What are the federal regulations for interest rates?

Interest rates are regulated by the federal government, and the regulations vary depending on the type of loan. Generally, banks are required to comply with the Truth in Lending Act, which requires them to disclose the annual percentage rate (APR) of all consumer loans. The APR includes all costs associated with the loan, such as the interest rate, any fees, and the terms of the loan. The federal government also sets the maximum rate of interest that banks are allowed to charge on loans they originate. For example, the Federal Reserve sets a rate cap for all consumer loans at 6 percent above the prime rate. For example, if the prime rate is 3 percent, then the maximum rate a lender can charge is 9 percent. Lastly, banks are prohibited from charging interest rates that are deemed excessive. This is determined by the state of California, and is based on the average loan rate of other lenders in the state. If the interest rate a bank charges exceeds the average loan rate of other lenders, then it is considered an “unconscionable rate” and the consumer may be entitled to restitution. In summary, the federal regulations surrounding interest rates include disclosing the APR, setting a maximum rate of interest, and prohibiting excessive rates of interest. These regulations are to protect consumers from being taken advantage of by lenders.

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What are the federal regulations for interest rates?

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