Jumping the Loan Shark : Understanding Florida Usury Loan Law

Generally, the law of contracts is liberal as to what two informed, consenting parties can agree to, and put into writing to form a valid contract. However, sometimes the state legislature may step in and put regulations in place limiting for what and how two parties can contract. One such limitation under Florida law is how much a party may charge as interest within a loan agreement, generally. Often times, parties may accept or even offer loans with an unlawful rate of interest, referred to as “usury loans.” It is imperative for any party entering into a loan agreement to be informed on Florida usury loan law, and how it may affect the application and enforcement of their agreement.

The General Rule

For Loans Up To $500,000:

• Florida law provides that it is unlawful for anyone to reserve, charge, or take for any loan, advance money, line of credit, forbearance to enforce the collection of any sum of any debt, or other obligation a rate of interest greater than 18% per annum simple interest. See§ 687.02(1); § 687.03(1), Fla. Stat.

For Loans Greater than $500,000:

• The same rule applies, but the simple interest rate may not be a rate of interest greater than 25% per annum. See§ 687.02(1); § 687.071, Fla. Stat.

NOTE: Be aware that, for any extension of credit which exceeds a 25% annual interest rate, there may be criminal penalties.

So, if you have a loan agreement presented to you with an annual interest rate greater than 18%, alarm bells should start ringing in your head that this deal has foundational issues. That isn’t to say that the deal runs afoul of Florida usury loan law, there are certain limited exceptions, which could keep the agreement within what Florida Law considers legal.

The Exceptions (A Non-Exhaustive List)

Sales of Bonds:

• Florida law expressly provides that the provisions of section 687.03 “shall not apply to sales of bonds in excess of $100 and mortgages securing the same, or money loaned on bonds.” § 687.03(1), Fla. Stat.

Loans or Advances of Credit Made Pursuant to Commitments from Certain Federal Agencies:

• Florida law expressly provides that the General Rule stated above does not apply to loans or advances of credits pursuant to commitments from federal agencies, such as a commitment to insure by the Federal Housing Administration. See 687.03(2)(a)1, Fla. Stat.

“Payday Loans”:

• Deferred presentment transactions, often referred to as “payday loans” are particularly problematic, and are governed by Florida Statutes sections 560.402-560.408.

“Retail Installment Contracts” for Vehicles:

• The Fourth District Court of Appeal held in the case of Nolden v. Summit Financial Corporation that a retail installment contract for the purchase of a vehicle was governed by the Florida Motor Vehicle Retail Sales Finance Act (“FMVRSA”), not the general Florida Usury Statute. See Nolden v. Summit Fin. Corp., 244 So. 3d 322, 324 (Fla. 4th DCA 2018).
• The calculation of what interest rates are allowed under the FMVRSA is more technical and requires a detailed computation, which should be fully evaluated by an attorney familiar with usury loan law.

Penalties

The primary penalty for any party who willfully violates Florida usury loan is that that entirety of the interest charged shall be forfeited. Be aware that while the interest charged pursuant to the usurious loan agreement may be forfeited, the actual principal sum of the loan can still be enforced. See § 687.04, Fla. Stat.

Conclusion

Florid Usury Loan Law can be a complicated and technical area to navigate. By taking preemptive steps while negotiating agreements, or being informed when an agreement goes south, you can minimize your risk and have an effective strategy to address these issues.

Whether you are a lender or a borrowing consumer, working with a legal team knowledgeable on usury loan law can safeguard your interests, and help you put yourself in the best position.

For more assistance on Florida usury loan law, contact one of our experienced attorneys at 305-570-2208. You can also email our lead attorney Eduardo directly at eduardo@ayalalawpa.com.  

You can also watch our video on the Florida usury loan law here.

We at Ayala Law PA are passionate about helping those in legal need, so please don’t hesitate to schedule a case evaluation with us online here. 

[The opinions in this blog are not intended to be legal advice. You should consult with an attorney about the particular details of your case].