Usury Penalties A lender that knowingly collect
Post# of 15187
Posted On: 06/19/2016 3:04:10 PM
Usury Penalties
A lender that knowingly collects criminally usurious interest commits a felony and could face penalties ranging from probation to prison. These penalties are 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. Significantly, while prior case law suggested that there was no civil remedy for criminal usury with respect to loans not subject to the civil usury statute (i.e., loans of $250,000 or more), a recent appellate court held, in Blue Wolf Capital Fund II, L.P. v. American Stevedoring Inc., 961 N.Y.S.2d 86 (1st Dep’t 2013), that such loans are nevertheless void and some lenders may be subject to forfeiture of principal and interest — or, in the case of a savings bank, a savings and loan association or a federal savings and loan association, a borrower may be able to recover twice the interest paid.
Substance Over Form
Attempts to disguise interest may put a loan in jeopardy. In order to determine whether a transaction is usurious, courts look not to its form but to its substance or real character. Warrants, success fees, consulting fees and other fees may be appropriate, but if used to disguise interest, lenders may be inviting trouble.
A lender that knowingly collects criminally usurious interest commits a felony and could face penalties ranging from probation to prison. These penalties are 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. Significantly, while prior case law suggested that there was no civil remedy for criminal usury with respect to loans not subject to the civil usury statute (i.e., loans of $250,000 or more), a recent appellate court held, in Blue Wolf Capital Fund II, L.P. v. American Stevedoring Inc., 961 N.Y.S.2d 86 (1st Dep’t 2013), that such loans are nevertheless void and some lenders may be subject to forfeiture of principal and interest — or, in the case of a savings bank, a savings and loan association or a federal savings and loan association, a borrower may be able to recover twice the interest paid.
Substance Over Form
Attempts to disguise interest may put a loan in jeopardy. In order to determine whether a transaction is usurious, courts look not to its form but to its substance or real character. Warrants, success fees, consulting fees and other fees may be appropriate, but if used to disguise interest, lenders may be inviting trouble.
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