Usury refers to the illegal practice of charging excessively high interest rates on loans, exceeding the limits set by law. Each state has its own regulations that determine the maximum allowable interest rate. If a loan is deemed usurious, the borrower is only required to repay the principal amount, and any interest charged becomes void.
Usury is primarily relevant in civil and criminal law contexts, particularly in cases involving loans and credit agreements. It often arises in disputes between lenders and borrowers. Individuals can manage usury-related issues using legal forms and templates provided by services like US Legal Forms, which can help ensure compliance with state laws.
Here are a couple of examples of abatement:
Example 1: A lender charges a borrower an interest rate of fifteen percent per year on a personal loan in a state where the legal limit is ten percent. This loan is considered usurious, and the borrower is only obligated to repay the principal amount.
Example 2: A payday lender charges an interest rate of twenty-five percent on a short-term loan, exceeding the legal limit in their state. The borrower can contest the loan's validity based on usury laws.
Each state has its own usury laws. For example, Virginia's usury law prohibits charging more than twelve percent per year on loans, with specific exceptions outlined in various statutes. Other states may have different limits and exceptions.
| State | Maximum Interest Rate | Notes |
|---|---|---|
| Virginia | 12 percent | Exceptions exist for certain types of loans. |
| California | 10 percent | Higher rates may apply to specific lenders. |
| Texas | 10 percent | Different rules apply for consumer loans and mortgages. |
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
| Term | Definition |
|---|---|
| Loan Shark | A person or entity that lends money at extremely high interest rates, often illegally. |
| Predatory Lending | Practices that impose unfair or abusive loan terms on borrowers. |
If you believe you have entered into a usurious loan agreement, consider the following steps:
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The maximum interest rate varies by state. It's essential to check your state's specific laws.