Griffith v. Connecticut
Headline: Connecticut law capping loan interest at 15% was upheld, with exemptions for national banks, state banks, trust companies, pawnbrokers, and mortgages, letting the state regulate lending rates.
Holding: The Court affirmed the state court, holding that Connecticut’s 15% interest cap and its exemptions do not violate equal protection and that the state law may stand.
- Leaves a 15% state interest cap in force while allowing listed lenders to charge different rates.
- Permits national and state-chartered banks and trust companies to remain exempt.
- Recognizes mortgages and pawnbrokers as categories allowed higher interest due to publicity or regulation.
Summary
Background
A Connecticut law set a 15% yearly cap on interest that most people or businesses can be charged when borrowing money. The law exempted national banks, state-chartered banks and trust companies, pawnbrokers, and bona fide mortgages. A challenger argued this exemption unfairly favored some lenders and violated constitutional protections, and the state courts upheld the law.
Reasoning
The core question was whether the exemptions treated similar people unfairly. The Court relied on the state court’s explanation that the exemptions had practical reasons: federal law limits what states can do to national banks; state-chartered trust companies were specially created and supervised; pawnbrokers are licensed and regulated; and mortgages are public through recording, reducing the risk of unfair deals. The Court agreed these differences gave the legislature a reasonable basis and rejected the equal-treatment challenge. The Court also noted that enforcing a statute can prevent enforcement of contracts made in violation of that statute.
Real world impact
The ruling affirms that Connecticut may keep its 15% interest cap in place while allowing the listed exemptions to stand. Lenders covered by exemptions may operate under different rules, and borrowers generally remain protected by the cap. The decision was resolved on the existing record and affirms the lower court’s judgment without creating a broader new national rule.
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