Printable Format16-207. Contract rate; penalties for prepayment of certain loans, recording fees; contracting for interest in excess of limitation; transactions excluded. (a) Subject to the following provision, the parties to any bond, bill, promissory note or other instrument of writing for the payment or forbearance of money may stipulate therein for interest receivable upon the amount of such bond, bill, note or other instrument of writing, at a rate not to exceed 15% per annum unless otherwise specifically authorized by law.
(b) No penalty shall be assessed against any party for prepayment of any home loan evidenced by a note secured by a real estate mortgage where such prepayment is made more than six months after execution of such note.
(c) The lender may collect from the borrower:
(1) The actual fees paid a public official or agency of the state or federal government, for filing, recording or releasing any instrument relating to a loan subject to the provisions of this section; and
(2) reasonable expenses incurred by the lender in connection with the making, closing, disbursing, extending, readjusting or renewing of loans subject to the provisions of this section.
(d) Any person so contracting for a greater rate of interest than that authorized by this section shall forfeit all interest so contracted for in excess of the amount authorized under this section; and in addition thereto shall forfeit a sum of money, to be deducted from the amount due for principal and lawful interest, equal to the amount of interest contracted for in excess of the amount authorized by this section and such amounts may be set up as a defense or counterclaim in any action to enforce the collection of such obligation and the borrower shall also recover a reasonable attorney fee.
(e) Subsection (a) shall not apply to:
(1) A covered transaction subject to the usury provisions of the Kansas mortgage business act, K.S.A. 9-2201 et seq., and amendments thereto;
(2) a consumer credit transaction subject to the usury provisions of the uniform consumer credit code, K.S.A. 16a-1-101 et seq., and amendments thereto;
(3) loans made by a qualified plan, as defined by the internal revenue code, to an individual participant in such plan or to a member of the family of such individual participant;
(4) a note secured by a real estate mortgage or a contract for deed to real estate when the note or contract for deed permits adjustment of the interest rate, the term of the loan or the amortization schedule; or
(5) a business or agricultural transaction. For the purpose of this section, a "business or agricultural transaction" means a loan, including a note secured by a contract for deed to real estate or a credit sale, which is made primarily for purposes other than personal, family or household purposes.
(f) Subsections (b), (c) and (d) shall not apply to:
(1) A covered transaction under the Kansas mortgage business act, K.S.A. 9-2201 et seq., and amendments thereto; or
(2) a consumer credit transaction under the uniform consumer credit code, K.S.A. 16a-1-101 et seq., and amendments thereto.
History: L. 1969, ch. 112, § 36; L. 1973, ch. 85, § 132; L. 1975, ch. 125, § 1; L. 1978, ch. 72, § 1; L. 1980, ch. 75, § 1; L. 1980, ch. 76, § 2; L. 1981, ch. 88, § 1; L. 1982, ch. 89, § 1; L. 1983, ch. 74, § 1; L. 1999, ch. 107, § 5; L. 2013, ch. 103, § 1; L. 2024, ch. 6, § 26; January 1, 2025.
Revisor's Note:
Section was also amended by L. 2013, ch. 29, § 1, but that version was repealed by L. 2013, ch. 129, § 2.
Cross References to Related Sections:
Joint rules and regulations governing loans under subsection (h), see 16-207d.
Law Review and Bar Journal References:
Impact of the Uniform Consumer Credit Code upon Kansas, Barkley Clark, 18 K.L.R. 277, 278, 283 (1970).
"The New Kansas Consumer Legislation," Barkley Clark, 42 J.B.A.K. 147, 194 (1973).
Warranty violations in Tripartite finance lease agreements, Winton A. Winter, Jr., 25 K.L.R. 573, 582 (1977).
"Recovery of Attorney Fees in Kansas," Mark A. Furney, 18 W.L.J. 535, 557 (1979).
"Interest Rates in Kansas: The Decline and Fall of Ezekiel," Barkley Clark, 49 J.B.A.K. 81, 87, 91, 93, 94 (1980).
"The U.C.C.C. and Real Estate Financing: A Square Peg in a Round Hole." Thomas L. Griswold, 28 K.L.R. 601, 602, 604, 605, 606 (1980).
"New Kansas Usury Laws and Interest Rate Regulation," Robert G. Martin, 20 W.L.J. 572 (1981).
"Combining Flexibility with Tax Sheltered Savings: Qualified Retirement Plan Loans," Alson R. Martin, 29 K.L.R. 179, 189 (1981).
"Alternate Methods of Financing the Sale and Purchase of Single Family Residences: Representing the Buyer and the Seller," Peter M. DiGiovanni, 50 J.K.B.A. 179, 185, 186 (1981).
"Interest and Usury in Kansas," Thomas V. Murray, 50 J.K.B.A. 270 (1981).
"Interest on Legal Fees," Calvin J. Karlin, 58 J.K.B.A. No. 5, 23 (1989).
Attorney General's Opinions:
Interest and charges; usury. 79-252.
Interest and charges; contract rate, limitations. 80-58.
Computation of usury rates. 80-64.
Interest and charges; business and agricultural loans. 81-200.
Consumer loans; finance charge; exemption of adjustable rate loans from maximum finance charge limits. 82-128.
Consumer loans; maximum finance charges; loans secured by mortgage on real estate; charging of nonrefundable origination fee. 84-2.
Entry of satisfaction of real estate mortgage; fee. 94-143.
Interest rates applicable to certain real estate mortgages; loan agreements applying consumer credit code (UCCC) rates. 97-99.
CASE ANNOTATIONS
1. Applied; subsection (d) requires the imposition of penalty when rate of interest usurious. Schulte v. Franklin, 6 Kan. App. 2d 651, 653, 654, 633 P.2d 1151 (1981).
2. Where no unlawful intent shown, variable interest rate loan not usurious when interest charged never exceeded statutory rate. Indian Springs State Bank v. Kelley's Auto Supply, Inc., 9 Kan. App. 2d 211, 215, 675 P.2d 379 (1984).
3. Modification agreement of existing real estate note and mortgage constituted new contract; current interest rate controlled. Frets v. Capitol Federal Savings & Loan Ass'n, 238 Kan. 614, 620, 712 P.2d 1270 (1986).
4. Usury laws do not apply to transaction for business or agricultural purposes. Wight v. Agristor Leasing, 652 F. Supp. 1000, 1014 (1987).
5. Whether absent specific contractual provision authorizing prepayment debtor has a right to prepay note and mortgage examined. Metropolitan Life Ins. Co. v. Strnad, 255 Kan. 657, 660, 666, 876 P.2d 1362 (1994).
6. Offensive usury action not authorized hereunder; attorney fees award reversed; plaintiffs not entitled to statutory damages. George v. Capital South Mtg. Investments, Inc., 265 Kan. 431, 447, 456, 462, 961 P.2d 32 (1998).
7. Subsection (b) applies to interest rate for contract for deed. Beltz v. Dings, 27 Kan. App. 2d 507, 6 P.3d 424 (2000).
8. Maturity date of mortgage and promissory note set fixed interest rate on unpaid balance. Brennan v. Kunzle, 37 Kan. App. 2d 365, 396, 154 P.3d 1094 (2007).