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Banking and Finance

What Rate Of Interest May My Company Lawfully Charge In New York?

In New York State, the rate of interest upon the loan or forbearance of any money, goods, or things in action may not exceed 16% per year.  N.Y. Gen. Oblig. Law § 5-501(1); N.Y. Banking Law § 14-a(1).  That is, in New York, charging interest of more than 16% per year is civil usury.

N.Y. Gen. Oblig. Law § 5-511 renders void any transaction taking interest in excess of that allowed by N.Y. Gen. Oblig. Law § 5-501.  Further, any person who has paid interest in excess of the (16%) rate authorized by N.Y. Gen. Oblig. Law § 5-501 may bring a civil lawsuit against the usurer to recover the amount of money paid above that lawful rate.  N.Y. Gen. Oblig. Law § 5-513.

Moreover, N.Y. Penal Law § 190.40 renders it a class E felony knowingly to charge, take, or receive interest at a rate exceeding 25% per year.  In other words, in New York, charging, taking, or receiving interest of 25% or more per year is criminal usury.

There are various exemptions from the (16%) civil usury provisions and from the (25%) criminal usury provision.

Corporations or limited liability companies ("LLCs") borrowing money generally cannot interpose the defense of civil usury in a civil action.  N.Y. Gen. Oblig. Law § 5-521(1); N.Y. Limited Liab. Co. Law § 1104(a).

Although corporations or LLCs borrowing money may interpose the defense of criminal usury in a civil action, see N.Y. Gen. Oblig. Law § 5-521(3); N.Y. Limited Liab. Co. Law § 1104(c), it has been held that "there is no specific statutory authority for voiding a loan that violates the criminal usury statute."  Funding Group, Inc. v. WaterChef, Inc., 19 Misc.3d 483, 490-491, 852 N.Y.S.2d 736, 740-742 (N.Y. Sup. Ct. N.Y. County 2008); see also In re Venture Mortgage Fund, L.P., 282 F.3d 185, 190 n.4 (2d Cir. 2002) (stating in dictum that "there seems to be no specific statutory authority for voiding a loan that violates the criminal usury statute without violating the civil usury statute").

Loans or forbearances of $250,000 or more generally are exempt from the (16%) civil usury statutes, but remain subject to the (25%) criminal usury statute.

Loans or forbearances of $2,500,000 or more are exempt from all of New York's usury statutes.

Loans or forbearances secured pursuant to Article 9 of the New York Uniform Commercial Code, N.Y. U.C.C. Law §§ 9-101 - 9-710, are not subject to civil usury or criminal usury limitations, if on the date when the interest is charged or accrued, such interest is not greater than eight percentage points above the prime rate.

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