Usury Laws: Florida's Business Loan Interest Rate Limits

Usury laws, which have existed in some form for thousands of years, are designed to protect needy borrowers from unscrupulous lenders. In the US state of Florida, usury laws are covered by Florida Statute Ch. 687. The maximum rate of interest that can be charged on loans of less than $500,000 is 18%. For loans that exceed $500,000, the maximum legal rate of interest is 25%.

The consequences of charging a usurious rate of interest can be severe. Lenders may be required to forfeit all interest charged, and the loan may become unenforceable. In addition, lenders may be liable to the borrower for damages, and may face criminal penalties.

Usury laws apply to interest charged on loans of money or forbearances of the collection of money. However, courts will look beyond the form of a transaction to its substance, so unscrupulous lenders cannot disguise an otherwise usurious loan as something else.

The maximum interest rate for loans under $500,000

In Florida, the maximum interest rate for loans under $500,000 is 18% per annum. This is the case for both simple interest and compound interest.

Florida's usury law is found in Fla. Stat. Ch. 687. Usury typically refers to the practice of charging interest on a loan that exceeds the legally established maximum allowable rate. In Florida, the maximum rate of interest of 18% on loans of less than $500,000 is established by Fla. Stat. § 687.03.

The four prerequisites for proving a usurious transaction are:

• An express or implied loan
• An understanding between the parties that the money must be repaid
• An agreement to pay a rate of interest in excess of the legal rate
• A corrupt intent to take more than the legal rate for the use of the loaned money

If a court finds that a loan is usurious, the lender forfeits all interest charged. With respect to loans deemed to be criminally usurious, the entire debt becomes unenforceable, and the lender may be liable to the borrower for damages in the amount of double the interest taken.

The maximum interest rate in Florida does not apply to national banks, pawnbrokers, or small loan companies.

The maximum interest rate for loans over $500,000

Florida's usury law is found in Fla. Stat. Ch. 687. In Florida, the maximum interest rate for loans of $500,000 or more is 25% per annum simple interest. This means that the interest rate is calculated as a flat rate over the full calendar year, and does not compound.

The usury law in Florida applies to interest charged on loans of money or forbearances of the collection of money. This means that ordinarily, usury laws would not apply to other transactions, such as a lease. However, courts can look beyond the form of a transaction to its substance and apply the usury law if they find that an arrangement has been disguised as something other than a loan.

The four prerequisites for proving a usurious transaction are:

• An express or implied loan
• An understanding between the parties that the money must be repaid
• An agreement to pay a rate of interest in excess of the legal rate
• A corrupt intent to take more than the legal rate for the use of the money loaned

If a loan is deemed usurious, the lender forfeits all interest charged. With respect to loans deemed to be criminally usurious, the entire debt becomes unenforceable, and the lender may be liable to the borrower for damages in the amount of double the interest taken.

It is important to note that the maximum interest rate does not apply to national banks, pawnbrokers, or small loan companies.

Criminal penalties for usury

Usury laws in Florida are designed to protect borrowers from unfair lending practices that involve charging exorbitant interest rates. These laws set a cap on the maximum interest rate that lenders can legally charge on loans. The primary goal is to ensure that loans are fair and reasonable, fostering a healthy economic environment where businesses can thrive without being burdened by overwhelming debt.

In Florida, the maximum interest rate of 18% on loans of less than $500,000. On loans that exceed $500,000, the maximum legal rate of interest is 25%. It is a criminal offense to provide loans with effective interest rates of 25% or more, but less than 45%. Interest rates that exceed 45% are punishable as a third-degree felony.

If a loan is deemed usurious, the lender forfeits all interest charged. With respect to loans deemed to be criminally usurious, in addition to forfeiting the interest, the entire debt becomes unenforceable. The lender may also be liable to the borrower for damages in the amount of double the interest taken. Furthermore, the lender may be liable for the borrower's attorney's fees.

• Second-degree misdemeanor for interest rates between 25% and 45%.
• Third-degree felony for interest rates exceeding 45%.
• Second-degree felony for extortionate extensions of credit, where the use of violence or criminal means is threatened to collect debt.
• First-degree misdemeanor for possessing or maintaining books of account or other documents recording extensions of credit in violation of the above usury laws.

It is important to note that usury laws apply to interest charged on loans of money or forbearances of debt collection. However, courts may look beyond the form of a transaction to its substance to determine if an otherwise usurious loan is disguised as another type of transaction, such as a lease.

To prove a usurious transaction in Florida, the following four prerequisites must be met:

• An express or implied loan.
• An understanding between the parties that the money must be repaid.
• An agreement to pay an interest rate that exceeds the legal rate.
• A corrupt intent to take more than the legal rate for the use of the loaned money.

The test for a corrupt intent is whether the lender consciously intends to charge and receives interest that exceeds the legal rate. The lender's testimony that they did not intend to charge excessive interest is not determinative, and the surrounding circumstances of the transaction will be considered.

In summary, usury laws in Florida impose criminal penalties on lenders who charge excessive interest rates, with the severity of the penalty increasing as the interest rate rises above the legal limit. These laws are designed to protect borrowers and promote a fair and healthy lending environment in the state.

Usury laws and compounding interest

Usury laws are state laws that specify the maximum legal interest rate at which loans can be made. In the United States, the primary legal power to regulate usury rests primarily with the states. Each U.S. state has its own statute that dictates how much interest can be charged before it is considered usurious or unlawful.

Usury typically refers to the practice of charging interest on a loan that exceeds the legally established maximum allowable rate. The concept of usury, and laws against it, have been around for thousands of years. The Old Testament, for example, commands that "thou shalt not lend upon usury to thy brother" or "take usurious interest from him".

In Florida, the maximum rate of interest is 18% on loans of less than $500,000. On loans that exceed $500,000, the maximum legal rate of interest is 25%. It is a criminal offense—a misdemeanor or felony—to provide loans that have effective interest rates of 25% or more but less than 45%. Interest rates that exceed 45% are punishable as a third-degree felony.

Florida's usury law also provides for the compounding of interest. Interest or finance charges on any loan or extension of credit secured by a mortgage that contains a provision for the compounding of interest may be compounded, provided the total amount of interest received by the lender as a result of such compounding, including interest upon interest, does not exceed any interest rate limitation imposed by applicable law.

In New York, a loan or other agreement providing for compound interest is enforceable, provided that such compound interest shall begin to accrue and become due and payable on the later of either June 24, 1989, or the date that any obligation to pay such compound interest may have arisen, including the date of any default or event of default under such loan or other agreement. The term "compound interest" means the accrual of interest upon unpaid interest, irrespective of whether such unpaid interest is added to the principal debt.

In California, the general rule is that professional lenders are exempt from limitations on usury under California law. An initiative measure enacted in 1918 (the "Initiative"), eventually included in California Civil Code Section 1916-1 through 1916-5, limits the amount of interest lenders may charge, and Section 1916-2 provides that lenders may not charge compound interest "unless an agreement to that effect is clearly expressed in writing and signed by the party to be charged therewith." This requirement is referred to as the "Disclosure Requirement."

The determination of whether a loan is usurious depends on the substance of the transaction rather than its form. At the outset, it is important to note that usury laws apply to interest charged on loans of money or forbearances of the collection of money. Therefore, ordinarily, usury laws would not apply to other transactions, such as a lease. However, unscrupulous lenders might try to disguise an otherwise usurious loan as something other than a loan. Courts are not blind to this fact and will look beyond the form of a transaction to its substance in determining whether an agreement is usurious.

The four prerequisites for proving a usurious transaction are:

• An express or implied loan;
• An understanding between the parties that the money must be repaid;
• An agreement to pay a rate of interest in excess of the legal rate; and
• A corrupt intent to take more than the legal rate for the use of the money loaned.

Usury laws and late fees

In Florida, usury laws apply to loans with interest rates exceeding 18% per annum for loans under $500,000, and 25% for loans over $500,000. These laws are outlined in Florida Statute Chapter 687. Late fees, on the other hand, are addressed separately under Florida Statute §83.808, which states that landlords may charge tenants a reasonable late fee, with a fee of $20 or 20% of the monthly rent considered reasonable. Late fees above this threshold are not prohibited but would need to be proven reasonable in court if challenged.

In California, usury laws apply to consumer loans with interest rates above 10% per annum and non-consumer loans with rates above the greater of 10% or the federal discount rate plus 5%. Late fees are not considered interest and are generally allowed as long as they are reasonable. The California Supreme Court has upheld an 18% interest rate on unpaid invoices for goods and services as valid and not subject to usury limitations. However, such a high interest rate may be challenged as an unreasonable penalty.

Therefore, while usury laws set maximum interest rates for loans, late fees are typically treated separately and assessed for reasonableness rather than being subject to the same caps as interest rates.

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