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

KEENAN WILLIAMS VS COLIN MACLEAN, ET AL.

Under the California Constitution, this interest rate appears to constitute illegal usury. Cal. Const. Art. 15, §1. Plaintiff must explain why this rate is lawful. - Plaintiff seeks to recover for common counts from individual defendants Colin and Christel Maclean, but the only evidence supporting plaintiff’s claim is a contract between Keenan Williams and Saratoga Juice Bar LLC. The individual defendants are not parties to the contract.

  • Hearing

    Jul 10, 2020

  • Type

    Collections

  • Sub Type

    Promisory Note

ESKANDARI STONE, INC., A CALIFORNIA CORPORATION, ET AL. VS RAYMOND J. PAGES

Fifth Affirmative Defense: No Cause of Action as Defendant Exempt from Usury Laws Defendant/Cross-Complainant Raymond J. Pages (“Defendant”) asserts as his fifth affirmative defense in the First Amended Answer that he is exempt from usury laws, so no cause of action may be maintained against him. Defendant cites Corporations Code section 25118, subdivisions (b)(1), (f)(1), and (f)(2), and Civil Code section 1916.1, as the bases for his assertion.

  • Hearing

    Jul 08, 2020

CYBERCODERS INC. VS BUNKER CAPITAL LLC

Under the California Constitution, this interest rate constitutes usury. Cal. Const. Art. 15, §1. Plaintiff must explain why this interest rate is lawful before obtaining default judgment. DENIED, with leave to file an OSC re: usury.

  • Hearing

    Jul 06, 2020

  • Type

    Collections

  • Sub Type

    Promisory Note

JENNIFER LECHTER VS JOSEPH LAM, ET AL.

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

  • Hearing

    Jul 06, 2020

  • 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

    Jul 06, 2020

  • Type

    Real Property

  • Sub Type

    other

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

Defendants move for summary judgment, arguing they have already paid the loans’ principal and that any remaining interest or fees owed are void under the California Constitution’s usury prohibition. Plaintiff’s evidentiary objection OVERRULED. Defendants’ evidentiary objections OVERRULED.

  • Hearing

    Jun 24, 2020

  • Type

    Collections

  • Sub Type

    Promisory Note

EDMUNDSON, ET AL. V. BONILLA, ET AL.

The parties dispute whether the agreements attached to the Complaint (entitled “Promissory Note”) are loans, which would be subject to the usury law, or part of joint ventures, which could exempt the agreements from usury laws. (See Junkin v.

  • Hearing

    Jun 19, 2020

TERESITA ALBA INDIVIDUALLY AND AS TRUSTEE OF THE TERESITA A. ALBA TRUST DATED NOVEMBER 1, 2016, VS H&O UNIQUE CONSTRUCTION, INC. A CALIFORNIA CORPORATION, ET AL.

Usury Claim In their supplemental brief, Plaintiffs also argue that the loan and loan modification were usurious. Plaintiffs rely on the usury claim to support the contention that Mehdiani “knew or should have known that charging Alba usurious rates of 11.99% and 22.99% on the loan and modification was harmful to Alba.” (Suppl. Oppo. 13-14.) Although Defendants declined to respond to the usury claim in their supplemental opposition, the court is not entirely persuaded by Plaintiffs’ arguments.

  • Hearing

    Apr 09, 2020

RICARDO RUBIO VS VICTOR SAMPSON

As alleged, the loans do not violate the usury laws. Plaintiff’s additional allegation at ¶ 33 that Sampson’s failure to comply with B&P Code § 10240 somehow invalidates his exemption to the usury laws is without merit and unsupported by any legal authority.

  • Hearing

    Mar 17, 2020

  • Type

    Real Property

  • Sub Type

    Quiet Title

  • Judge

    Lori Ann Fournier or Olivia Rosales

  • County

    Los Angeles County, CA

CAROLINE PHENIX VS. DON JOHNSON

Overrule Phenix's general demurrer to the second cause of action for unlicensed private investigative services, third cause of action for unauthorized practice of law, and fifth cause of action for usury law violations, on the ground that Phenix fails to identify any deficiencies in the pleading of these three causes of action.

  • Hearing

    Feb 28, 2020

SAM SEGAL ET AL VS BIDDING UNLIMITED INC ET AL

This is willful intent for purposes of usury. (WRI Opportunity Loans II, LLC v. Cooper (2007) 154 Cal.App.4th 525, 533 (“ ‘[T]he intent sufficient to support the judgment [of usury] does not require a conscious attempt, with knowledge of the law, to evade it.

  • Hearing

    Feb 28, 2020

  • Type

    Personal Injury/ Tort

  • Sub Type

    Fraud

PETER LAKE, AN INDIVIDUAL VS DAVID A. CRAMER, AN INDIVIDUAL

Moreover, the Court finds that the usury law is inapplicable here. The settlement between the parties to repay the debt over time, plus interest at the rate of 12% per annum does not represent an agreement to expend the payment of a debt, but rather created a new obligation. (See Roodenburg v. Pavestone Co., L.P. (2009) 171 Cal.App.4th 185.)

  • Hearing

    Feb 20, 2020

  • Type

    Real Property

  • Sub Type

    Landlord Tenant

  • Judge

    Lori Ann Fournier or Olivia Rosales

  • County

    Los Angeles County, CA

JEFF PERRY VS ERNEST TILL

Violation of Usury Laws – Loansharking (11th COA) “There are two remedies available to borrowers who have paid interest under a usurious loan agreement. A borrower who pays interest at a usurious rate may recover treble the amount paid, ‘providing such action shall be brought within one year after such payment or delivery.’

  • Hearing

    Feb 20, 2020

WE LOVE WATCHES VS ROBERT MARON

('RMI') has no affirmative defense to WLW's claim that the subject transactions were sales of goods not subject to the usury law"; and 2) "The undisputed facts demonstrate that there is no triable issue of fact as to RMI's cause of action as RMI cannot show that the subject transactions were subject to the usury law."

  • Hearing

    Feb 18, 2020

LASER VS CORPORAL BUILDING SERVICES

The court allows Plaintiff 10 days leave to amend to plead additional facts to establish standing and to avoid the bar of the statute of limitations and usury law. Absent a viable breach of contract cause of action, Plaintiff's breach of the covenant of good faith and fair dealing also fails. See, Pacific States Enterprises, Inc. v.

  • Hearing

    Jan 23, 2020

  • Type

    Contract

  • Sub Type

    Breach

GEORGIANNA CHRISTINE GARCIA VS BURCH CAPITAL, INC.

It is also alleged that during loan modification consideration defendants arbitrarily and falsely advised that the only options available to plaintiff were to pay off the subject loan or reinstate plaintiff’s account in full, and falsely added over $30,000 in charges and applied an unreasonable and usury rate without notice or explanation, and also made unexplained increases in the amount of the loan.

  • Hearing

    Jan 17, 2020

  • Type

    Real Property

  • Sub Type

    Foreclosure

GEORGIANNA CHRISTINE GARCIA VS BURCH CAPITAL, INC.

It is also alleged that during loan modification consideration defendants arbitrarily and falsely advised that the only options available to plaintiff were to pay off the subject loan or reinstate plaintiff’s account in full, and falsely added over $30,000 in charges and applied an unreasonable and usury rate without notice or explanation, and also made unexplained increases in the amount of the loan.

  • Hearing

    Dec 20, 2019

  • Type

    Real Property

  • Sub Type

    Foreclosure

CIT BANK, N.A. VS G & T GENERAL MERCHANDISE, LLC, ET AL.

(LR 3.214(d)) [OK] Interest Computations: Declaration re Usury Exemption – Plaintiff, as a national bank is exempt from usury laws – Fin. Code § 1504(b).

  • Hearing

    Dec 19, 2019

  • Type

    Real Property

  • Sub Type

    Landlord Tenant

VERNON CAPITAL VS. GIVV, INC.

The Comment does not indicate that usury in an underlying loan transaction is a ground for vacating a sister state judgment under section 1710.40, and Judgment Debtors cite no California decision in support of the proposition that it is. On the other hand, in the opposition memorandum, Judgment Creditor cites California decisions persuasively demonstrating that section 1710.40 is construed narrowly, and that usury would not be a ground for vacating a sister state judgment under section 1710.40.

  • Hearing

    Dec 11, 2019

CIT BANK, N.A. VS G & T GENERAL MERCHANDISE, LLC, ET AL.

(LR 3.214(d)) [NO] Interest Computations: Must explain exemption from usury laws to charge 24.90% per annum.

  • Hearing

    Nov 19, 2019

  • Type

    Real Property

  • Sub Type

    Landlord Tenant

CAMPOY VS. REITZFELD

But he has not alleged the actual elements of a usury cause of action, set out above.

  • Hearing

    Nov 07, 2019

ECHELON MEDICAL CAPITAL, LLC VS DR. KEVIN CALHOUN

Usury Defendant argues that the causes of action are predicated on an agreement that is unenforceable and illegal under Florida’s Lending Practices Act and Consumer Finance Act. Defendant argues that the agreement is usurious because it is a contract for a loan to enforce the collection of a debt at an interest rate above 18%. Defendant argues that under Florida law, the penalty for engaging in criminal usury is cancellation of the debt itself; thus, there is no valid contract.

  • Hearing

    Oct 25, 2019

  • Type

    Personal Injury/ Tort

  • Sub Type

    Fraud

  • County

    Los Angeles County, CA

ONEMAIN FINANCIAL GROUP LLC VS BUSTOS

In this regard, the motion was successful, as it "smoked out" a purported defense that was not raised in the answer: usury. See opposition brief at 9-10. Inasmuch as the pleadings frame the issues for summary judgment, this unpled defense is disregarded. The motion is denied. Plaintiff has failed to carry its initial burden to establish entitlement to summary judgment. The copy of the note attached to the complaint is legible but incomplete (only one page of three).

  • Hearing

    Oct 17, 2019

  • Type

    Collections

  • Sub Type

    Collections

ONEMAIN FINANCIAL GROUP LLC VS BUSTOS

In this regard, the motion was successful, as it "smoked out" a purported defense that was not raised in the answer: usury. See opposition brief at 9-10. Inasmuch as the pleadings frame the issues for summary judgment, this unpled defense is disregarded. The motion is denied. Plaintiff has failed to carry its initial burden to establish entitlement to summary judgment. The copy of the note attached to the complaint is legible but incomplete (only one page of three).

  • Hearing

    Oct 17, 2019

  • Type

    Collections

  • Sub Type

    Collections

MJ GLOBAL ENTERRPISE, INC., A CALIFORNIA CORPORATION, ET AL. VS SUSAN HEO, ET AL.

Usury The Heo Defendants contend that the usury cause of action fails because Open Bank is exempt from California’s usury laws. The Heo Defendants point out that Plaintiffs allege that Open Bank was the lender on the $200,000 loan (FAC, ¶ 29).

  • Hearing

    Oct 09, 2019

  • Type

    Personal Injury/ Tort

  • Sub Type

    Fraud

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