Is A Usury Savings Clause Valid?
Often the documentation for an extension of credit provides that it will bear interest at the lesser of a specified rate or the highest rate permitted by applicable law. A “highest permissible rate” limitation is generally called a “usury savings clause.” There are no published Michigan cases considering the validity of such a clause. The courts in the eight other states that have addressed the issue have taken different approaches, with some holding that such a clause is always invalid, others holding that it is always valid, and others holding that it is enforceable in certain circumstances. Given the absence of Michigan case law and the different approaches that courts in other states have taken, a creditor should not assume that a Michigan court would enforce a usury savings clause and should make sure that the interest rate is lawful without regard to such a clause.
