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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
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
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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