Do Georgia Usury Laws Restrict Banking Fees?

November 5, 2014 | Charles Bowen

Interest and Georgia Banking LawThe Question

Do Georgia usury laws prohibit accumulating bank fees from becoming significantly higher than the depositor’s average annual balance? 

The Answer: No

Overdraft fees and other similar fees are not considered interest by Georgia banking law.

More information: HB 824

Governor Nathan Deal signed HB 824 into law on April 29, 2014.  This bill makes changes to the descriptions of usury in Georiga banking law.  It explicitly specifies that the following fees shall not be considered interest when included in a written agreement governing a deposit, share or other account:

  • overdraft fees
  • nonsufficient funds fees
  • delinquency or default charges
  • returned payment charges
  • stop payment charges
  • automated teller (ATM) charges

The bill further states that other similar fees are permissible even though they are not specifically listed.

Further Background: Georgia Usury Laws, Federal Law and Court Rulings

Georgia banking law limits the legal rate of interest to “7 percent per annum simple interest where the rate percent is not established by written contract” (O.C.G.A. § 7-4-2).  The courts have considered the issue of whether overdraft and other similar bank fees should be governed by federal usury laws (See Video Trax, Inc. v. NATIONSBANK, NA, 33 F. Supp. 2d 1041 (1998)) and ruled that these fees are not usury. HB 824 clarifies Georgia’s position on this issue and makes Georgia banking law more explicitly consistent with federal banking on the issue of fees and usury.  

It is worth noting that HB 824 may be most important for Georgia-chartered banks and credit unions who now have explicit legal authorization to charge these fees (See Issue Brief from the Georgia Bankers Association).

Bottom Line / Quick Info You Can Use

Georgia banking law does not consider fees such as overdraft and insufficient funds as interest as long as the charges are included in a written agreement governing a deposit, share or other account between the financial institution and the depositor (as defined in O.C.G.A. § 7-1-4).

Topics: Georgia Banking Law