A usurious contract is an agreement that involves charging interest on a debt at a rate higher than what is legally allowed. In such contracts, the lender receives more than the permitted interest rate, which can lead to legal issues. The law generally does not support the enforcement of these contracts, meaning that individuals can seek relief if they are affected by them.
Usurious contracts are primarily relevant in civil law, particularly in cases involving loans and debts. They often arise in financial disputes where one party claims that the interest charged exceeds legal limits. Users can manage these situations with legal templates from US Legal Forms, which provide resources for drafting agreements that comply with state laws.
Here are a couple of examples of abatement:
In a hypothetical example, if a lender charges a borrower an interest rate of 15 percent on a loan where the legal limit is 10 percent, this would constitute a usurious contract. If the borrower defaults, they could argue in court that the contract is unenforceable due to usury.
Usury laws vary by state, but they generally set maximum interest rates for loans. For example, many states have statutes that explicitly define the legal interest rates and the penalties for violating these limits. Notable cases, such as Chaffe v. Wilson, establish that courts will not enforce usurious contracts.
| State | Maximum Interest Rate |
|---|---|
| California | 10 percent |
| Texas | 18 percent |
| New York | 16 percent |
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
| Term | Definition |
|---|---|
| Usurious Contract | A contract that charges an illegal interest rate. |
| Predatory Lending | Loans that impose unfair or abusive terms on borrowers. |
| Loan Sharking | Illegal lending practices often involving extreme interest rates. |
If you believe you are involved in a usurious contract, consider the following steps:
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A usurious contract is one that involves charging interest at a rate higher than what is legally allowed.