Under Arizona usury laws, the default interest rate ceiling is 10% per year, but a signed written contract can set almost any rate the parties agree to. Specific categories of loans — consumer lender loans, auto title loans, and medical debt — have their own statutory caps. A lender who charges more than the law allows forfeits all interest on the loan, not just the overage.1Arizona Legislature. Arizona Revised Statutes 44-1202 – Forfeiture of All Interest Upon Obligation Involving Interest
The 10% Default and the Written Contract Exception
ARS 44-1201 sets 10% per year as the legal interest rate for any loan or obligation. That ceiling kicks in automatically for verbal agreements, handshake deals, and any lending arrangement that isn’t put in writing.2Arizona Legislature. Arizona Revised Statutes 44-1201 – Rate of Interest for Loan or Indebtedness Lend money to a friend on a promise alone, and 10% is the most you can charge regardless of what you discussed.
Put the same deal in writing and the picture changes. The statute says that when both parties sign a written agreement, “any rate of interest may be agreed to.” That is why Arizona has no hard interest cap on most private written loans. The freedom to pick a rate does not extend to lending categories governed by their own statutes, which are discussed below.
Because the written-contract exception is so broad, the quality of the document matters. The agreement should state the interest rate, repayment schedule, and any fees clearly. Vague or misleading terms can push a contract back to the 10% default, and courts look past labels to the economic substance of a charge, so calling interest an “origination fee” or “processing charge” does not reliably sidestep a usury finding.
The Medical Debt Cap
Arizona recently added a separate, much lower ceiling for medical debt. Under ARS 44-1201(A)(1), the maximum rate on medical debt is the lesser of two benchmarks: the weekly average one-year constant maturity Treasury yield published by the Federal Reserve, or 3% per year. That cap also applies to any court judgment on medical debt, so a hospital or collection agency cannot win in court and then charge a higher rate on what you owe.
If a medical bill is accruing interest above 3%, the creditor is likely in violation of the statute. Medical debt is rarely the product of voluntary borrowing, and the lower cap reflects that.
Licensed Consumer Lenders
Companies licensed under the Arizona Consumer Lender Act handle consumer loans of $10,000 or less and can charge rates well above 10%.3Arizona Legislature. Arizona Code 6-601 – Definitions The statute imposes its own tiered ceilings:
- On loans of $3,000 or less, up to 36% per year.
- On loans above $3,000, 36% on the first $3,000 of principal and 24% on the balance above that, or a single blended rate producing the same total finance charges over the life of the loan.
Revolving credit lines follow the same split: 36% on balances up to $3,000, 24% on balances above.4Arizona Legislature. Arizona Revised Statutes Title 6, Section 6-632 A lender charging rates at these levels without a valid consumer lender license is operating illegally.
Auto Title Loans
After Arizona effectively ended payday lending in 2010, when the enabling statute expired, auto title loans became one of the main high-cost credit products in the state.5UPI. Arizona Law Shutting Down Payday Lenders ARS 44-291 sets maximum monthly finance rates based on the original loan amount:
- $500 or less: 17% per month (204% annualized)
- $501 to $2,500: 15% per month (180% annualized)
- $2,501 to $5,000: 13% per month (156% annualized)
- Over $5,000: 10% per month (120% annualized)
These are monthly rates, which is easy to miss. A $1,000 title loan at 15% per month means $150 in finance charges every month the loan is outstanding.6Arizona Legislature. Arizona Code 44-291 – Computation of Interest; Prepayment Rebate; Additional Charges
When State Caps Don’t Apply
Not every loan to an Arizona borrower is governed by Arizona rate limits. Two large categories sit outside the state ceilings.
National banks, federal savings associations, and federally insured credit unions can charge interest at the rate allowed by the state where the bank is located, regardless of where the borrower lives. That is federal law under 12 USC 85.7Office of the Law Revision Counsel. 12 USC 85 – Rate of Interest on Loans, Discounts, and Purchases A bank headquartered in a state with no usury cap can lend to Arizona borrowers at rates that Arizona law would otherwise forbid. Federal regulations confirm that a national bank may charge the highest rate permitted to any state-licensed lender in its home state.8eCFR. 12 CFR 7.4001 – Charging Interest by National Banks at Rates Permitted Competing Institutions
First-lien residential mortgages are separately preempted. The Depository Institutions Deregulation and Monetary Control Act of 1980 overrides state interest rate ceilings for first-lien residential mortgages, including loans on manufactured homes and cooperative housing stock.9Office of the Law Revision Counsel. 12 USC 1735f-7a – State Constitution or Laws Limiting Rate or Amount of Interest The preemption applies regardless of lender type, so a non-bank mortgage lender making a first-lien residential loan is not bound by Arizona’s rules either.
What Happens If a Lender Charges Too Much
Arizona’s penalty is blunt. A lender who charges more than the maximum permitted rate forfeits all interest on the obligation, not just the amount over the limit. Charge 12% on an oral loan where the cap is 10%, and every dollar of interest is wiped out. The borrower still owes the principal, but the lender collects none of the interest. Courts apply the forfeiture whether the excess interest came as cash, goods, or any other arrangement; the statute covers direct and indirect methods of extracting interest above the ceiling.
Title lenders face a harsher consequence. Overcharging on a title loan makes the entire transaction voidable, and the lender loses the right to collect principal, finance charges, and fees. An unlicensed person making title loans faces the worst outcome: those transactions are void from the start.
How to Push Back Against an Overcharge
Borrowers have three paths to challenge a usurious loan.
The first is a lawsuit. You can sue to recover improperly charged interest and invoke the forfeiture rule in ARS 44-1202. Courts can declare the interest void and order a refund of payments already made. Class actions have been used where the same lending practice affects many borrowers.
The second is a complaint to state regulators. The Arizona Department of Insurance and Financial Institutions oversees licensed lenders and can investigate complaints, conduct examinations, and issue cease-and-desist orders. Sanctions run from fines to license revocation for repeated or intentional violations.10Arizona Department of Insurance and Financial Institutions. Enforcement Actions The Arizona Attorney General’s Office can also act when lending practices involve deceptive advertising or misrepresentation of loan terms.11Arizona Attorney General’s Office. About Consumer Protection
The third is a federal complaint. The Consumer Financial Protection Bureau accepts complaints about lending practices and forwards them to the company, which generally responds within 15 days (complex matters take up to 60).12Consumer Financial Protection Bureau. Submit a Complaint A CFPB complaint does not replace a state action or lawsuit, but it creates a federal record and sometimes produces a faster resolution than litigation.
The Federal Loan Sharking Line
At the extreme end, federal criminal law takes over. Under 18 USC 892, an extension of credit at an annual rate above 45% (calculated using the actuarial method) can be prima facie evidence of an extortionate transaction when combined with other factors, such as the borrower’s belief that the lender uses threats or violence to collect.13Office of the Law Revision Counsel. 18 USC 892 – Making Extortionate Extensions of Credit The penalty is up to 20 years in federal prison. This statute runs alongside Arizona’s civil framework and targets the end of the lending spectrum where high rates intersect with coercion.