What are the Interest Rates and Usury Laws?

California’s usury law, found in Article XV, Section 1 of the California Constitution, limits the interest rate which may be charged on nonpersonal loans. Loans made or arranged by licensed real estate brokers are exempt from the limit. Id.; CC Sec. 1916.1.

Elements

The essential elements of usury are:

  1. The transaction must be a loan or forbearance;
  2. the interest to be paid must exceed the statutory maximum;
  3. the loan and interest must be absolutely repayable by the borrower; and
  4. the lender must have a willful intent to enter into a usurious transaction.

Ghirardo v. Antonioli (1994) 8 Cal. 4th 791, 798.

Standard of Review

The constitutional proscription against usury applies by its express terms only to a “...loan or forbearance of any money, goods or things in action.” (Cal. Const., art. XV, Sec. 1.) Without a loan or forbearance, usury cannot exist. (Southwest Concrete Products v. Gosh Construction Corp. (1990) 51 Cal. 3d 701, 705.) “However, ‘[b]oth a loan of money and a forbearance’ are to be distinguished from a sale which is the 'transfer of property in a thing for a price in money.’” (O'Connor v. Televideo System, Inc. (1990) 218 Cal. App.3d 709, 713.)

“In determining whether a transaction constitutes a loan or forbearance, we look to the substance rather than the form of the transaction.” (Boerner v. Colwell Co. 21 Cal. 3d 38, 44.) "In all such cases the issue is whether or not the bargain of the parties, assessed in light of all the circumstances and with a view to substance rather than form, has as its true object the hire of money at an excessive rate of interest." Id.

Statute of Limitations

“Every person... who for any loan or forbearance of money, goods or things in action shall have paid or delivered any greater sum or value than is allowed to be received ... may ... recover in an action at law against the person, company, association or corporation who shall have taken or received the same, or his or its personal representative, treble the amount of the money so paid or value delivered in violation of said sections, providing such action shall be brought within one year after such payment or delivery.” (Civ. Code, § 1916-3(a).)

Remedies

The Usury Law is designed to discourage the imposition of excessive charges on necessitous borrowers, and in order to foster this policy, it provides for an additional, cumulative remedy to a borrower against the lender of the usurious loan. (E.g., Gibbo v. Berger (2004) 123 Cal.App.4th 396, 404; Charlotte Guyer and Assoc. v. Franklin Factors (1963) 211 Cal.App.2d 690, 696 (stating “plaintiff is entitled to a return of interest paid prior to the one-year period and treble the amount of usurious interest paid within one year”); Penziner v. West American Finance Co. (1937) 10 Cal.2d 160, 171.) As a statutory penalty against the lender, the borrower can recover damages against the lender in the sum of three times the amount of interest paid the lender during the one-year period preceding the filing of the action. (Id.)

Useful Rulings on Interest Rates and Usury Laws

Recent Rulings on Interest Rates and Usury Laws

BRISTER V. YOUNG

Therefore, the usury law interest limits of the California Constitution applies to the transaction in question and it would appear that the 20% annual interest, which is prayed for, is a usurious rate and can not be awarded. TENTATIVE RULING # 2: APPEARANCES ARE REQUIRED AT 8:30 A.M. ON FRIDAY, NOVEMBER 20, 2020 IN DEPARTMENT NINE. NOTE: NO PERSONAL APPEARANCES WILL BE ALLOWED DUE TO THE ONGOING PUBLIC HEALTH CRISIS. APPEARANCES VIA ZOOM ARE REQUIRED AND MEETING INFORMATION WILL BE PROVIDED.

  • Hearing

SAM SEGAL ET AL VS BIDDING UNLIMITED INC ET AL

For example, according to the Segals, they will demonstrate that Itkin placed the 15% interest rate in the Note with full knowledge of this state’s usury laws. Conclusion BUI’s and Itkin’s motion for judgment on the pleadings is denied.

  • Hearing

  • Type

    Personal Injury/ Tort

  • Sub Type

    Fraud

MANUEL BOROBIA VS COUNTRYWIDE HOME LOANS, INC., (A "LENDER"), ET AL.

On June 17, 2020, Plaintiff in pro per filed a 15 cause of action complaint for breach of real estate agreement/contract and impaired covenant of good faith and fair dealing, fraud in factum, usury and misrepresentation, theft and embezzlement of promissory note deposit money, theft of real property, violation of GAAP and GAAS, violation of notice law, violation of disclosure law, violation of fair debt collection practices act, violation of administrative procedures act, violation of truth in lending act (regulation

  • Hearing

  • Type

    Real Property

  • Sub Type

    Foreclosure

MANUEL BOROBIA VS COUNTRYWIDE HOME LOANS, INC., (A "LENDER"), ET AL.

On June 17, 2020, Plaintiff in pro per filed a 15 cause of action complaint for breach of real estate agreement/contract and impaired covenant of good faith and fair dealing, fraud in factum, usury and misrepresentation, theft and embezzlement of promissory note deposit money, theft of real property, violation of GAAP and GAAS, violation of notice law, violation of disclosure law, violation of fair debt collection practices act, violation of administrative procedures act, violation of truth in lending act (regulation

  • Hearing

  • Type

    Real Property

  • Sub Type

    Foreclosure

LASER VS CORPORAL BUILDING SERVICES

In light of this ruling the court does not reach Defendants' usury arguments. The court orders Defendants to submit a proposed judgment of dismissal within 10 days of this ruling.

  • Hearing

  • Type

    Contract

  • Sub Type

    Breach

LASER VS CORPORAL BUILDING SERVICES

In light of this ruling the court does not reach Defendants' usury arguments. The court orders Defendants to submit a proposed judgment of dismissal within 10 days of this ruling.

  • Hearing

  • Type

    Contract

  • Sub Type

    Breach

GERALD M. FRIEDMAN, ET AL. VS YOSSI DINA, ET AL.

Affirmative defenses 30, 39, and 40 assert that the contracts alleged in the FAC are void or unenforceable as against public policy because of purported usury. Plaintiffs argue that a loan with a usurious interest is not void, and usury is not a viable defense against Plaintiffs’ ability to collect the principal on the loan.

  • Hearing

  • Type

    Personal Injury/ Tort

  • Sub Type

    Fraud

JOSEPH SAIDIAN, ET AL. VS IRA JAY BOREN, ET AL.

Second Cause of Action for Violation of California Constitution Article XV, § 1 “‘“Usury is the exacting, taking or receiving of a greater rate than is allowed by law, for the use or loan of money.” [Citation.] A transaction is usurious if there is a loan at greater than the legal rate of interest or an exaction at more than the legal rate for the forbearance of a debt or sum of money due. [Citation.]’ [Citation.]

  • Hearing

  • Type

    Personal Injury/ Tort

  • Sub Type

    Fraud

JOSEPH SAIDIAN, ET AL. VS IRA JAY BOREN, ET AL.

Second Cause of Action for Violation of California Constitution Article XV, § 1 “‘“Usury is the exacting, taking or receiving of a greater rate than is allowed by law, for the use or loan of money.” [Citation.] A transaction is usurious if there is a loan at greater than the legal rate of interest or an exaction at more than the legal rate for the forbearance of a debt or sum of money due. [Citation.]’ [Citation.]

  • Hearing

  • Type

    Personal Injury/ Tort

  • Sub Type

    Fraud

ENGAGE BDR, LLC VS AMOBEE, INC.

Plaintiff’s usury claim arose out of and related to the Master Demand Agreement. See Complaint, ¶¶34-35. Plaintiff’s economic duress claim was an action for restitution arising from the allegedly usurious terms of the Master Demand Agreement. See Complaint, ¶71; FAC, ¶¶88-90. None of the complaints contained any tort claims. Thus, all of Plaintiff’s complaints and causes of action were “on the contract” under Civil Code §1717(a). See Douglas E.

  • Hearing

  • Type

    Contract

  • Sub Type

    Breach

  • Judge

    H. Jay Ford

  • County

    Los Angeles County, CA

RICARDO RUBIO VS VICTOR SAMPSON

Demurrer is OVERRULED. 2nd CAUSE OF ACTION USURY: “A loan is exempt from the usury law if the loan is ‘made or arranged by any person licensed as a real estate broker by the State of California and secured in whole or in part by liens on real property…. [Citation.] Broker made loans are those in which the broker acts as a principal by lending the broker’s own money. [Citation.]

  • Hearing

  • Type

    Real Property

  • Sub Type

    Quiet Title

  • Judge

    Lori Ann Fournier or Olivia Rosales

  • County

    Los Angeles County, CA

JOSEPHINE L. ELLINGER, ET AL. VS ANR TURTLEROCK, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY, ET AL.

In Opposition, Plaintiffs argue that the “bank records sought from East West Bank are all relevant to prove the notes and Plaintiffs’ efforts to enforce them do not run afoul of usury conventions.” (Opp. 3:21-22.) For discovery purposes, information is relevant if it might reasonably assist a party in evaluating the case, preparing for trial, or facilitating settlement. (Gonzales v. Superior Court (1995) 33 Cal.App.4th 1539, 1546.).

  • Hearing

  • Type

    Personal Injury/ Tort

  • Sub Type

    Fraud

  • Judge

    Lori Ann Fournier or Olivia Rosales

  • County

    Los Angeles County, CA

WILMINGTON SAVINGS FUND SOCIETY, FSB., ET AL VS LATANYA LOUIS

This violates the usury restrictions of California Constitution, article 15, which limits interest on loans for personal, family or household purposes to ten percent per year. Plaintiff must put forth evidence showing this loan falls outside those categories, or it is exempt. Plaintiff may choose to accept 10% interest or file additional papers. IN LIGHT OF THE ONGOING COVID-19 PANDEMIC PARTIES AND COUNSEL ARE TO APPEAR REMOTELY VIA LA COURT CONNECT.

  • Hearing

  • Type

    Real Property

  • Sub Type

    Landlord Tenant

BANK OF HOPE, A CALIFORNIA CORPORATION VS CALIFORNIA AVERLAND CONSTRUCTION, INC., ET AL.

Although Plaintiff pleads that “Plaintiff is exempt from the usury provisions of Article XV, Section 1, of the California Constitution,” (see Complaint at ¶ 1), Plaintiff does not explain why and fails to provide the annual percentage rate used in its calculation. Further, Plaintiff fails to provide an interest declaration explaining how it calculated the “Default Rate.”

  • Hearing

MANUEL BOROBIA VS COUNTRYWIDE HOME LOANS, INC., (A "LENDER"), ET AL.

On June 17, 2020, Plaintiff in pro per filed a 15 cause of action complaint for breach of real estate agreement/contract and impaired covenant of good faith and fair dealing, fraud in factum, usury and misrepresentation, theft and embezzlement of promissory note deposit money, theft of real property, violation of GAAP and GAAS, violation of notice law, violation of disclosure law, violation of fair debt collection practices act, violation of administrative procedures act, violation of truth in lending act (regulation

  • Hearing

  • Type

    Real Property

  • Sub Type

    Foreclosure

MB PROPERTIES, LLC VS A-MAY INVESTMENT, LLC, ET AL.

Plaintiff argues (1) the subject loan is exempt from the California Constitution’s usury restrictions on the basis that it was arranged by a licensed real estate broker and is secured by real property (Civ. Code § 1916.1); (2) the subject loan is exempt from the California Constitution’s usury restrictions because the borrower and lender had a preexisting business relationship and the borrower had the resources to protect itself (Corp.

  • Hearing

  • Type

    Contract

  • Sub Type

    Breach

HAYK MELKUMYAN VS. ELMER A. DIAZ, ET AL

Specifically, the court is concerned about the rate of interest being charged and usury laws. Plaintiff was invited to file additional briefing. It is likely that the court will set a hearing on the issues of damages. The parties and witnesses may appear remotely.

  • Hearing

  • Type

    Personal Injury/ Tort

  • Sub Type

    Fraud

LEV INVESTMENTS, LLC VS RUVIN FEYGENBERG, ET AL.

Plaintiff filed a first amended complaint (FAC) on September 27, 2019, alleging claims for: (1) breach of the implied covenant against encumbrances; (2) usury; (3) quiet title; and (4) declaratory relief. Zhu was dismissed from this action on February 19, 2020. On March 20, 2020, Feygenberg, Leizerovitz, and Sensible (Defendants) filed a cross-complaint against Plaintiff, Dmitri Lioudkovski, Yevgeniya Lisitsa, Lisitsa Law, Inc., Real Property Trustee, Inc.

  • Hearing

  • Type

    Real Property

  • Sub Type

    other

MARINA HABA VS VICINO LIMITED PARTNERSHIP, A CALIFORNIA LIMITED PARTNERSHIP, ET AL.

On August 7, 2020, Plaintiff filed a First Amended Complaint asserting causes of action for: (1) Declaratory Relief; (2) Breach of Contract; (3) Breach of the Implied Covenant of Good Faith and Fair Dealing; (4) Tortious Interference with Contract; (5) Aiding and Abetting Tortious Interference with Contract; (6) Intentional Misrepresentations; (7) Negligent Misrepresentations; (8) Usury [Civ. Code §1916-3]; and (9) Unfair Business Practices [Cal. Bus. Prof. Code §§17200 et seq.].

  • Hearing

  • Type

    Personal Injury/ Tort

  • Sub Type

    Fraud

  • Judge

    Paul A. Bacigalupo or Virginia Keeny

  • County

    Los Angeles County, CA

AMIR REJAEI, ET AL., VS BRYAN SIEGEL, ET AL.,

Defendants cross-complained, alleging usury. On February 6, 2020 the court granted plaintiffs’ unopposed motion to conduct limited discovery on defendants’ financial condition for punitive damages purposes.

  • Hearing

  • Type

    Collections

  • Sub Type

    Promisory Note

MANUEL BOROBIA VS COUNTRYWIDE HOME LOANS, INC., (A "LENDER"), ET AL.

On June 17, 2020, Plaintiff in pro per filed a 15 cause of action complaint for breach of real estate agreement/contract and impaired covenant of good faith and fair dealing, fraud in factum, usury and misrepresentation, theft and embezzlement of promissory note deposit money, theft of real property, violation of GAAP and GAAS, violation of notice law, violation of disclosure law, violation of fair debt collection practices act, violation of administrative procedures act, violation of truth in lending act (regulation

  • Hearing

  • Type

    Real Property

  • Sub Type

    Foreclosure

ELIZON DB TRANSFER AGENT LLC VS CARITINA DRIVE, LLC, ET AL.

Elizon also asserts that the two-year statute of limitations to claim usury has elapsed and it is too late for the Bandys to do so now. App. at 17-18; Reply at 5-6. Finally, Elizon contends that the Note’s usury savings clause would entitled it to the maximum interest permitted by law. App. Ex. C, §17. Reply at 7-8. A loan in excess of 10% interest is usurious. Cal. Const., Art. XV, §1. However, the usury law does not apply to loans arranged by a licensed real estate broker. Civil Code §1916.1.

  • Hearing

  • Type

    Real Property

  • Sub Type

    other

JENNIFER LECHTER VS JOSEPH LAM, ET AL.

XV; Civil Code secs. 1916 -2 and 1916-3) – 2017 Friedman Loan Usury (CA Const. Art.

  • Hearing

  • Type

    Real Property

  • Sub Type

    other

ARMANDO FLORES, ET AL. VS EDK CUSTOM WHEELS, LLC

Plaintiffs’ main allegations are that the Promissory Note violates California usury law. Accordingly, Defendant’s demurrer to the second cause of action is SUSTAINED with 30 days leave to amend. Third Cause of Action – Treble Damages Defendant contends that California law allows a lender to charge up to seven percent annually, charging 5.44% over the last two years does not run afoul of California’s usury law and does not entitle Plaintiffs to treble damages.

  • Hearing

  • Type

    Real Property

  • Sub Type

    other

  • Judge

    Lori Ann Fournier or Olivia Rosales

  • County

    Los Angeles County, CA

JOHN BANAFSHEHA VS DJAMSHID YOUNESSI

[TENTATIVE] ORDER RE: DEFENDANT’S MOTION FOR SUMMARY JUDGMENT On May 8, 2018, Plaintiff John Banafsheha (“Plaintiff”) filed his first amended complaint (“FAC”) against Djamshid Younessi, individually and as Trustee of the Younessi Living Trust dated February 19, 1997 (“Defendant”) alleging (1) usury, (2) fraud, and (3) money had and lent. On August 30, 2018, the Court sustained Defendant’s demurrer to the first and third causes of action without leave to amend.

  • Hearing

  • Type

    Personal Injury/ Tort

  • Sub Type

    Fraud

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