Title 12 — Banks and BankingRelease 119-73
§1831d State-chartered insured depository institutions and insured branches of foreign banks
Title 12 › Chapter CHAPTER 16— - FEDERAL DEPOSIT INSURANCE CORPORATION › § 1831d
Summary
Allows state-chartered insured banks (including insured savings banks) and insured branches of foreign banks to charge interest on loans or other debts up to whichever is higher: the rate allowed by the state, territory, or district where the bank is located, or a rate equal to 1 percent more than the discount rate on ninety-day commercial paper at the Federal Reserve bank in that bank’s Federal Reserve district. If this higher rate applies, it overrides any state rule to the contrary for this purpose. If a bank knowingly charges more than that allowed rate, it loses the right to any interest on the debt. If someone paid the extra interest, they can sue within two years to recover twice the amount of interest they paid.
Full Legal Text
Title 12, §1831d
Banks and Banking — Source: USLM XML via OLRC
(a)In order to prevent discrimination against State-chartered insured depository institutions, including insured savings banks, or insured branches of foreign banks with respect to interest rates, if the applicable rate prescribed in this subsection exceeds the rate such State bank or insured branch of a foreign bank would be permitted to charge in the absence of this subsection, such State bank or such insured branch of a foreign bank may, notwithstanding any State constitution or statute which is hereby preempted for the purposes of this section, take, receive, reserve, and charge on any loan or discount made, or upon any note, bill of exchange, or other evidence of debt, interest at a rate of not more than 1 per centum in excess of the discount rate on ninety-day commercial paper in effect at the Federal Reserve bank in the Federal Reserve district where such State bank or such insured branch of a foreign bank is located or at the rate allowed by the laws of the State, territory, or district where the bank is located, whichever may be greater.
(b)If the rate prescribed in subsection (a) exceeds the rate such State bank or such insured branch of a foreign bank would be permitted to charge in the absence of this section, and such State fixed rate is thereby preempted by the rate described in subsection (a), the taking, receiving, reserving, or charging a greater rate of interest than is allowed by subsection (a), when knowingly done, shall be deemed a forfeiture of the entire interest which the note, bill, or other evidence of debt carries with it, or which has been agreed to be paid thereon. If such greater rate of interest has been paid, the person who paid it may recover in a civil action commenced in a court of appropriate jurisdiction not later than two years after the date of such payment, an amount equal to twice the amount of the interest paid from such State bank or such insured branch of a foreign bank taking, receiving, reserving, or charging such interest.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
Prior Provisions
Provisions similar to this section were contained in section 1831a of this title prior to its repeal by Pub. L. 96–221.
Amendments
1989—Subsec. (a). Pub. L. 101–73 substituted “insured depository institutions” for “insured banks”. 1987—Subsec. (a). Pub. L. 100–86 struck out “and insured mutual savings banks” after “insured savings banks”.
Statutory Notes and Related Subsidiaries
Effective Date
Section applicable only with respect to loans made in any State during the period beginning on
April 1, 1980, and ending on the date, on or after
April 1, 1980, on which such State adopts a law or certifies that the voters of such State have voted in favor of any provision, constitutional or otherwise, which states explicitly and by its terms that such State does not want this section to apply with respect to loans made in such State, except that this section shall apply to a loan made on or after the date such law is adopted or such certification is made if such loan is made pursuant to a commitment to make such loan which was entered into on or after
April 1, 1980, and prior to the date on which such law is adopted or such certification is made, see section 525 of Pub. L. 96–221, set out as an
Effective Date
of 1980 Amendment note under section 1785 of this title. Choice of Highest Applicable Interest RateIn any case in which one or more provisions of, or
Amendments
made by, title V of Pub. L. 96–221, section 1735f–7 of this title, or any other provisions of law, including section 85 of this title, apply with respect to the same loan, mortgage, credit sale, or advance, such loan, mortgage, credit sale, or advance may be made at the highest applicable rate, see section 528 of Pub. L. 96–221, set out as a note under section 1735f–7a of this title. Definition of “State” For purposes of this section, the term “State” to include the several States, the Commonwealth of Puerto Rico, the District of Columbia, Guam, the Trust Territories of the Pacific Islands, the Northern Mariana Islands, and the Virgin Islands, see section 527 of Pub. L. 96–221, set out as a note under section 1735f–7a of this title.
Reference
Citations & Metadata
Citation
12 U.S.C. § 1831d
Title 12 — Banks and Banking
Last Updated
Apr 6, 2026
Release point: 119-73