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Interest Rates that are Too High are Illegal

Allina case case spotlights illegal interest rate issue.  With certain exceptions, it has long been illegal to charge more than 8% interest under a written contract in Minnesota.  And if there is no written contract, the highest allowable interest rate is 6% under the general rule applicable to most contracts.

KARE11.com reported that Attorney General Lori Swanson reached a settlement with Allina that will reimburse patients who paid more than 8% interest to the health care company.

This puts the spotlight on an issue that is rarely discussed and apparently little understood.  It is very, very common to see invoices with a notation at the bottom that interest at the rate of 1.5% per month will be charged on balances not paid when due.  Although there are exceptions to the 6% and 8% interest caps, most if not all of the invoices charging 1.5% per month are not subject to any of the exceptions.

When a practice like this becomes as common as it has been, people tend to believe that it must be legal because everybody's doing it. 

No doubt it would surprise most small businesses to learn that they not only might not be able to recover any interest at all in this situation, but they might not even be able to recover the underlying debt, because there is a Minnesota statute that declares that usurious contracts are void.

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