If you are lending money in New York it is very important that you understand what the maximum interest rates are because the crime of usury also known as “loan sharking” in the first degree, codified at New York Penal Law 190.42, is a Class C felony; the maximum penalty is 15 years in prison with a fine of $5000.00 or double the gain made by committing the crime.
If you or someone you know has been accused of New York usury call our experienced New York criminal defense attorneys today for a free consultation. We may be able to get your charges reduced or dismissed.
The elements of usury in the first degree are 1) Where a person is not otherwise permitted by law to make such a loan, that person receives interest at a 25% per year rate or higher 2) and the person was a part of an enterprise that made or recovered debt payments on loans at an interest rate that was 25% per year or greater or the person had a previous conviction for usury or attempted usury. Remarkably, this means that if a person’s friend likes to play cards and needs some money, and a loan were to be made to the friend at a normal rate of interest to make sure that they pay on time, the friend were to pay the loan off, then get a second loan, one could incur serious criminal liability for usury in the first degree.
Is the New York usury statute unconstitutionally vague? Usury statutes have withstood constitutional challenges to their definiteness. The strict text of the statute is unclear about what sort of enterprise can be charged with usury. The statute makes it seem as though only a bank or lending institution could be liable for usury in the first degree, however, the law’s scope is far wider. Any person who makes more than two loans with usurious interest as part of the same single scheme can be charged with usury in the first degree. This principle has been upheld by the New York Court of Appeals.
If one pays careful attention to the statute, the first element exempts lenders who can lawfully make loans with usurious interest. According to General business law 5-501(b)6 loans of $2,500,000 or greater are exempt from criminal usury statutes. Remarkably, the New York Court of Appeals does not require that the prosecution prove beyond a reasonable doubt that a defendant is not lawfully permitted to make loans with usurious interest rates. The Court of Appeals found that the issue of being lawfully permitted to make usurious loans was one that the defendant had to argue, and that rule complied with the requirements of the due process clause of the Constitution.
If a court finds that a loan is usurious, borrowers can claw black the usurious interest paid, the loan is voided, and the loan vests to the victim as a gift unless the lender is a lending institution. If the lender is a lending institution the lender must return all the interest, including the portion that is not usurious, and pay the victim two times the interest that was actually paid to the lending institution.
If you have been accused of usury in the first degree or “loan sharking” as it is commonly called, please call one of our experienced New York criminal defense lawyers today.