Q: What is a "preference payment" and why do I care?
Q: If I am a victim of corporate fraud, do I have recourse against a deadbeat corporation?
Q: Can I recover the fees that I pay to my lawyer if I win my lawsuit?
Q: What is usury? Is there still a cap on the amount of interest I can charge or pay?
Q: What is usury? Is there still a cap on the amount of interest I can charge or pay?
A: Usury is lending money at an exorbitant interest rate. In California, our state constitution sets the maximum interest rate at 7% per year for loans or accounts receivable, but provides that a creditor and a debtor can agree in writing to a charge of 10% interest per year (a higher rate may apply in years in which the Federal Reserve Rate is higher than 5%).
In determining the 10% interest rate cap, fees, discounts or other compensation received or accrued is added to the stated interest rate.
Civil Code Section 1916-3 imposes civil and criminal liability for usurious transactions. A borrower or debtor who paid interest on a usurious transaction is entitled to damages equal to treble the amount of money paid or the value delivered. Such an action must be brought within one year after making such a payment. In addition, the lender/creditor can be prosecuted for "loan sharking" which is a felony punishable by imprisonment for up to 5 years.
So, why aren't those banks issuing credit cards and car loans at higher interest rates being sued? Any person or entity licensed to loan money is expressly exempted from the general usury laws. This means mortgage companies and others with real estate licenses, pawn brokers, banks, savings and loan associations, credit unions, and others are not faced with the same ceiling.
For the rest of us, the California usury laws apply.
Back to Top
Other questions? Contact:
Daniel Kessler
BKGG Partner
949-975-7500
dkessler@bmkglaw.com