seq.

Retail Installment and Home Solicitation Sales Act, § 10-1-1 et seq.

Illegal payday loans, § 16-17-1 et seq.

- Ga. L. 2014, p. 213, § 3/HB 824, not codified by the General Assembly, provides that: "It is not the intent of the General Assembly to affect the law applicable to litigation pending as of February 19, 2014."

- For article surveying 1979 legislative developments in commercial law, see 31 Mercer L. Rev. 13 (1979). For article on Georgia's usury laws and interest on interest, see 8 Ga. St. U.L. Rev. 291 (1992). For annual survey on construction law, see 65 Mercer L. Rev. 67 (2013). For note discussing the reservation of interest at highest lawful rate as constituting usury, see 1 Ga. L. Rev. No. 2 p. 38 (1927). For note discussing problems with profits generated by escrow account, and proposing federal legislative reform, see 10 Ga. St. B.J. 618 (1974). For note discussing whether a holder in due course takes free of claims of violations of the usury laws, see 12 Ga. L. Rev. 814 (1978).

ANALYSIS

• General Consideration
• Interest and Other Charges
• Usury
• Forfeiture of Interest
• Written Contract
• Acceleration
• Interest after Maturity
• Attorney Fees
• Jury/Court Determinations

OPINIONS OF THE ATTORNEY GENERAL

Editor's notes.

- Many of the opinions cited below were rendered under this Code section as it read prior to the 1983 amendment, which extensively rewrote this Code section.

- Usury is not the taking of interest from the borrower at an unlawful rate, but rather it is receiving from any source a greater sum for use of money than the lawful interest. 1969 Op. Att'y Gen. No. 69-53.

- When no distinction is made between cash price and time price of an article, carrying charges are limited to legal rate of interest, plus any actual expense incurred by vendor incident to sale, such as fee for recording security instrument and reasonable protective insurance. 1954-56 Op. Att'y Gen. p. 448.

- If monthly service charge plan does not come within any specific exception set out by state law, then charge of one to one and a half percent per month of unpaid balance would probably be usurious. 1969 Op. Att'y Gen. No. 69-45.

- Merchant who makes cash advances of $3,000.00 or less is subject to the provisions of the Georgia Industrial Loan Act, O.C.G.A. § 7-3-1 et seq., rather than O.C.G.A. § 7-4-2(a)(2), unless the merchant charges eight percent simple interest per annum or less. 1984 Op. Att'y Gen. No. 84-79.

- If a loan or origination fee charged in connection with a non-real estate loan under $3,000 is not adduced based on the time value of money, if its use merely increases the lender's expectation of collecting in full the principal amount of the loan plus interest or if the fee is attributable to a service or benefit other than the extension of credit, and if the fee's factual justification is clearly documented in sufficient detail, such a fee should not be considered prepaid interest. 2003 Op. Att'y Gen. No. 2003-8.

- Overdraft fee will not be considered interest when the transaction is readily characterized as a checking account transaction, lacking the legal and economic reality of a loan or extension of credit, and when the fee is not determined based on the amount and time value of overdraft amounts. 2003 Op. Att'y Gen. No. 2003-9.

RESEARCH REFERENCES

Am. Jur. 2d.

- 44B Am. Jur. 2d, Interest and Usury, §§ 1, 3.

- 47 C.J.S., Interest and Usury; Consumer Credit, §§ 1 et seq., 84, 85.

- Provision in statute or ordinance limiting rate of interest per annum as precluding requirement of payment at maximum rate at intervals of less than a year, 29 A.L.R. 1109.

Validity of agreement to pay interest on interest, 37 A.L.R. 325; 76 A.L.R. 1484.

Construction of contractual provisions as to interest as regards time from which interest is to be computed, 69 A.L.R. 958.

Delay in paying over proceeds of loan to borrower as affecting question of usury, 76 A.L.R. 1467.

Obligations covering deferred payments of purchase money, or extension thereof, as loan or forbearance within usury laws, 91 A.L.R. 1105.

Validity, construction, and effect of express agreement releasing cause of action or defense based on exaction of usury, 99 A.L.R. 600.

Termination of interest, or reduction of interest rate, on deposit of public funds, 107 A.L.R. 1210.

Rate of interest chargeable against guardians, executors or administrators, and trustees, 112 A.L.R. 333.

Note or other obligation payable on demand for an amount in excess of amount actually loaned as usurious, 127 A.L.R. 460.

Finance charge in connection with conditional sale contract as usury, 143 A.L.R. 238.

Usury as affecting conditional sale contract, 152 A.L.R. 598.

Usury as predictable upon transaction in form a sale or exchange of commercial paper or other choses in action, 165 A.L.R. 626.

Retrospective application and effect of statutory provision for interest or changed rate of interest, 4 A.L.R.2d 932; 40 A.L.R.4th 147; 41 A.L.R.4th 694.

Computing interest on basis of 360 days in year, 30 days in month, or the like, as usury, 35 A.L.R.2d 842.

Taking or charging interest in advance as usury, 57 A.L.R.2d 630.

Interest upon arrearages or unpaid accumulations of annuities, 66 A.L.R.2d 857.

Usury as affected by repayment of, or borrower's option to repay, loan before maturity, 75 A.L.R.2d 1265.

What is "compound interest" within meaning of statutes prohibiting the charging of such interest, 10 A.L.R.3d 421.

Advance in price for credit sale as compared with cash sale as usury, 14 A.L.R.3d 1065.

Usury: effect of borrower's agreement to pay, guarantee, or secure some other debt owed to or by lender, 31 A.L.R.3d 763.

Validity and construction of provision (escalator clause) in land contract or mortgage that rate of interest payable shall increase if legal rate is raised, 60 A.L.R.3d 473.

Reformation of usurious contract, 74 A.L.R.3d 1239.

Validity under usury laws of provision calling for repayment of principal which exceeds sum loaned by amount reflecting any decline in purchasing power of dollar, 90 A.L.R.3d 763.

Contingency as to borrower's receipt of money or other property from which loan is to be repaid as rendering loan usurious, 92 A.L.R.3d 623.

Leaving part of loan on deposit with lender as usury, 92 A.L.R.3d 769.

Application of usury laws to transactions characterized as "leases,", 94 A.L.R.3d 640.

Validity and construction of state statute or rule allowing or changing rate of prejudgment interest in tort actions, 40 A.L.R.4th 147.

Retrospective application and effect of state statute or rule allowing interest or changing rate of interest on judgments or verdicts, 41 A.L.R.4th 694.

Propriety of Landlord's Imposition of Fee for Late Payment of Rent, 49 A.L.R.7th Art. 2.

Intentional or Negligent Infliction of Emotional Distress in Aviation Cases Involving Crashes, Hard Landings, or In-Flight Injuries, 49 A.L.R.7th Art. 9.