N.Y. General Obligations Law § 5-501

GOL § 5-501: New York's usury limit on loans and forbearances

General Obligations Law § 5-501 sets New York's maximum rate of interest on loans and lists the transactions the usury laws do not reach.

Official text N.Y. General Obligations Law § 5-501 — New York

§ 5-501. Rate of interest; usury forbidden. 1. The rate of interest, as computed pursuant to this title, upon the loan or forbearance of any money, goods, or things in action, except as provided in subdivisions five and six of this section or as otherwise provided by law, shall be six per centum per annum unless a different rate is prescribed in section fourteen-a of the banking law.

  • 2. No person or corporation shall, directly or indirectly, charge, take or receive any money, goods or things in action as interest on the loan or forbearance of any money, goods or things in action at a rate exceeding the rate above prescribed. The amount charged, taken or received as interest shall include any and all amounts paid or payable, directly or indirectly, by any person, to or for the account of the lender in consideration for making the loan or forbearance as defined by the superintendent of financial services pursuant to subdivision three of section fourteen-a of the banking law except such fee as may be fixed by the commissioner of taxation and finance as the cost of servicing loans made by the property and liability insurance security fund.
  • 3. If the rate of interest charged, taken or received on any loan or forbearance secured primarily by either (i) an interest in real property improved by a one to six family residence occupied by the owner or (ii) certificates of stock or other evidence of an ownership interest in a corporation or partnership formed for the purpose of the cooperative ownership of real estate taken as security for a loan under subdivision five of section one hundred three of the banking law, subdivision eight-a of section two hundred thirty-five of such law or subdivision two-a of section three hundred eighty of such law, exceeds six per centum per annum,

a. in the case of a loan referred to by clause (i) of this subdivision, the term of such loan or forbearance may extend five years beyond the maximum maturity of such loan otherwise prescribed by law, and

b. notwithstanding any other provision of law, the unpaid balance of the loan or forbearance may be prepaid, in whole or in part, at any time. If prepayment is made on or after one year from the date the loan or forbearance is made, no penalty may be imposed. If prepayment is made prior to such time, no penalty may be imposed unless provision therefor is expressly made in the loan contract, provided that no penalty may be imposed if prohibited by sections six-l and six-m of the banking law. In all cases, the right of prepayment shall be stated in the instrument evidencing the loan or forbearance, provided, however, that the provisions of this subdivision shall not apply to the extent such provisions are inconsistent with any federal law or regulation.

  • 4. Except as otherwise provided by law, interest shall not be charged, taken or received on any loan or forbearance at a rate exceeding such rate of interest as may be authorized by law at the time the loan or forbearance is made, whether or not the loan or forbearance is made pursuant to a prior contract or commitment providing for a greater rate of interest, provided, however, that no change in the rate of interest prescribed in section fourteen-a of the banking law shall affect (a) the validity of a loan or forbearance made before the date such rate becomes effective, or (b) the enforceability of such loan or forbearance in accordance with its terms, except that if any loan or forbearance provides for an increase in the rate of interest during the term of such loan or forbearance, the increased rate shall not exceed such rate of interest as may have been authorized by law at the time such loan or forbearance was made.

4-a. Notwithstanding the provisions of subdivision four of this section, a loan or forbearance repayable on demand may provide for changes, reflecting variations in lending rates, from time to time in the rate of interest payable on such loan or forbearance up to the rate of interest authorized by law at the time of such change and in such case the rate of interest may be so changed in accordance with the terms of the contract or loan commitment relating thereto; provided, however, that the rate of interest charged, taken or received on such a loan or forbearance shall not exceed the rate of interest authorized by law as it may subsequently be reduced from time to time; and further provided, however, that in no event shall such a loan or forbearance by subject to an authorized rate of interest less than that applicable at the time such loan or forbearance was made. The provisions of this subdivision shall apply only to a loan or forbearance repayable on demand which has an initial principal of more than five thousand dollars and which the borrower has the right to repay at any time in whole or in part, together with accrued interest on the principal so repaid, without any penalty. With respect to a loan or forbearance covered by this subdivision, the lender shall disclose to the borrower in writing not less often than annually the amount of interest accrued or payable as of the date of such disclosure and the manner by which such amount was computed.

  • 5. No law regulating the maximum rate of interest which may be charged, taken or received shall apply to any loan or forbearance insured by the federal housing commissioner or for which a commitment to insure has been made by the federal housing commissioner or to any loan or forbearance insured or guaranteed pursuant to the provisions of an act of congress entitled "Servicemen's Readjustment Act of 1944."
  • 6. a. No law regulating the maximum rate of interest which may be charged, taken or received, except section 190.40 and section 190.42 of the penal law, shall apply to any loan or forbearance in the amount of two hundred fifty thousand dollars or more, other than a loan or a forbearance secured primarily by an interest in real property improved by a one or two family residence. A loan of two hundred fifty thousand dollars or more which is to be advanced in installments pursuant to a written agreement by a lender shall be deemed to be a single loan for the total amount which the lender has agreed to advance pursuant to such agreement on the terms and conditions provided therein.

b. No law regulating the maximum rate of interest which may be charged, taken or received, including section 190.40 and section 190.42 of the penal law, shall apply to any loan or forbearance in the amount of two million five hundred thousand dollars or more. Loans or forbearances aggregating two million five hundred thousand dollars or more which are to be made or advanced to any one borrower in one or more installments pursuant to a written agreement by one or more lenders shall be deemed to be a single loan or forbearance for the total amount which the lender or lenders have agreed to advance or make pursuant to such agreement on the terms and conditions provided therein.

  • 7. Except as otherwise expressly provided by law, in the event of prepayment in full of a loan, any refund of unearned interest to which the borrower may be entitled may not be computed by a sum of the balances or similar method but must be determined according to a generally accepted actuarial method.

Text as published in the 2026 snapshot of the code.

Source: Vaquill Open US Law, compiled from official state publishers (huggingface.co), reproduced under license CC BY 4.0.

Read this provision at the official source →

What it actually says

Subdivision 1 fixes the rate: six per cent per annum on the loan or forbearance of money, goods or things in action, unless a different rate is prescribed by Banking Law § 14-a, which is the provision that actually sets the operative civil usury rate. Subdivision 2 makes charging more unlawful, directly or indirectly, and - importantly for how these disputes are argued - says the amount taken as interest includes any and all amounts paid or payable, directly or indirectly, to or for the lender's account in consideration for making the loan. Fees dressed as something other than interest are counted.

The section then sets out the exclusions, and these decide most real cases. Subdivision 6(a): no law regulating the maximum rate applies to a loan or forbearance of two hundred fifty thousand dollars or more, other than one secured primarily by an interest in real property improved by a one- or two-family residence - except the criminal usury provisions of Penal Law §§ 190.40 and 190.42. Subdivision 6(b): no maximum-rate law at all, including the criminal ones, applies at two million five hundred thousand dollars or more. Loans advanced in installments under one written agreement are treated as a single loan for these thresholds. Subdivision 5 disapplies the rate limits to FHA-insured and Servicemen's Readjustment Act loans.

Subdivision 3 deals with home and co-op loans above six per cent, extending the permitted term by five years and, in the case of a loan on an owner-occupied one- to six-family residence, giving a right to prepay at any time - with no penalty at all after one year, and no penalty before then unless expressly provided in the loan contract and not otherwise prohibited by the Banking Law. Subdivision 4 fixes the rate ceiling as at the time the loan is made. Subdivision 7 requires that refunds of unearned interest on prepayment be computed by a generally accepted actuarial method rather than by a sum-of-the-balances method.

When it applies

  • A private lender charges an interest rate far above the statutory maximum on a personal loan.
  • A short-term business advance carries fees that, added together, exceed the rate limit.
  • A borrower on an owner-occupied home wants to prepay and is told there is a penalty.
  • A lender argues that the size of the loan takes it outside the usury laws.
  • A borrower is asked to sign for a loan structured in installments under one agreement.

What this section does not say

  • It does not state the operative civil rate itself. Subdivision 1 defers to Banking Law § 14-a.
  • It does not apply to loans of $250,000 or more except for criminal usury, or to loans of $2.5 million or more at all - subject to the one- and two-family residence carve-out.
  • It does not say what happens to a usurious loan. Forfeiture, voidness and the defenses available to corporate borrowers are dealt with by other sections of the article.
  • It is not a general consumer-credit statute. Licensed lending, credit cards and retail installment credit have their own regimes, state and federal.
  • It does not decide whether a transaction is a loan at all, which is often the real question.

Worked examples

Invented situations, written to show how the wording bites. They are not real cases, not judgments and not precedent, and nothing here predicts what would happen in yours.

Illustrative example

Someone short of cash borrows from a private lender at a rate far above the statutory maximum, with a large arrangement fee taken off the top before the money arrives. When the borrower falls behind, the lender demands the whole balance at once.

How the wording applies

Subdivision 2 counts the fee: the amount taken as interest includes any and all amounts paid or payable, directly or indirectly, to or for the lender's account in consideration for making the loan, so a charge dressed as something other than interest is still interest. What decides whether the limits apply at all is the size of the advance - at two hundred fifty thousand dollars or more only the criminal usury provisions remain, and at two and a half million none applies.

How the parties settled it

They agree a repayment figure that treats the arrangement fee as part of the cost of the money and spread the balance over a fixed period, with the lender dropping the demand for immediate payment in full.

Illustrative example

A borrower on a two-family house they live in wants to clear a high-rate loan early using a bonus. The lender says the contract carries a prepayment penalty for the whole of the remaining term.

How the wording applies

Subdivision 3 gives a right to prepay at any time on a loan on an owner-occupied one- to six-family residence: after one year no penalty may be charged at all, and before then only where expressly provided in the loan contract and not otherwise prohibited by the Banking Law. So it turns on how long the loan has run, and then on whether the contract actually contains the express provision the lender is describing.

How the parties settled it

They agree a payoff figure with no penalty attached, and the lender undertakes to issue the discharge within a fixed number of days of receiving cleared funds.

Illustrative example

A business draws money in a series of tranches under a single written facility. Each tranche on its own is below the usury threshold; added together they are comfortably above it, and the parties disagree about whether the rate limits apply.

How the wording applies

The section treats loans advanced in installments pursuant to one written agreement as a single loan for the purposes of the thresholds, so counting the tranches separately does not work. It turns on whether all the advances were genuinely made under one written agreement or under separate ones.

How the parties settled it

They restate the arrangement in a single clean document setting out the total, the rate and the draw schedule, so that neither has to argue later about which advance belonged to what.

How courts have read it

Decisions construing this provision. The question and the summary are ours; the quoted sentence is the court's own words, taken from the published opinion. These are the decisions in our corpus, not every decision there is, and nothing here predicts any other case. Reported 2003 to 2017.

Feivel Funding Associates v. Bender, 156 A.D.3d 416 (2017)

Appellate Division

What the court had to decide

Did the trial court err in granting plaintiff summary judgment dismissing defendant's usury defense and counterclaim based on alleged cash payments that could render the loan usurious under General Obligations Law § 5-501?

What it held

Yes, because defendant raised sufficient factual issues regarding the alleged cash payments, and the court reversed the order granting summary judgment and denied the motion.

In the court's words
Order, Supreme Court, Bronx County (Lizbeth Gonzalez, J.), entered March 10, 2016, which, to the extent appealed from as limited by the briefs, granted plaintiff’s motion for summary judgment foreclosing on a note and mortgage given by defendant Zhanna Bender and dismissing defendant’s defense and counterclaim alleging usury, unanimously reversed, on the law, without costs, and the motion denied.

Roopchand v. Mohammed, 154 A.D.3d 986 (2017)

Appellate Division

What the court had to decide

Whether the loan at issue was usurious under General Obligations Law § 5-501, such that the action on the promissory note should be dismissed.

What it held

The loan was criminally usurious because the interest rate of 50% per annum exceeded the 25% per annum criminal usury threshold, and the defendants proved usury by clear and convincing evidence, so the action was properly dismissed.

In the court's words
Thus, the defendants met their burden of establishing the elements of criminal usury.

Stransky v. DiPalma, 137 A.D.3d 1734 (2016)

Appellate Division

What the court had to decide

Does the parol evidence rule preclude defendants from raising an issue of fact whether the interest rate on a promissory note is usurious under General Obligations Law § 5-501?

What it held

The court held that parol evidence is admissible to show the illegal nature of a contract, and thus there is an issue of fact whether the interest rate is usurious, so neither party was entitled to summary judgment.

In the court's words
We conclude that there is an issue of fact whether the interest rate is usurious, and that neither party is entitled to summary judgment at this stage of the proceedings.

Bryan L. Salamone, P.C. v. Cohen, 129 A.D.3d 877 (2015)

Appellate Division

What the court had to decide

Whether a retainer agreement that assessed an annual interest rate of 18% upon an outstanding balance when a client defaulted on payment of a bill is subject to the usury limitations of General Obligations Law § 5-501.

What it held

The interest that may be charged on such an outstanding balance is not subject to the limitations on the rate of interest imposed by General Obligations Law § 5-501 because the underlying obligation does not constitute a loan or forbearance.

In the court's words
The interest that may be charged on such an outstanding balance is not subject to the limitations on the rate of interest imposed by General Obligations Law § 5-501 because the underlying obligation does not constitute a loan or forbearance (see Matias v Arango, 289 AD2d 459, 460 [2001]).

Bryan L. Salamone, P.C. v. Russo, 129 A.D.3d 879 (2015)

Appellate Division

What the court had to decide

Whether a retainer agreement that assessed an annual interest rate of 18% upon an outstanding balance when the defendant defaulted on payment of a bill is subject to the limitations on the rate of interest imposed by General Obligations Law § 5-501.

What it held

The interest that may be charged on such an outstanding balance is not subject to the limitations of General Obligations Law § 5-501 because the underlying obligation does not constitute a loan or forbearance, and the 18% interest rate was not usurious because it involved a contingency within the debtor's control.

In the court's words
The interest that may be charged on such an outstanding balance is not subject to the limitations on the rate of interest imposed by General Obligations Law § 5-501 because the underlying obligation does not constitute a loan or forbearance (see Matias v Arango, 289 AD2d 459, 460 [2001]).

Bouffard v. Befese, 111 A.D.3d 866 (2013)

Appellate Division

What the court had to decide

Whether the August 2004 transaction, structured as a deed with an option to repurchase, was a usurious loan under General Obligations Law § 5-501.

What it held

The transaction was a usurious loan because the effective interest rate of over 40% annually exceeded the statutory maximum of 16% per annum, rendering the loan void.

In the court's words
Thus, this transaction was plainly usurious.

Source: Caselaw Access Project, CC0 1.0 Universal (public domain dedication).

Related sections

N.Y. General Obligations Law § 5-701 NY Statute of Frauds: N.Y. General Obligations Law § 5-701 N.Y. General Obligations Law § 17-101 GOL § 17-101: putting an old debt back on the clock N.Y. General Obligations Law § 5-903 Renewal Notice Rule: N.Y. General Obligations Law § 5-903

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This page reproduces the text of N.Y. General Obligations Law § 5-501 in force at the date shown and explains it in general terms. It is not legal advice and takes no account of the circumstances of your case, which can change the answer completely. For a live dispute, for limitation periods, and before taking any step in court, consult a qualified lawyer in New York.

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