Personal Loans in Massachusetts: What Licensed Lenders May Charge

How the Massachusetts limits work

The small loan rate is set by regulation under the small loan law. The $20 administrative fee may be charged when the loan is granted, and not more than once in any 12-month period. On a precomputed loan you pay off early, you are owed a refund or credit of the unearned interest.

The usury statute counts nearly every charge: interest, brokerage, recording fees, commissions, service and extension charges, and third-party charges the lender knew of or could have found out about. It does not apply to loans whose rate is regulated by another law, or to lenders that a state or federal agency regulates or examines. A person who notifies the Attorney General in advance, and keeps the required records, is also outside it.

How Massachusetts compares with its neighbors

On the National Consumer Law Center's comparison of a $2,000 two-year loan, Massachusetts and Rhode Island cap the loan at about 24% APR and New York at about 25%, while Connecticut and New Hampshire allow about 36%. For a $10,000 five-year loan, Massachusetts allows about 20%, against 21% in Rhode Island and 25% in New York and Connecticut. The state rules map shows every state side by side.

Who needs a license and who does not

Under G.L. chapter 140, section 96, no one may make loans of $6,000 or less for personal, family or household purposes, at interest and expenses above 12% a year, without a small loan license from the Commissioner of Banks. The 12% test counts all charges together, including fees, commissions and extension or forbearance charges, so a low stated rate with large fees can still require a license. The law reaches past storefront lenders in two ways.

• Lenders outside the state: when a Massachusetts resident applies and someone outside the Commonwealth advances or guarantees the money, the loan is treated as made in Massachusetts and the law applies.
• Arrangers: a person who arranges, aids or assists in making such loans for a fee is treated as being in the small loan business, even if someone else makes the loan.
• Banks and credit unions answer to separate charters and regulators, and a bank may charge the rates its home state allows. Ask any online lender who the lender of record is.

Payday and title loans are covered by our sister site Lendmira on its Massachusetts lending laws page. If a lender asks for a fee before it will approve or fund a loan, treat that as a warning sign; how to verify a lender explains what to check.

Check a lender and file a complaint

1. 1 Look up the license on NMLS Consumer Access or with the Division of Banks licensee lookup before you apply.
2. 2 Keep the loan papers: the Truth in Lending disclosure, the agreement and any messages about fees.
3. 3 File a complaint with the Division of Banks through the state's consumer complaints page, or call (800) 495-2265 toll-free or (617) 956-1500, weekdays 9 a.m. to 4 p.m.
4. 4 Send a complaint to the CFPB as well if the lender is a bank or a bank partner, or if you are unsure who regulates it.

Questions people ask