New York Usury Laws Explained
Definition of Usury
The term “USURY” is an ancient word that was used in context of unscrupulous practices in lending and financial transactions. Prior to the modern era, the charging of interest was considered “usury” and condemned by religions and religious governments. In many parts of the world, Muslim countries as an example, this practice is still outlawed.
As the United States is a secular, capitalist nation there are no laws prohibiting the charging of interest. There are, however, state statutes governing the amount of interest that can be charged and statutes that regulate the pricing of certain items or services. Criminal usury is considered a WHITE COLLAR CRIME and is usually dealt with through use of financial penalties.
Usury is the general practice of making unethical financial loans that unilaterally benefit the lender. Typically, a loan is considered usurious if the interest rate is excessive or abusive. Usurious loans can be made by any person or business willing to step outside the limits of the law. The common term in America for usurious lenders is loan shark. In Dante’s “The Divine Comedy,” usurious lenders were relegated to the inner ring of the seventh circle of hell.
Usury in New York
In America, the main legal authority to regulate interest rates lies with each state. New York law says how much interest can be charged on a loan before it is considered usurious. If a lender bills for interest above the approved rate, New York courts will bar the lender from attempting to recover the debt through a lawsuit as the original load was illegal because of the unlawful interest. In New York, such loans are made void ab initio.
In New York, charging interest greater than 16 percent annual, but less than, or equal to 24 percent is civil usury. Interest rates of 25 percent or more is criminal usury.
Despite the New York usury laws, lenders frequently provide loans at higher rates, often between 350 and 650 percent.
Payday Lenders
Just one example of the groups of lenders that are currently on the radar of New York legislators are so-called payday lenders.
Payday lenders offer quick cash to borrowers who are willing to put up their paychecks as collateral.
“The exploitative practice, including exorbitant interest rate and automatic payments are typical of this industry as a whole,” said Cyrus R. Vance Jr., Manhattan District Attorney.
Fees and Charges Count — Sometimes
One confusing inside New York law is the question often asked by potential borrowers: “What fees count towards a loan’s interest rate when it comes to calculating the possibility of usury laws being broken.”
Any loan secured by real property can allow origination fees, points and all other amounts paid, or payable, by any person for the account of the lender in exchange and consideration for making the loan. In other words, several fees and charges do not get calculated as part of the interest rate on home/real estate loans:
Reasonable fees, appraisal charges, title searches, title insurance and notarizations Charges that cover mortgage recording, taxes and incidental government charges, and Fees included in a signed contract between lender and borrower which are triggered by specific acts or defaults of the borrower including prepayment penalties, delinquent fees and collection fees
Usury Penalties
Because of the way New York laws are written, a person convicted of usurious interest rates could face penalties ranging from probation to prison. Incarceration is in addition to any other co-occurring crimes, such as bank fraud and money laundering. Healthy monetary fines are typically levied as well as the court’s requirement for restitution.
Find a Usury Attorney
As the New York laws surrounding usury can be confusing, if you are charged with usurious lending, your first step should be contacting Bukh Law Firm.
Bukh Law Firm have spent years helping individuals and businesses charged with violating the state’s laws regarding interest and have the experience and talent to help you walk away with the best possible outcome of your case.
