The term usury isn’t one used in many everyday conversations. It’s defined as the “Illegal action or practice of lending money at unreasonably high rates of interest,” and it’s a crime punishable by law. A loan shark is one of the best ways to provide an example or usury crime. Usury is most often considered white collar in the criminal world, and it’s handled with financial restitution and penalties rather than jail time or criminal punishment. Every state has authority to determine proper interest rates, and the State of New York is no exception. State regulators work to determine how much interest a lender can legally charge before they cross the line into excessive interest.
It’s not always simple for the everyday citizen without ample legal experience to understand how usury law works. Interest rates vary significantly based on several factors, and it’s confusing to many. For example, the interest a person pays for their mortgage is far less than the interest they pay on a credit card account. Two people can carry the same credit card from the same lender, issued on the same day, and one might pay more interest on the card than the other. Why is this? Every lender is provided the legal ability to choose the interest rate their customers pay. Lenders use credit scores, down payments, types of loans being applied for, and credit history as a means for determining how much money a customer can borrow as well as how much interest they can charge each customer. Fortunately, credit card interest rates are not considered a financial loan, so usury doesn’t apply.
Usury Laws in New York
The law is always subject to change. Currently, lenders in New York are legally permitted to charge customers interest on any financial loan up to a certain point. The penalties are then placed in two distinct categories.
Civil usury, as defined in New York, is the act of charging a borrower between 16 and 24 percent interest on a financial loan. Criminal usury in New York is the act of charging a borrower 25 percent or more on a loan. Unfortunately, many lenders make it a common practice to charge their borrows criminal usury rates despite the laws. One example of a lender guilty of criminal usury is a payday loan lender. These companies typically target individuals with poor credit history and/or financial problems. They promise to lend customers money in return for their promise to use their next paycheck to pay off the loan, but they charge interest rates averaging more than 100% in many instances.
This causes customers to owe more money than they can afford when it’s time to repay their loan, forcing them to apply for yet another payday loan. It doesn’t take long before the customer is in so much debt with the lender they end up paying back double, triple, or more than the amount they borrowed in the first place.
Special consideration and additional laws apply to loans over a certain amount of money. Loans of more than $2.5 million are subject to a different set of rules than loans less than $250,000. This is why it’s imperative someone with a criminal usury case contacts a New York attorney for help understanding the law, what the penalties might be, and how you can plead your case to avoid fines, penalties, probation, and even jail time.
Many people have questions about fees that originate with their loans. Fees are not always calculated when it comes to the interest rate being charged on a loan, specifically in real estate loans. Other fees, however, might apply to the interest charged on a loan. Understanding the differences, which fees are considered, and which fees are not is helpful when it comes to understanding criminal usury.
New York Usury Penalties
How a lender is charged for usury in New York varies based on the case, the offense, and several other factors. While it’s typically considered a white collar crime, there are lenders that face prison time for providing loans with criminal usury rates. Most people who face prison time are also found guilty of other financial crimes. If usury is the only crime a lender is guilty of, the most common penalties are financially related. Probation is not uncommon, and many lenders with states licenses put their licenses at risk if they’re found guilty of criminal usury.
Finding an attorney who works with you to ensure you are given the best possible protection in a criminal usury case is in your best interest. Our attorneys work with the knowledge and experience it takes to help clients defend their case by understanding the charges brought against them and the crimes they’re being accused of committing. Talking to an attorney about your rights helps you understand the law, which protects you and your business.