In New York State, charging interest of more than 16% per year is civil usury. Further, in New York, charging, taking, or receiving interest of 25% or more is criminal usury. Lenders and borrowers frequently ask me what fees or charges count toward a loan’s interest rate for purposes of New York’s usury laws. The answer depends upon the nature of the loan.
With respect to any loan or forbearance secured primarily by an interest in real property improved by a one- or two-family residence occupied by the owner, the term ‘interest,’ for purposes of New York’s civil and criminal usury statutes, “includes[s] origination fees, points and other discounts and all other amounts paid or payable, directly or indirectly, by any person, to or for the account of the lender in consideration for making the loan or forbearance,” except for those categories of fees and charges which are set forth in 3 N.Y.C.R.R. § 4.3. 3 N.Y.C.R.R. § 4.2 [an annotated version of this statute is available to lexis.com subscribers] ; see N.Y. Gen. Oblig. Law § 5-501(2) [annotated version].
With regard to the above-described home mortgage loans, the fees and charges which 3 N.Y.C.R.R. § 4.3 excludes from the definition of ‘interest’ include, among other categories, the following, if itemized in writing to the borrower:
3 N.Y.C.R.R. § 4.3(b), 4.3(e), 4.3(g) [annotated version].
With respect to any loan or forbearance other than the above-described residential mortgage loans, the term ‘interest,’ for purposes of New York’s civil and criminal usury statutes, “mean[s] all amounts paid or payable, directly or indirectly, by any person, to or for the account of the lender which would be includible as interest under New York law as it existed prior to the enactment of [section 14-a of the New York Banking Law,] chapter 349 of the Laws of 1968.” 3 N.Y.C.R.R. § 4.2(b); see N.Y. Gen. Oblig. Law § 5-501(2).
In other words, as to any loan other than the above-delineated home mortgage loans, the term ‘interest,’ for purposes of New York’s statutes banning usury, includes all fees and charges which were considered interest under New York judicial decisions predating 1968.
The categories of fees and charges which, under pre-1968 New York case law, were considered interest included, but were not limited to, the following:
It follows that — as to any loan or forbearance other than the above-mentioned home mortgage loans — consulting fees, incentive fees, commissions, and loan origination fees, among other fees and charges, count toward a loan’s interest rate for purposes of New York’s usury laws. See Kredietbank, N.V., 48 B.R. at 547-551; Funding Group, Inc., 19 Misc. 3d at 486-488; Weiss, 2009 N.Y. Misc. LEXIS 4705; Lugli, 78 A.D.3d at 1133-1135.
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