The provisions of sections 37-4, 37-5 and 37-6 shall not affect: (1) Any loan made prior to September 12, 1911; (2) any loan made by (A) any bank, as defined in section 36a-2, or any out-of-state bank, as defined in section 36a-2, that maintains in this state a branch, as defined in section 36a-410, (B) any wholly-owned subsidiary of such bank or out-of-state bank, except a loan for consumer purposes, or (C) any Connecticut credit union, as defined in section 36a-2, or federal credit union, as defined in section 36a-2; (3) any bona fide mortgage of real property for a sum in excess of five thousand dollars; (4) (A) any loan, carrying an annual interest rate of not more than the deposit index, as determined under section 36a-26, for the calendar year in which the loan is made plus seventeen per cent, made to a foreign or domestic corporation, statutory trust, limited liability company, general, limited or limited liability partnership or association organized for a profit or any individual, provided such corporation, trust, company, partnership, association or individual is engaged primarily in commercial, manufacturing, industrial or nonconsumer pursuits and provided further that the funds received by such corporation, trust, company, partnership, association or individual are utilized in such entity's business or investment activities and are not utilized for consumer purposes and provided further that the original indebtedness to be repaid is in excess of ten thousand dollars but less than or equal to two hundred fifty thousand dollars, or, in the case of one or more advances of money of less than ten thousand dollars made pursuant to a revolving loan agreement or similar agreement or a loan agreement providing for the making of advances to the borrower from time to time up to an aggregate maximum amount, the total principal amount of all loans owing by the borrower to the lender at the time of any such advance is in excess of ten thousand dollars but less than or equal to two hundred fifty thousand dollars, or (B) any loan made to a foreign or domestic corporation, statutory trust, limited liability company, general, limited or limited liability partnership or association organized for a profit or any individual, provided such corporation, trust, company, partnership, association or individual is engaged primarily in commercial, manufacturing, industrial or nonconsumer pursuits and provided further that the funds received by such corporation, trust, company, partnership, association or individual are utilized in such entity's business or investment activities and are not utilized for consumer purposes and provided further that the original indebtedness to be repaid is in excess of two hundred fifty thousand dollars, or, in the case of one or more advances of money of less than two hundred fifty thousand dollars made pursuant to a revolving loan agreement or similar agreement or a loan agreement providing for the making of advances to the borrower from time to time up to an aggregate maximum amount, the total principal amount of all loans owing by the borrower to the lender at the time of any such advance is in excess of two hundred fifty thousand dollars; (5) any obligations, including bonds, notes or other obligations, issued by (A) the state, (B) any municipality, including any city, town, borough, district, whether consolidated or not, or other public body corporate, or (C) any authority, instrumentality, public agency or other political subdivision of the state or of a municipality; (6) any loan made by (A) the state, (B) any municipality, including any city, town, borough, district, whether consolidated or not, or other public body corporate, or (C) any authority, instrumentality, public agency or other political subdivision of the state or of a municipality; (7) any loan made for the purpose of financing the purchase of a motor vehicle, a recreational vehicle or a boat, carrying an interest rate of not more than (A) eighteen per cent per annum on loans made on or after July 1, 1981, and prior to October 1, 1985, and (B) on loans made on or after October 1, 1985, and prior to October 1, 1993, (i) sixteen per cent per annum for new motor vehicles, recreational vehicles or boats, and (ii) eighteen per cent per annum for used motor vehicles, recreational vehicles or boats, payable in four or more monthly, quarterly or yearly installments which is unsecured or in which a security interest is taken in such property; (8) any loan by an institution of higher education made to an individual for the purpose of enabling attendance at such institution and carrying an interest rate of not more than the greater of (A) the maximum rate then permitted by section 37-4, or (B) a rate which is not more than five per cent in excess of the discount rate, including any surcharge, on ninety-day commercial paper in effect from time to time at the federal reserve bank in the federal reserve district where such institution is located; (9) any loan made to a plan participant or beneficiary from an employee pension benefit plan as defined in the Employee Retirement Income Security Act of 1974, Public Law 93-406, as from time to time amended. The provisions of part III of chapter 668 shall not apply to loans made pursuant to subdivision (7) of this section. No provision of this section shall prevent any such bank, out-of-state bank, Connecticut credit union or federal credit union or other lender from recovering by an action at law the amount of the principal and the interest stipulated or interest at the legal rate, if interest is not stipulated, in any negotiable instrument which it has acquired for value and in good faith without notice of illegality in the consideration. For the purpose of this section: “Interest” shall not be construed to include attorney's fees, including preparation of mortgage deed and note, security agreements, title search, waivers and closing fees, survey charges or recording fees paid by the mortgagor or borrower; and “consumer purposes” means the utilization of funds for personal, family or household purchases, acquisitions or uses.
(1949 Rev., S. 6784; 1955, S. 2891d; 1959, P.A. 7, S. 1; 1967, P.A. 774; 1969, P.A. 573, S. 1; 804; P.A. 77-212, S. 1; P.A. 78-121, S. 111, 113; P.A. 81-33, S. 1, 2; 81-267; 81-362, S. 1, 4; P.A. 82-313, S. 27, 28; P.A. 83-230, S. 1, 2; P.A. 84-546, S. 95, 173; P.A. 85-522, S. 3; P.A. 87-36, S. 2; 87-46; P.A. 89-329; P.A. 90-49; P.A. 91-306, S. 7; P.A. 98-46, S. 1, 2; P.A. 99-10; 99-158, S. 9; P.A. 14-122, S. 163; P.A. 16-65, S. 41.)
History: 1959 act included private bankers; 1967 act added survey charges to terms not construed to be included in “interest”; 1969 acts added application of section to any federal or state chartered savings and loan associations, added application to certain loans in excess of $10,000 where interest rate is not more than 18%, added preparation of security agreements to terms not construed to be included in “interest” and added “borrower” to “mortgagor” in that reference; P.A. 77-212 added application of section to any credit union or federal credit union; P.A. 78-121 deleted private bankers from application of section, effective January 1, 1979; P.A. 81-33 added Subdivs. (5) and (6) to exempt obligations and loans of the state and its political subdivisions; P.A. 81-267 amended Subdiv. (2) to exempt nonconsumer loans by a subsidiary of a national bank or bank or trust company, amended Subdiv. (4) by replacing the exemption for business loans in excess of $10,000 with an interest rate of not more than 18% with an exemption for loans in excess of $10,000 to business entities where the funds are used in the entity's business or investment activities and are not used for consumer purposes, and added a definition of “consumer purposes”; P.A. 81-362 added Subdiv. (7) to exempt certain loans made on or after July 1, 1981, and prior to March 1, 1983, with an interest rate of not more than 18% for the purpose of financing the purchase of a motor vehicle, recreational vehicle or boat; P.A. 82-313 amended section to allow institutions of higher education which make loans to students to charge a rate of interest in excess of that permitted by law; P.A. 83-230 amended Subdiv. (7) to extend March 1, 1983, to October 1, 1985; P.A. 84-546 made technical change to section; P.A. 85-522 amended Subdiv. (7) to establish a maximum interest rate of 16% for new motor vehicles, recreational vehicles or boats and 18% for used motor vehicles, recreational vehicles or boats, sold on or after October 1, 1985, and prior to October 1, 1987; P.A. 87-36 amended Subdiv. (2) to include references to state or federal savings banks; P.A. 87-46 amended Subdiv. (7)(B) to extend the maximum interest rate for motor vehicles, recreational vehicles or boats from October 1, 1987 to October 1, 1989; P.A. 89-329 amended Subdiv. (7)(B) by changing the date from October 1, 1989, to October 1, 1991, re the applicability of the maximum interest rate for loans on motor vehicles, recreational vehicles or boats; P.A. 90-49 added Subdiv. (9) to exempt loans made from employee pension benefit plans; P.A. 91-306 amended Subdiv. (7)(B) to extend the maximum interest rate for motor vehicles, recreational vehicles or boats from October 1, 1991, to October 1, 1993; P.A. 98-46 amended Subdiv. (4) by adding statutory trusts, limited liability companies and limited liability partnerships or associations, effective May 17, 1998, and applicable to loans made before, on or after said date; P.A. 99-10 changed former references to various types of state and federally chartered financial institutions to the terms for such institutions as defined in Secs. 36a-2 and 36a-410; P.A. 99-158 amended Subdiv. (4) by adding Subpara. (A) re loans carrying an interest rate of not more than the deposit index plus 17%, designating existing provisions as Subpara. (B) and changing the minimum indebtedness amount from $10,000 to $250,000; P.A. 14-122 made technical changes; P.A. 16-65 replaced provision re deposit index determined pursuant to Sec. 49-2a(c) with provision re deposit index as determined under Sec. 36a-26 and made a technical change in Subdiv. (4)(A), effective July 1, 2016.
Exception of real property mortgages not unconstitutional. 113 C. 92. Mere inclusion of bonus in mortgage will not destroy its bona fides. Id., 93. Mortgage not within exception where amount actually loaned was under $500. Id., 573. Exception is limited to mortgage itself and does not permit action on the note alone. 120 C. 661; 123 C. 94. Industrial bank is within exception. 125 C. 319. Cited. 126 C. 338. Inclusion in mortgage of bonus with intent to exact more than 12 per cent interest does not of itself render mortgage invalid so as to take it out of the exception. 128 C. 57. Construction of word “interest” applies to chapter generally. 145 C. 342. Attorney's fees paid by borrower cannot be deducted in computing amount of loan. Id., 465. Cited. 172 C. 395; 180 C. 491; 188 C. 477; 193 C. 304; 211 C. 613.
Cited. 21 CA 131; 27 CA 628; 41 CA 754.
Provision excepting mortgage also excepts the note which it secures. 3 CS 22; 8 CS 245. Bona fide defined. Id. Where the note is not usurious as to the corporate maker, it is not usurious against an individual guarantor, though a note at such interest on a loan to an individual would be usurious. 31 CS 154. Cited. 32 CS 245.
Subdiv. (3):
“Mortgage” construed to mean not only mortgage conveyance but also mortgage loan or loan secured by the mortgage; exemption permits deficiency judgment on mortgage loan of over $5,000 with an interest rate in excess of 12 per cent per annum. 244 C. 189.
Cited. 2 CA 119. Exemption does not apply to a deficiency judgment. 6 CA 691. Cited. 44 CA 439. Transaction secured by mortgage on real property in which amount involved exceeded $5,000 was exempted by section. 147 CA 681.
Structure Connecticut General Statutes
Section 37-1. - Legal rate. Accrual as addition to debt.
Section 37-1a. - Payment of interest on commercial loans in excess of ten thousand dollars.
Section 37-2. - No recovery after payment.
Section 37-3. - Rate recoverable as damages.
Section 37-3a. - Rate recoverable as damages. Rate on debt arising out of hospital services.
Section 37-3b. - Rate of interest recoverable in negligence actions.
Section 37-3c. - Rate of interest recoverable in condemnation cases.
Section 37-4. - Loans at greater rate than twelve per cent prohibited.
Section 37-5. - Notes not to be accepted for greater amounts than loaned.
Section 37-6. - Certain expenses not to be charged to the borrower.
Section 37-8. - Actions not to be brought on prohibited loans.