Title XIII (Commerce), Subtitle 3 (Money and Credit), Chapter 535 regulates the rates of interest in the state of Iowa. Section 535.2 prescribes that the rate of interest as five percent per year i.e., five cents on the hundred by the year. The maximum lawful rate of interest that parties can agree upon in writing shall be two percentage points above the monthly average ten-year constant maturity interest rate of United States government notes and bonds as published by the board of governors of the federal reserve system.
Section 535.4 prescribes that no person shall charge a greater rate of interest than actually prescribed in the Chapter. By the authority of Section 535.5, a person who has paid an increased interest amount may have judgment only for principal sum remaining unpaid without interest or costs; forfeiture of eight percent by the year upon the amount of the principal remaining unpaid at time of judgment.
Interest on judgment is fixed pursuant to Section 535.3 as ten percent per annum. Section 668.13 of Iowa Code prescribes rate of interest on judgment or decree, which is based on a contract, as the rate expressed in the contract. But this rate shall not exceed the maximum rate prescribed otherwise by law.
Certain exceptions to the usury penalty are:
- Loans for acquiring real property or refinancing a contract for deed,
- Loans more than $25,000, excluding interest, for improvement on real property, or
- Loans more than $25,000 for business or agricultural or household purposes
Iowa Code § 535.2
Rate of interest.
1. Except as provided in subsection 2 hereof, the rate of interest shall be five cents on the hundred by the year in the following cases, unless the parties shall agree in writing for the payment of interest at a rate not exceeding the rate permitted by subsection 3
3. a. The maximum lawful rate of interest which may be provided for in any written agreement for the payment of interest entered into during any calendar month commencing on or after April 13, 1979, shall be two percentage points above the monthly average ten-year constant maturity interest rate of United States government notes and bonds as published by the board of governors of the federal reserve system for the calendar month second preceding the month during which the maximum rate based thereon will be effective, rounded to the nearest one-fourth of one percent per year.
Iowa Code § 535.2 (2)
2. a. The following persons may agree in writing to pay any rate of interest, and a person so agreeing in writing shall not plead or interpose the claim or defense of usury in any action or proceeding, and the person agreeing to receive the interest is not subject to any penalty or forfeiture for agreeing to receive or for receiving the interest:
(1) A person borrowing money for the purpose of acquiring real property or refinancing a contract for deed.
(2) A person borrowing money or obtaining credit in an amount which exceeds twenty-five thousand dollars, exclusive of interest, for the purpose of constructing improvements on real property, whether or not the real property is owned by the person.
(3) A vendee under a contract for deed to real property.
(4) A domestic or foreign corporation, and a real estate investment trust as defined in section 856 of the Internal Revenue Code, and a person purchasing securities as defined in chapter 502 on credit from a broker or dealer registered or licensed under chapter 502 or under the Securities Exchange Act of 1934, 15 U.S.C., ch. 78A, as amended.
(5) A person borrowing money or obtaining credit for business or agricultural purposes, or a person borrowing money or obtaining credit in an amount which exceeds twenty-five thousand dollars for personal, family, or household purposes. As used in this paragraph, “agricultural purpose” means as defined in section 535.13, and “business purpose” includes but is not limited to a commercial, service, or industrial enterprise carried on for profit and an investment activity.
Iowa Code § 535.5
Penalty for usury.
If it is ascertained in an action brought on a contract that a rate of interest has been contracted for, directly or indirectly, in money or in property, greater than is authorized by this chapter, the rate shall work a forfeiture of eight cents on the hundred by the year upon the amount of the principal remaining unpaid upon the contract at the time judgment is rendered, and the court shall enter final judgment in favor of the plaintiff and against the defendant for the principal sum remaining unpaid without costs, and also against the defendant and in favor of the state, to be paid to the treasurer of state for deposit in the general fund of the state, for the amount of the forfeiture. If unlawful interest is contracted for the plaintiff shall not have judgment for more than the principal sum, whether the unlawful interest is incorporated with the principal or not.
Iowa Code § 535.4
Illegal rate prohibited — usury.
No person shall, directly or indirectly, receive in money or in any other thing, or in any manner, any greater sum or value for the loan of money, or upon contract founded upon any sale or loan of real or personal property, than is in this chapter prescribed.
Iowa Code § 535.3
Interest on judgments and decrees.
1. Interest shall be allowed on all money due on judgments and decrees of courts at a rate calculated according to section 668.13, except for interest due pursuant to section 85.30 for which the rate shall be ten percent per year.
2. Interest on periodic payments for child, spousal, or medical support shall not accrue until thirty days after the payment becomes due and owing and shall accrue at a rate of ten percent per annum thereafter. Additionally, interest on these payments shall not accrue on amounts being paid through income withholding pursuant to chapter 252D for the time these payments are unpaid solely because the date on which the payor of income withholds income based upon the payor’s regular pay cycle varies from the provisions of the support order.
Iowa Code § 668.13
Interest on judgments.
Interest shall be allowed on all money due on judgments and decrees on actions brought pursuant to this chapter, subject to the following:
1. Interest, except interest awarded for future damages, shall accrue from the date of the commencement of the action.
2. If the interest rate is fixed by a contract on which the judgment or decree is rendered, the interest allowed shall be at the rate expressed in the contract, not exceeding the maximum rate permitted under section 535.2.