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Introduction

Usury

Usury - Wikipedia, the free encyclopedia

Usury ([2]) is today the practice of making unethical or immoral monetary loans that unfairly enrich the lender. Originally, usury meant interest of any kind. A loan may be considered usurious because of excessive or abusive interest rates or other factors. Historically in Christian societies, and in many Islamic societies today, charging any interest at all can be considered usury.[5] Someone who practices usury can be called a usurer, but a more common term in contemporary English is loan shark.

The term may be used in a moral sense—condemning taking advantage of others' misfortunes—or in a legal sense where interest rates may be regulated by law. Historically, some cultures (e.g., Christianity in much of Medieval Europe, and Islam in many parts of the world today) have regarded charging any interest for loans as sinful.

Some of the earliest known condemnations of usury come from the [6]  Similar condemnations are found in religious texts from Buddhism, Judaism, Christianity, and Islam (the term is riba in Arabic and ribbit in [7]  At times, many nations from ancient China to ancient Greece to ancient Rome have outlawed loans with any interest. Though the Roman Empire eventually allowed loans with carefully restricted interest rates, the Christian church in medieval Europe banned the charging of interest at any rate (as well as charging a fee for the use of money, such as at a bureau de change).

The pivotal change in the English-speaking world seems to have come with lawful rights to charge interest on lent money,[8] particularly the 1545 Act, "An Act Against Usurie" (37 H. viii 9) of King Henry VIII of England.

New Jersey Usury Laws Usury

New Jersey Usury Laws Usury

Television and motion pictures have fostered an image of New Jersey being the home of crime figures and illicit activities. Indeed, “The Sopranos” is one of the most popular and widely regarded television programs of all time.

Of course, much of what is broadcast and filmed pertaining to life in New Jersey is fanciful. New Jersey is not a state in which a person can find a loan shark on every corner. However, with that said, New Jersey does have some of the most liberal laws in the country when it comes to personal lending practices and usury laws.

In this regard, when it comes to personal loans made from one individual to another, the usury cap is a very high 30% per annum. Loan sharking is subject to Federal RICO laws in most instances. Under RICO, in order for a person to be charged with loan sharking, that person would have be lending money to an individual at a rate twice the usury limit in a particular state. In other words, in order for a person to be charged with being a loan shark in New Jersey under Federal law, that person would have to be charging interest rates of 60% or more per annum -- which is an extraordinary amount.

When it comes to loans made to corporations, the usury limits is 50%. Again, this is one of the highest usury caps to be found anywhere in the United States. There are some exceptions to this law. However, as a general rule, this is the permissible cap on interest rates associated with loans made to corporations.

The statutory provisions governing usury in New Jersey can be found in Title 31 of New Jersey Statutes. The entire Title is dedicated to usury caps and related lending practices.

Generally speaking, a personal or corporate loan that has interest that exceeds the usury limits set forth by statute will be considered an illegal contract. As an illegal contract, it will be voided and considered unenforceable.

If you have any questions pertaining to usury limits in New Jersey after reading this article, you need to consult with a qualified lawyer. Additionally, keep in mind that the usury laws in New Jersey do change from time to time. We work to keep the information in this article up to date. However, with the changes in laws, we cannot always guarantee the accuracy of all of the information contained in this article.

New York Usury Laws Usury

New York Usury Laws Usury

New York has a pretty straightforward usury law on its books at this time. The general usury limit is set at 16% in New York. This is imposed on all personal, consumer loans.

In New York, if a personal loan agreement is crafted that includes an interest rate over and above the usury rate of 16%, there are two possible recourses. First, in many instances, when a personal loan has an interest rate above and beyond the usury cap, the loan agreement itself will be determined to be illegal and voided.

On the other hand, there are instances in which a personal loan agreement with impermissible interest will be reformed to lower the interest rate to an appropriate level. The loan agreement will remain otherwise the same and enforceable.

There are also criminal statutes on the book governing usury violations in certain circumstances. In order to prosecuted under New York criminal law for usury, or loan sharking as it is more commonly known, there really does need to be a pattern of lending to individuals or consumers in violation of the law.

In addition, Federal RICO statutes have been used to prosecute people in New York for serious violation of the usury statutes, for serious cases of loan sharking. Federal prosecutions occur in New York in instances in which a person loan agreement has been entered into that calls for the consumer to pay interest in the amount of twice the usury limit in the state, or in amount of 32% or more.

There are other statutory schemes that cover other lending practices in New York. This includes statutes governing interest that can be charged by state chartered financial institutions such as banks, savings and loans as well as credit unions. In addition, the Uniform Commercial Code governs financing arrangements relating to the sale of goods with a value over $500 in the State of New York.

The general statutes pertaining to usury and related lending matters in New York can be found in the Consolidate Laws of New York in Section DCD.

Keep in mind that this article is not intended to provide legal advice. If you have questions or concerns about usury laws in New York, see a lawyer. Finally, while we make every effort to keep the information in these articles up to day, the usury laws in New York do change from time to time.

Exceptions to the Usury Law
There are many instances where the usury law does not apply. These are known as exceptions to the usury law. The list provided below includes many of these exceptions.

Commercial, Agricultural, Investment and Business Loans

If a loan was made primarily for a commercial, agricultural, investment or business purpose, then a borrower may not claim a defense of usury against the lender. Interest rates on loans made primarily for a commercial, agricultural, investment or business purpose may exceed Washington State’s usury law. See RCW 19.52.080.

Credit Card and Other Retail Installment Debts

Of course, credit card and other retail installment debt may, and frequently does, exceed the maximum rate of interest that may be charged per RCW 19.52.020(1). This is because Washington State’s usury law generally does not apply to debts related to “retail installment transactions,” as defined in RCW 63.14.010(8). Retail installment transactions include “retail installment contracts,” “retail charge agreements,” "lender credit cards" (such as Nordstrom or Macy's) and "financial institution credit cards" (such as VISA or MasterCard). See RCW 19.52.100.

Note: If credit card issuers comply with RCW 63.14.167, which covers lender credit card agreements, they do not have to comply with the general usury law (see RCW 19.52.115, which redirects you to RCW 63.14.165). This is how credit card issuers can charge higher rates than the usury law allows. It is a provision well known and generally followed by credit card issuers.

Consumer Leasing

Consumer leasing includes personal property such as automobiles and furniture. In the case of a consumer lease that exceeds 4 months on personal property up to $25,000 in value (as defined in RCW 63.10.020(4)), a consumer may not raise a claim or defense of usury. See RCW 19.52.150 and RCW 63.10.060.

Most Favored Lender Status

Regardless of Washington State’s usury law, a national banking association such as Wells Fargo Bank, N.A., or Bank of America, N.A., may charge interest on a consumer debt (including, without limitation, a retail installment or credit card debt) at the highest rate available on any day for any other institution in the United States or U.S. Territories (see 12 U.S.C. 85).

In addition, Washington State banking law (RCW 30.04.025) allows any depository financial institution (bank, trust company, mutual savings bank, savings and loan association or credit union per RCW 30.22.040(12)) authorized to do business and accept deposits in Washington State, under either state or federal law, to have the same “most favored lender” power and status as national banking associations. The addition of RCW 30.04.025 to our statutes in 2003 was prompted by House Bill 1759, which was introduced by the banking industry.

Most First Lien Residential Mortgage Loans

Federal law generally takes precedence over (preempts) Washington State’s usury law for most first lien mortgage loans. However, a private lender who makes an isolated transaction, or a seller of a home who makes a first lien purchase money loan or land installment contract of sale with his or her buyer, is generally subject to Washington State’s usury law.

Specifically, federal law (12 U.S.C. 1735f - 7A) preempts state usury law for any loan, mortgage, credit sale or advance that is secured by a first lien on:

In addition, state usury laws do not apply if the loan, mortgage, credit sale or advance (even a junior lien mortgage) is:

Note: For this purpose, “high-interest mortgage” is a consumer credit transaction that is secured by the consumer's principal dwelling, and in which the annual percentage rate (APR) at closing exceeds, by more than 10%, the yield on U.S. Treasury Department securities having comparable periods of maturity on the 15th day of the month, immediately preceding the month in which the loan application is received by the creditor. Or, if the total points and fees payable by the consumer at or before closing will exceed the greater of 8% of the total loan amount or $400, the mortgage is considered "high-interest."

Second Mortgages & Home Equity Loans by Licensed Consumer Loan Companies

A consumer loan company licensed under the Washington Consumer Loan Act (RCW Chapter 31.04) may generally make second mortgages and subordinate lien home equity loans on residential real estate at interest rates in excess of Washington State’s usury law.

“Small Loans” Regulated Under Washington State Law

A licensed check casher or check seller under RCW Chapter 31.45, who has obtained a “small loan endorsement” from the DFI per RCW 31.45.030, may make a “small loan” up to $700 (most commonly a “payday loan”) at interest rates that greatly exceed the maximum rate of interest under Washington State’s usury law. The lender must provide all proper disclosures and comply with all other terms of RCW 31.45.

Lease-Purchases on Personal Property

A lease-purchase of personal property under RCW Chapter 63.19 is exempt from Washington State’s usury law. See RCW 19.52.010(2)(b).

Certain Financing of Mobile Homes

Washington State’s usury law does not apply to the financing of a mobile home that has become “real property” as defined in RCW 84.04.090, and which financing is insured by the federal government (e.g., FHA or VA). See RCW 19.52.160.

Note: The term “real property” includes a mobile home that has substantially lost its identity as a mobile unit by being permanently fixed in location upon land owned or leased by the owner of the mobile home and placed on a permanent foundation (posts or blocks) with fixed pipe connections with sewer, water, or other utilities.

Loans from a Tax-Qualified Retirement Plan

Washington State’s usury law does not apply to any loan permitted under applicable federal law and regulations from a tax-qualified retirement plan to a person then a participant or a beneficiary under the plan. See RCW 19.52.170.

Certain Interest Charged by Broker-Dealers

A broker-dealer, who is registered under the Securities Act of Washington (RCW 21.20) and under the federal Securities and Exchange Act of 1934, is not limited by the maximum rate of interest under RCW 19.52.020(1) if the underlying loans made by the broker-dealer may be paid in full at the option of the borrower and are subject to Federal Reserve Board regulations. See RCW 19.52.110.

Interest, Penalties and Costs on Delinquent Property Taxes

Washington State’s usury law does not apply to interest, penalties, or costs on delinquent property taxes. See RCW 19.52.140.

Deferred Payment of Purchase Price

Washington State’s usury law does not apply to sales contract for goods or services providing for the deferred payment of the purchase price. See RCW 19.52.120.

Statutory Interest on Judgments

Statutory interest on judgments entered and enforced in Washington State courts may bear interest, per RCW 4.56.110, as follows:

High Risk Business Loans

High Risk Business Loans

As the term indicates, a high-risk business loan is one that involves high risk on the part of the lender, as well as the borrower. Typically, high-risk loans are issued to those debtors who have a bad credit history, or are unable to supply the requisite collateral, or have no clear idea of how they will go about repaying the loan. For a lender to approve a loan to such a borrower naturally requires drastic measures to safeguard the lender’s interests, and hence high-risk loans will always be accompanied by very high rates of interest and a high down payment.

... ... ...

Also, since most high-risk business loans are unsecured – that is, they do not involve a collateral – it is usual for the lender to specify that repayments will be drawn straight from the borrower’s bank account or credit card account. “That way, the lender feels a little more secure about repayments and ensures maximum recovery in case of defaults,” says Arnold.

It isn’t as though only those businesses with a bad credit history are the targets of high-risk business loans. Areas such as biotechnology and information technology are seen as more high-risk than others, as entrepreneur Wayne Cheung found out when launching an e-learning portal. “The common refrain was, ‘Oh no, not another dotcom,’ and I began to realize that I was trying to set up a business in the high-risk category,” says the 35-year-old Korean expatriate.

Whatever your situation, however, there are certain benefits of applying for a high-risk business loan. “For one thing, it gets you out of an impossible situation,” says Arnold. “And it also gives your business a chance to re-establish credibility by making repayments on time, because if you are behind schedule with high-risk loan repayments, you know you are in real trouble, so most borrowers try desperately to avoid that situation.”

For most entrepreneurs who have burnt their fingers with their start-ups, a high-risk business loan is often the only way out.


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[Dec 06, 2015] Boca Raton loan shark sentenced to 24 months in federal prison

Jan 9, 2015 | Sun Sentinel

A Boca Raton man accused of being a loan shark was sentenced to two years in prison after he charged an undocumented worker 180 percent interest on a $10,000 loan.

The United States Attorney for the Southern District of Florida said Francisco Aletto, 60, was working at a pawn shop in Boca Raton in 2009 when he made the deal that landed him in prison.

Officials said an undocumented worker entered the pawn shop where Aletto worked and wanted to pawn a gold chain. Instead, Aletto offered him a $10,000 loan and charged him $375 per week in interest, according to a news release.

After the worker made several payments, Aletto introduced him to people who loaned the man more than $30,000. In 13 months, the victim paid out about $57,000 in interest and handed over a 2004 Dodge Ram pickup truck. When he couldn't make payments anymore, the people threatened to kill him, according to the release.

Four of Aletto's accomplices have pleaded guilty and have been sentenced in the case.

[Dec 19, 2013] FBI - Loan Shark Sentenced to Prison

December 19, 2013 |

A Troy man was sentenced today to serve 41 months in prison for loan sharking activities within the Albanian community, U.S. Attorney Barbara L. McQuade announced today.

Joining in the announcement was Paul M. Abbate, Special Agent in Charge of the Detroit Field Office of the Federal Bureau of Investigation, and Carolyn Weber, Acting Special Agent in Charge of the Internal Revenue Service-Criminal Investigations.

U.S. District Judge Nancy G. Edmunds imposed the sentence on Tomo Duhanaj, 44, who pleaded guilty to charges of making extortionate extensions of credit and money laundering on December 19, 2013.

The information presented to the court established that Duhanaj, an undocumented alien from Kosovo, loaned hundreds of thousands of dollars at high interest rates, sometimes exceeding 100 percent per year, to members of the Albanian community with the understanding that failure to repay the loans would result in violence by Duhanaj and his organization. Duhanaj concealed the proceeds of these activities, in part, by placing assets in the names of other people. Duhanaj will be deported to Kosovo at the conclusion of his sentence.

"This defendant used his contacts in his community to prey upon people who were desperate for cash," McQuade said.

[Mar 27, 2013] North Andover loan shark gets 2 years in prison By Warren Talbot

March 27, 2013 | Eagle-Tribune
North Andover loan shark gets 2 years in prison

By Warren Talbot
wtalbot@eagletribune.com

Joseph Giallanella of North Andover, whom prosecutors call a loan shark and top associate of the once powerful New England Mafia captain Mark Rossetti, had another date in court this week and the outcome again went against him.

On Monday, the balding, grandfatherly-looking Giallanella was in Middlesex Superior Court in Cambridge where he was sentenced to two years in state prison. He had pleaded guilty to charges of criminal usury (three counts), conspiracy to commit attempted extortion, and attempt to procure perjury before a grand jury.

The sentence came two weeks after Giallanella, 64, of 134 Candlestick Road, North Andover, was sentenced in Essex Superior Court to two to four years after pleading guilty to managing a gaming enterprise, using a telephone for gaming, criminal usury, two counts of conspiracy and two counts of accessory after the fact of larceny.

The latest sentence will be served concurrently with the Essex County sentence.

Attorney General Martha Coakley says the convictions against the likes of Giallanelli and Rossetti are visible symbol of the dismantling of the La Cosa Nostra in New England.

Earlier this month, Rossetti, 53, of East Boston, was sentenced to 12 years in prison for running a violent criminal enterprise across Eastern Massachusetts. He will serve the sentence simultaneously with previous punishments for selling heroin and for breaking and entering to steal from a rival drug dealer.

"The investigation into this extensive criminal organization began when authorities starting looking into Giallanella's reputation as a bookmaker and loan shark," Coakley said in a statement yesterday. "With this sentence, nearly 20 defendants have been found guilty and sentenced in connection with that criminal enterprise."

Giallanella's sentence is the result of a multi-agency targeted investigation into a highly organized and violent criminal enterprise that operated throughout eastern Massachusetts. The investigation began in 2009 and was conducted jointly by the Attorney General's Office, Essex District Attorney Jonathan Blodgett's Office, and the Massachusetts State Police Special Service Section.

In October 2010, state law enforcement officials announced the indictments of 31 individuals in connection with a violent criminal enterprise that involved extortion, drug trafficking, robberies, assaults and other crimes.

[Dec 12, 2011] Loan Shark Senenced to Five Years In Prison By EDMUND H. MAHONY

December 12, 2011 | thecourant
The Hartford Courant

A 79-year-old mob loan shark, who authorities say once collected more than $300,000 in interest on a $10,000 loan, was sentenced Monday in U.S. District Court in New Haven to five years in prison on extortion and weapons charges.

The prison sentence was the third in a decade for Nicola "The Greaseball" Melia, an associate of the Gambino crime family who lives in Stamford, where he owns a beauty parlor called Continental Coiffeurs III. Federal prosecutors call him "a major league loan shark," and the FBI says he once negotiated a loan in his then-98-year-old mother's nursing home room.

In additon to imposing the prison sentence, U.S. District Judge Janet Bond Arterton ordered Melia to pay a $50,000 fine and forfeit another $253,800 and a 2000 Mercedes Benz SL 600 to the government. Melia had pleaded guilty to collecting an extension of credit by extortionate means, illegally possessing ammunition, and violating the terms of his release from prison following a 2005 federal racketeering conviction.

Much of the evidence federal prosecutors had against Melia in the case that concluded Monday came from a small notebook one of his loan shark customers used to record his payments over a period of about nine years.

In May 2000, the victim vouched for another borrower, to whom Melia loaned $10,000. The initial interest payment on the $10,000 loan was $600 a week, a rate of 312 percent a year. When the borrower disappeared without making a payment, Melia decreed that the victim was responsible for the loan, prosecutors said.

The victim paid $600 a week, according to entries in his notebook, from May 2000 to March 2008. In 2008, the victim borrowed another $15,000 to bail out his struggling landscaping business, and the weekly interest payments jumped to $1,100.

By April 2009, federal prosecutors said entries in the victim's notebook showed that he had missed a handful of installments, but had paid $308,300 in interest. His requests to Melia and Melia's son Philip to close the loan by paying off the principal balance were repeatedly denied, federal prosecutors said.

That's about when the victim's relationship with Melia collapsed, according court filings by prosecutors. Frustrated over his inability to close his loan, the victim helped set up a robbery of Melia's home on Brushwood Road in Stamford. In March 2010, two unidentified robbers tied up Melia and stole his cash and jewelry.

For reasons never fully explained in court, the victim admitted his involvement in planning the robbery to Melia. He was hospitalized within days with head, neck and arm injuries after Philip Melia allegedly beat him with a wrench, according to prosecutors. Philip Melia was charged with assault.

Upon his recovery, the victim went to work for the FBI, secretly recording conversations with Melia. During a meeting in January at Melia's beauty parlor, Melia demanded that the victim give him a $375,000 promissory note for, among other things, the anxiety Melia suffered as a result of the robbery of his home.

Should the victim fail to pay, Melia said he would be unable to control what he described as an out-of-control crew of the Bonanno crime family that had somehow acquired an interest in the loan.

"We're going to have a lot of problems because of the Bonanno family," Melia said on the recording. "They are connected to the Bonanno family. They don't want to wait ... they use rough muscle. They got a big crew....they go in the house and they kill people."

"Loaning cash at excessively high interest rates while enforcing repayment through violence or threat is a federal crime," said Paul M. Abbate, Special Agent in Charge of the FBI Detroit Field Office. "Those who prey upon members of the community in this manner and act outside the bounds of the law will be brought to justice."

"Today's sentencing is a direct result of the excellent partnership IRS, FBI, and the U.S. Attorney's office have and demonstrates our role in combating all types of financial fraud," said Carolyn Weber, Acting Special Agent in Charge IRS Criminal Investigation, Detroit Field Office.

McQuade commended the efforts of special agents of the FBI and the IRS who investigated this case, and Assistant U.S. Attorneys Kenneth Chadwell, Margaret Smith and Linda Aouate, who prosecuted the case.

This content has been reproduced from its original source.

[Sep 08, 2000] 3 Sentenced to Prison for Loan-Sharking by DAVID ROSENZWEIG

Sep 08, 2000 | latimes

Court: Former record promoter Joseph Isgro, two associates operated outside a Beverly Hills shopping center.

September 08, 2000| | TIMES STAFF WRITER

Former record promoter Joseph Isgro was sentenced to 50 months in federal prison Thursday for running a loan-sharking business outside a Beverly Hills shopping center.

Isgro, who spent most of 1990s fending off federal payola and racketeering charges, was accused of lending money at 5% interest a week to people in financial distress and using subordinates to threaten those who fell behind in their payments.

U.S. District Judge Audrey B. Collins ordered the 52-year-old Isgro to pay $356,657 in restitution, representing interest he earned from the usurious loans.

Anthony Saitta, 63, who served as Isgro's chief enforcer, was also sentenced to 50 months in prison and ordered to pay $356,657 restitution. Valentino Bartolone, 35, a collector, got a 32-month prison term and was ordered to pay $344,507 in restitution.

[Feb 04, 1986] Loan Shark Gets 10 Years in Prison, Fine of $200,000

latimes

Loan Shark Gets 10 Years in Prison, Fine of $200,000

February 04, 1986|JANE APPLEGATE | Times Staff Writer

Twice-convicted loan shark Vito Dominic Spillone was sentenced Monday to serve 10 years in federal prison and pay a $200,000 fine in connection with a scheme to make high-interest loans to local card club gamblers.

Spillone, 48, was convicted on similar charges in Chicago in 1971 and served five years of a 12-year sentence before being paroled to Los Angeles, according to government prosecutors.

"I have little doubt there was a conspiracy to extort loans at rates of high interest," U.S. District Judge Matt Byrne Jr. said before sentencing Spillone and three others convicted by a federal jury last October.

Byrne said he had no doubt that "Spillone and perhaps others were at the upper echelon of the scheme" and "the threat of violence was certainly an integral part of this conspiracy."
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