What You Should Know About Florida Usury Laws
Usury doesn’t sound like the kind of topic that comes up on a day to day basis. It may actually sound like something that comes up in gangster movies or stories about bookies taking under the table bets. And it’s true that most major lenders, well aware of the usury laws in their state, tend to be smart enough to avoid running into problems with usury. Still, as a consumer, it’s good to understand usury laws, and to be able to spot usury when you see it.
Usury is the charging of an interest rate that’s above the legal limit of interest that can be charged. In Florida, the maximum interest rate that can be charged is 18% for loans that are up to $500,000 and 25% on loans that are greater than that amount.
Usury is a criminal offense, and can vary between a misdemeanor and a felony depending on the amount of interest that is charged. Most consumers care about the civil aspect, which can make either the interest uncollectable, or in some cases, can completely void the entire agreement and entitle a borrower to refunds of moneys paid.
You may be thinking that you have loads of creditors that charge more than the maximum numbers stated above. That’s because usury is a state limit that doesn’t apply to national banks. That’s why your credit card company can get away with charging you 25% on a $3,000 loan.
How Usury Happens
Many loans end up being usurious for two reasons. The first is greed, but that’s not a legal reason. The other reason is failure to take into account extra fees or charges, and details of the statute.
For example, the usury statute says that usury is calculated on a 365 day year. But a lender may calculate it on a 360 day year. When extrapolated to 365 days as the statute requires, the loan could end up being usurious.
Compound interest gets lenders in trouble. For example, many lenders will charge “interest on interest.” This is legal by itself, but even if the base yearly rate may be under the usury limit, when compounded, the yearly limit can easily exceed the yearly rate.
Similarly, lenders may charge interest but also late fees. Labeling late fees as a “fee” doesn’t mean the court won’t see it is just extra interest.
Intention at Creation Matters
To see if a contract is usurious, courts will look to the intention of the parties—that is, what they intended to charge at the time the contract was entered into. Practically, that means that a lender that generously decides to “forgive” or not charge or demand payment for interest that exceeds the legal rate, won’t make the agreement legal.
If you are being sued on a contract with excessively high interest get a professional legal opinion on whether the agreement is enforceable in court. Contact Jacobs Legal in Miami today to discuss your rights and defend yourself from creditors.