CHAPTER 673*
INTEREST

      *Note: Prior to 1995 this chapter was known as chapter 663 but in 1995 it was renumbered by the Revisors as chapter 673 to allow for the creation of titles 36a, The Banking Law of Connecticut, and 36b, Connecticut Securities and Business Opportunity Act. Those titles constitute successor provisions to former title 36 and certain sections from title 42.

      History of statute. The rate of interest was fixed in 1702 at six per cent and so remained until 1872 when parties were permitted to contract for any rate. In 1873 the maximum was fixed at seven per cent and in 1874 this was made the legal rate in absence of agreement for a lesser rate. In 1877 the rate was fixed at six per cent, in the absence of agreement to the contrary. 107 C. 278. Cited. 110 C. 259. Cited. 117 C. 253. Cited. 125 C. 315.


Table of Contents

Sec. 37-1. Legal rate. Accrual as addition to debt.
Sec. 37-1a. Payment of interest on commercial loans in excess of ten thousand dollars.
Sec. 37-2. No recovery after payment.
Sec. 37-3. Rate recoverable as damages.
Sec. 37-3a. Rate recoverable as damages. Rate on debt arising out of hospital services.
Sec. 37-3b. Rate of interest recoverable in negligence actions.
Sec. 37-3c. Rate of interest recoverable in condemnation cases.
Sec. 37-4. Loans at greater rate than twelve per cent prohibited.
Sec. 37-5. Notes not to be accepted for greater amounts than loaned.
Sec. 37-6. Certain expenses not to be charged to the borrower.
Sec. 37-7. Penalty.
Sec. 37-8. Actions not to be brought on prohibited loans.
Sec. 37-9. Loans to which prohibitions do not apply.
Sec. 37-10.

      Sec. 37-1. Legal rate. Accrual as addition to debt. (a) The compensation for forbearance of property loaned at a fixed valuation, or for money, shall, in the absence of any agreement to the contrary, be at the rate of eight per cent a year; and, in computing interest, three hundred and sixty days may be considered to be a year.

      (b) Unless otherwise provided by agreement, interest at the legal rate from the date of maturity of a debt shall accrue as an addition to the debt.

      (1949 Rev., S. 6776; 1971, P.A. 783, S. 1; P.A. 79-364, S. 1.)

      History: 1971 act added new Subsec. (b) providing that interest shall accrue as an addition to the debt; P.A. 79-364 changed rate of interest from 6% to 8% in Subsec. (a).

      Allowed because of contract express or implied or as damages. 22 C. 392; 72 C. 705. Note "with fifteen per cent after maturity"; the per cent held to be interest and not damages. 42 C. 524. Effect of validating act subsequently repealed on usurious contract for interest. Id., 574; 56 C. 214. A note on which the interest is payable quarterly at the legal rate is not usurious. 44 C. 494. The law takes note of the running of interest at the legal rate where the principal is due. 56 C. 114. The taking of interest in advance on a demand note constitutes an agreement to forbear for that time. 63 C. 87. Generally, any rate agreed on is lawful. 76 C. 388. Agreed rate governs till default, then legal rate; exceptions. 78 C. 323. Effect of insolvency of bank on its liability to pay interest. 88 C. 206. Cited. 126 C. 461; 147 C. 225. See note to Sec. 37-4. An agreed interest rate will prevail over the stated rate in statute. 160 C. 534. Cited. 177 C. 149.

      Cited. 15 CA 718. Cited. 44 CA 402. Statute not applicable where there is a wrongful detention of funds and no forbearance. 109 CA 691.

      Cited. 10 CS 240. Statutory rate of interest does not apply unless there is an expressed or implied agreement to pay interest. 29 CS 114. Cited. 38 CS 610. Cited. 41 CS 538.

      Subsec. (a):

      Cited. 186 C. 612. Cited. 188 C. 316.

      Cited. 13 CA 330.

      Subsec. (b):

      Cited. 188 C. 316.


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      Sec. 37-1a. Payment of interest on commercial loans in excess of ten thousand dollars. On any loan in excess of ten thousand dollars made to any person, corporation, partnership or association engaged in commercial, manufacturing, industrial or nonconsumer pursuits the loan agreement may provide for the interest to be either paid currently or to accrue, and, if such interest is to accrue, such accrued interest may be added to the principal of the debt on which interest may be charged and collected.

      (P.A. 83-225.)

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      Sec. 37-2. No recovery after payment. No borrower of money shall be permitted to set off or recover back, by any proceeding in court, any sum of money paid by way of interest, discount or damages, for the detention of money, in excess of the rate of six per cent a year.

      (1949 Rev., S. 6777.)

      Cited. 193 C. 304.

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      Sec. 37-3. Rate recoverable as damages. Section 37-3 is repealed.

      (1949 Rev., S. 6778; 1961, P.A. 116, S. 19; 1971, P.A. 574; 783, S. 2.)

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      Sec. 37-3a. Rate recoverable as damages. Rate on debt arising out of hospital services. (a) Except as provided in sections 37-3b, 37-3c and 52-192a, interest at the rate of ten per cent a year, and no more, may be recovered and allowed in civil actions or arbitration proceedings under chapter 909, including actions to recover money loaned at a greater rate, as damages for the detention of money after it becomes payable. Judgment may be given for the recovery of taxes assessed and paid upon the loan, and the insurance upon the estate mortgaged to secure the loan, whenever the borrower has agreed in writing to pay such taxes or insurance or both. Whenever the maker of any contract is a resident of another state or the mortgage security is located in another state, any obligee or holder of such contract, residing in this state, may lawfully recover any agreed rate of interest or damages on such contract until it is fully performed, not exceeding the legal rate of interest in the state where such contract purports to have been made or such mortgage security is located.

      (b) In the case of a debt arising out of services provided at a hospital, prejudgment and postjudgment interest shall be no more than five per cent per year. The awarding of interest in such cases is discretionary.

      (1972, P.A. 292, S. 1; P.A. 76-316, S. 1; P.A. 79-364, S. 2; P.A. 81-315, S. 1; P.A. 83-267, S. 1; P.A. 87-260, S. 2; May Sp. Sess. P.A. 92-11, S. 10, 70; P.A. 03-266, S. 7.)

      History: P.A. 76-316 added exception as provided in Sec. 52-192a; P.A. 79-364 applied section to arbitration proceedings; P.A. 81-315 added reference to Sec. 37-3b as an exception to this section; P.A. 83-267 increased rate of interest from eight to 10%; P.A. 87-260 added reference to Sec. 37-3c as an exception to this section; May Sp. Sess. P.A. 92-11 deleted exception re recovery of interest with respect to demand obligations as provided in repealed Sec. 42a-3-122(4)(a); P.A. 03-266 designated existing provisions as Subsec. (a) and added Subsec. (b) re rate on debt arising out of hospital services.

      Cited. 175 C. 138. Cited. 178 C. 323; 180 C. 11. Statute does not apply to interest payments ordered by the public utilities control authority (PUCA). 183 C. 128. Challenge by general contractor to constitutionality of mechanic's lien statutes discussed. 185 C. 583. Where condemnation award contemplated payment of interest at the prevailing statutory rate, court did not err in awarding interest at 6% from date of taking to October 1, 1979, when statute was amended to provide for interest at 8% from that date to date of payment. 187 C. 171. Prejudgment and postjudgment interest discussed with reference to Sec. 52-192a. 192 C. 301. Determination of interest in condemnation proceedings is not subject to provisions of the statute. Id., 377. Cited. 196 C. 81. Increase in interest rate only prospective in its operation. 199 C. 683. Cited. 203 C. 324. Cited. 207 C. 468. Cited. 210 C. 734. Cited. 211 C. 648. Cited. 213 C. 145. Cited. 217 C. 281. Cited. 218 C. 628; Id., 646; Id., 681. Cited. 222 C. 480. Cited. 224 C. 758; Id., 766. Cited. 228 C. 206. Cited. 234 C. 169. Cited. 235 C. 1. Cited. 238 C. 293. Cited. 239 C. 144; Id., 708. Cited. 240 C. 287. Cited. 241 C. 749. Interest payable on money wrongfully withheld calculated from date on which court determines the money was due and payable. 247 C. 242.

      Cited. 1 CA 595. Held not an abuse of discretion for trial court to determine that statutory eight per cent interest rate which became effective in 1979 should be applied to money due since 1973. 2 CA 322. Cited. 3 CA 111. Cited. 6 CA 292; Id., 417; Id., 447. Cited. 12 CA 468. Cited. 13 CA 330. Cited. 16 CA 705. Cited. 18 CA 559. Cited. 20 CA 566; Id., 676; Id., 680. Cited. 21 CA 359; Id., 380; Id., 549. Cited. 22 CA 640. Cited. 25 CA 529. Cited. 27 CA 635. Cited. 29 CA 484. Cited. 30 CA 136; Id., 729. Cited. 31 CA 253; Id., 455. Inapplicable to punitive damages. 32 CA 133. Cited. 34 CA 27. Cited. 35 CA 504. Cited. 36 CA 322. Cited. 39 CA 122. Cited. 41 CA 302. Cited. 42 CA 712. Cited. 43 CA 645. Cited. 44 CA 402; Id., 490. Cited. 45 CA 543. Cited. 46 CA 37; Id., 87. Section interpreted as providing for interest to date of judgment. 56 CA 139. Prejudgment interest owed where defendant wrongfully withheld moneys owed plaintiffs at the time they were payable. 69 CA 366. Postjudgment interest awarded pursuant to section begins to run from date of judgment. Where there is a rescript that modifies a judgment, postjudgment interest is to run from date of the original judgment. It should be as if the correct judgment had been issued by the original trial court, with interest running from that date. 73 CA 492. Trial court properly ruled that plaintiff was not entitled to prejudgment interest pursuant to section because plaintiff sought damages necessary to correct damage proximately caused by defendant's negligence. 75 CA 334. Plaintiff was entitled to prejudgment interest based on facts of case. 81 CA 213. Award of statutory prejudgment interest is contingent on the presence of two components: Claim to which the interest attaches must be for a liquidated sum of money wrongfully withheld, and trier must find that equitable considerations warrant payment of interest. Prejudgment interest pursuant to section is not warranted, however, in actions for breach of contract where damages sought are similar to those in a personal injury action for negligence, where a party seeks to be made whole for a loss caused by another. Id., 419. Plaintiff's claim for prejudgment interest resulting from tax overassessment was not based on final judgment and thus void ab initio and attempt to cure by withdrawing interest claim did not save action. 86 CA 817. Prejudgment interest is awarded in discretion of trial court to compensate the prevailing party for delay in obtaining money that rightfully belongs to him. Detention of the money must be determined to have been wrongful. The party seeking prejudgment interest has burden of demonstrating that retention of money is wrongful, and this requires more than demonstrating that opposing party detained money when it should not have done so. Focus of the prejudgment interest award allowed by this section has been to provide interest, at court's discretion, when there is no dispute over the sum due and the liable party has, without justification, refused to pay. 99 CA 747. Trial court did not abuse its discretion in denying prejudgment interest. 102 CA 23. When judgment is modified, modified amount should be construed as becoming due and payable from date of original judgment. 109 CA 691. Trial court improperly determined that the parties' stipulation did not limit the issues of interest to the law of another state and that the jury found the facts necessary for an award of interest. 110 CA 668. Trial court abused its discretion in ordering interest on money awarded in a dissolution of marriage action to accrue from date of judgment rather than from date it became payable in accordance with the court's judgment. 111 CA 143. Section establishes a maximum rate of prejudgment interest, and therefore it was within the court's discretion to award prejudgment interest at a rate lower than the maximum rate of 10 per cent. 112 CA 160. Award of prejudgment interest was equitable under the circumstances because party retaining money would receive unfair advantage if it were allowed to retain it while opposing party was deprived of its use and the opportunity to earn interest on it for six years. Given the particular facts of the case, court did not abuse its discretion in awarding postjudgment interest. 121 CA 31.

      Cited. 33 CS 609. Cited. 37 CS 50. Cited. 38 CS 610. Cited. 41 CS 538. Cited. 44 CS 207.


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      Sec. 37-3b. Rate of interest recoverable in negligence actions. (a) For a cause of action arising on or after May 27, 1997, interest at the rate of ten per cent a year, and no more, shall be recovered and allowed in any action to recover damages for injury to the person, or to real or personal property, caused by negligence, computed from the date that is twenty days after the date of judgment or the date that is ninety days after the date of verdict, whichever is earlier, upon the amount of the judgment.

      (b) If any plaintiff in such action files a postverdict or postjudgment motion or an appeal, the recovery of interest by such plaintiff shall be tolled and interest shall not be added to the judgment for the period that such postverdict or postjudgment motion or appeal is pending before the court. The provisions of this subsection shall not apply if the reason for the filing of a postverdict or postjudgment motion or appeal by the plaintiff is to reply to or answer a motion or appeal filed by a defendant.

      (P.A. 81-315, S. 2; P.A. 97-58, S. 2, 5.)

      History: P.A. 97-58 designated existing provisions as Subsec. (a) and amended said Subsec. to make the recovery of interest mandatory, rather than discretionary, for causes of action arising on or after May 27, 1997 and to provide that the interest shall be computed "from the date that is 20 days after the date of judgment or the date that is 90 days after the date of verdict, whichever is earlier, upon the amount of the judgment" rather than "from the date of judgment", and added Subsec. (b) re the effect on the recovery of interest when the plaintiff files a postverdict or postjudgment motion or an appeal, effective May 27, 1997.

      Cited. 15 CA 381. Cited. 31 CA 455. Cited. 45 CA 543.

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      Sec. 37-3c. Rate of interest recoverable in condemnation cases. The judgment of compensation for a taking of property by eminent domain shall include interest at a rate that is reasonable and just on the amount of the compensation awarded. If a court does not set a rate of interest on the amount of compensation awarded, the interest shall be calculated as follows: (1) If the period for which interest is owed does not exceed one year, interest shall be calculated from the date of taking at an annual rate equal to the weekly average one-year constant maturity yield of United States Treasury securities, as published by the Board of Governors of the Federal Reserve System, for the calendar week preceding the date of taking; and (2) if the period for which interest is owed exceeds one year, interest for the first year shall be calculated pursuant to the provisions of subdivision (1) of this section and interest for each additional year shall be calculated on the combined amount of principal, which is the amount by which the compensation award exceeds the original condemnation deposit, plus accrued interest at an annual rate equal to the weekly average one-year constant maturity yield of United States Treasury securities, as published by the Board of Governors of the Federal Reserve System, for the calendar week preceding the beginning of each year for which interest is owed. Such judgment shall not include interest on any funds deposited by the condemnor as compensation for the taking for the period after such deposited funds become available for withdrawal by the condemnee. The interest shall accrue from the date of taking to the date of payment.

      (P.A. 87-260, S. 3; P.A. 95-343, S. 1, 2; P.A. 02-52, S. 1.)

      History: P.A. 95-343 added provisions re calculation of interest applicable if court does not set rate of interest on amount of compensation awarded, effective July 13, 1995; P.A. 02-52 changed the rate of interest from the coupon issue yield equivalent of the average accepted auction price of 52-week U.S. Treasury bills settled immediately prior to the date of taking to the weekly average one-year constant maturity yield of U.S. Treasury securities for the calendar week preceding the date of taking, effective May 9, 2002.

      Cited. 21 CA 359. Trial court's statement that final award included, "all claims for interest, costs and appraisal fees," precluded proper application of the statute by preventing landowner from claiming interest on damages awarded to him. 109 CA 16.

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      Sec. 37-4. Loans at greater rate than twelve per cent prohibited. No person and no firm or corporation or agent thereof, other than a pawnbroker as provided in section 21-44, shall, as guarantor or otherwise, directly or indirectly, loan money to any person and, directly or indirectly, charge, demand, accept or make any agreement to receive therefor interest at a rate greater than twelve per cent per annum.

      (1949 Rev., S. 6779.)

      Meaning of "mortgage"; assignment of wages. 82 C. 232. This section valid. Id.; 83 C. 1; 218 U.S. 563. Whether contract is made in evasion of this section is question of fact. 91 C. 601. Does not apply to "guarantee of loan". 93 C. 647. Particularity required in information. Id., 646. Does not apply to receipt of higher rate of interest as a gift. Id., 668. "Agreement" constitutes separate offense. Id., 669. Necessity of proving wrongful intent. 94 C. 148; 101 C. 558; 118 C. 4. Defense of usury on part of endorser in due course. 97 C. 320; 99 C. 684. Defense of usury of accommodation endorser with knowledge of usurious agreement. 101 C. 560; 102 C. 37. Cited. 107 C. 280. A larger price fixed in good faith by a seller because sale is on time and not for cash does not make contract usurious. 110 C. 259; 117 C. 254. Cited. 111 C. 87. Cited. 113 C. 571. History of usury statutes. 120 C. 665. Voluntary taking or reservation of more than legal interest is per se usurious; specific intent to violate this section is not essential. 123 C. 94. Usurious note, found not to represent loan as such but to constitute separate obligation given as collateral security, will not prevent recovery on loan. 124 C. 489. Cited. 125 C. 317. Renewal notes as tainted with usury of original. 126 C. 339. Cited. 128 C. 61. Cited. 130 C. 19. Method of determining if note violates usury statutes; bonus for use of money counts as interest. Id., 552. Intent to violate statute as a matter of law. Id. Jury could reasonably have found that transaction was a usurious loan in violation of statute rather than a bona fide sale of the note. 138 C. 636. Cited. 139 C. 425; 141 C. 301. Cited. 145 C. 342, 465. Cited. 149 C. 159. Cited. 153 C. 400. See note to section 37-5. Cited. 172 C. 395; Id., 520. Cited. 180 C. 491. Cited. 193 C. 304. Cited. 211 C. 613.

      Cited. 2 CA 119. Statute does not apply to sales on credit. 3 CA 306. Cited. 6 CA 88. Provisions of this statute and Sec. 37-8 bar a deficiency judgment in this case. Id., 691. Cited. 21 CA 131. Cited. 27 CA 628. Cited. 31 CA 455. Cited. 41 CA 754. Cited. 44 CA 439; Id., 471. Statute does not apply when indebtedness arose from purchase of educational and related services, rather than from a loan of money. 53 CA 455.

      Cited. 1 CS 160. Promissory note and certificate of indebtedness executed simultaneously held to be one transaction and the loan usurious. 6 CS 49. Payee not entitled to charge interest upon whole sum, only upon that part which remains payable. 7 CS 424. Intent necessary to constitute usury. 8 CS 244. Does not apply to any loan made by any national bank or any state bank or trust company incorporated in Connecticut. 32 CS 245. Cited. 36 CS 183. Where there are only a few percentage points difference in usury laws of this state and those of another state and both states have a substantial relationship to the transaction, court will apply the usury laws of state which gives validity to the contract. 39 CS 510.

      Cited. 6 Conn. Cir. Ct. 283.


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      Sec. 37-5. Notes not to be accepted for greater amounts than loaned. No person and no firm or corporation, or agent thereof, shall, with intent to evade the provisions of section 37-4, accept a note or notes for a greater amount than that actually loaned.

      (1949 Rev., S. 6780.)

      Unlawful intent as well as acceptance must be proved. 94 C. 148; 101 C. 558; 118 C. 4. Intent to violate statute as a matter of law. 130 C. 552. Cited. 113 C. 571; 117 C. 255; 120 C. 665; 123 C. 95; 126 C. 338. See notes to Secs. 37-4, 37-8. Transactions between plaintiff and defendant were sales of notes and contracts and not usurious even though interest exceeded 12%. 139 C. 424. Cited. 145 C. 465. Unless the difference between the actual amount of the loan and the face amount of the note are explained to show that interest does not exceed twelve per cent, the loan is per se usurious and in violation of section 37-4. 151 C. 21. Where lender was a seventy-eight-year-old woman and borrower, an astute businessman, persuaded lender not to seek legal counsel and to accept his note in an usurious amount, held no intent to evade provisions of section 37-4. 153 C. 400. Cited. 172 C. 395. Cited. 188 C. 477. Cited. 211 C. 613.

      Cited. 6 CA 691. Cited. 21 CA 131.

      Cited. 1 CS 160. Does not apply to any loan made by any national bank or any state bank or trust company incorporated in Connecticut. 32 CS 245.


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      Sec. 37-6. Certain expenses not to be charged to the borrower. No person and no firm or corporation, or agent thereof, shall charge a borrower with any expense of inquiry as to his financial responsibility or expense of negotiating a loan, or charge, at the time of making the loan, the expense of collecting the interest and principal of the loan, unless the total of such charges and of the interest agreed upon is, during any one year, twelve per cent of the loan or less.

      (1949 Rev., S. 6781.)

      Cited. 113 C. 571. Cited. 120 C. 665. Cited. 145 C. 342, 465. Cited. 172 C. 395. Cited. 211 C. 613.

      Cited. 6 CA 691.

      Cited. 1 CS 160.


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      Sec. 37-7. Penalty. Any person who, individually, or as a member of any firm, or as an officer of any corporation, or as an agent of any firm or corporation, violates any provision of section 37-4, 37-5 or 37-6 shall be fined not more than one thousand dollars or imprisoned not more than six months or both.

      (1949 Rev., S. 6782.)

      Cited. 126 C. 338. Cited. 149 C. 12.

      Cited. 6 CA 691. Cited. 44 CA 439; Id., 471.

      Cited. 8 CS 245.

      Cited. 6 Conn. Cir. Ct. 283.


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      Sec. 37-8. Actions not to be brought on prohibited loans. No action shall be brought to recover principal or interest, or any part thereof, on any loan prohibited by sections 37-4, 37-5 and 37-6, or upon any cause arising from the negotiation of such loan.

      (1949 Rev., S. 6783.)

      Cited. 111 C. 87. Cited. 120 C. 665. Acceptance of note appearing to be usurious on its face is not sufficient to invoke ban of this section; intent to evade Sec. 37-4 must also be proved. 118 C. 4. Voluntary taking or reservation of more than legal interest is per se usurious; specific intent to violate Sec. 37-4 is not essential. 123 C. 94; 130 C. 552. Where no evidence is offered to explain difference between amount of note and actual loan, court may justifiably find note usurious. 126 C. 339. Statute makes no distinction between rights of an accommodation party who has participated in the usurious transaction and one who has not. 138 C. 636. Cited. 139 C. 425. See notes to Secs. 37-4, 37-5. Where note which would be usurious in Connecticut was executed in New York and payable there, action could be brought thereon in Connecticut, since controlling statute re usury was that of New York. 149 C. 9. Same result where note was executed in Connecticut for convenience of defendant cosigner but delivery was in Massachusetts. Id., 159. Where lender was a seventy-eight-year-old woman and borrower, an astute businessman, persuaded her not to seek legal counsel and to accept his note in an usurious amount, action on note allowed. 153 C. 400, 406. Cited. 193 C. 304. Cited. 211 C. 613.

      Cited. 3 CA 306. Provisions of this statute and Sec. 37-4 bar a deficiency judgment in this case. 6 CA 691. Cited. 21 CA 131. Cited. 44 CA 439; Id., 471.

      A conditional bill of sale given to avoid the usury statute is void. 1 CS 160. A first mortgage given to secure the performance of an illegal and unenforceable loan is equally ineffective. 8 CS 245. Cited. 33 CS 554.


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      Sec. 37-9. Loans to which prohibitions do not apply. 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 determined pursuant to subsection (c) of section 49-2a 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; "consumer purposes" shall mean 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.)

      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.

      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; 130 C. 558, Diss. op. 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. Cited. 180 C. 491. Cited. 188 C. 477. Cited. 193 C. 304.

      Cited. 6 CA 691. Cited. 21 CA 131. Cited. 27 CA 628. Cited. 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 five thousand dollars with an interest rate in excess of twelve 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.

      Subdiv. (4):

      Cited. 211 C. 613.


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      Sec. 37-10. Transferred to Chapter 846, Sec. 49-2b.

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