Free Contract in Financing Act Exposed

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The Free Contract in Financing Act is listed under ALEC's Commerce, Insurance and Economic Development Task Force and was included in the 1995 ALEC Sourcebook of American State Legislation. According to, the Act was approved by the Board of Directors in January, 1995, re-approved on January 28, 2013. (Accessed on 3/10/2016).

ALEC Bill Text


The Free Contract in Financing Act removes restrictions on interest rates for all loans and sales, including those to both consumers and businesses, and allows borrowers and lending institutions to contract for a mutually agreeable interest rate.

Model Legislation

{Title, enacting clause, etc.}

Section 1.

This Act may be cited as the Free Contract in Financing Act.

Section 2. {Contracting for extension of credit.}

Not withstanding any contrary provision of the law, the parties to any transaction involving the extension of credit may contract for any interest, finance charge or other consideration for such extension of credit, as agreed upon by the parties in writing.

Section 3. {Contracting for additional charges.}

In addition to the interest, finance charge or consideration permitted under this Act, the parties to any such transaction may contract for such additional charges as may be agreed upon by the parties in writing.

Section 4. {Severability clause.}

Section 5. {Repealer clause.}

Section 6. {Effective date.)