Consumer Credit Regulation: 5.9.5.5 Is the New Rate Proper?
The economic injury caused by refinancing or consolidation is compounded when the new loan is written at a higher rate than the loan being refinanced. In some cases, the rate increase can be challenged.
A few states explicitly restrict the right of a lender to raise the interest rate on a refinanced loan. For example, in Iowa, if the rate on the original loan exceeded 18%, the rate cannot be increased on the refinancing of the unpaid balance.660