Asked about 2 years ago - Horseheads, NY
FlagIn a private contract, can I charge a 25% finance charge per month?
No, not if your type of contract and NY state law prohibit this interest rate under their usury laws. A contract that violates your state's usury law may be declared void and unenforceable, or even criminal "loan sharking." In NY, the maximum rate of interest is 16% per annum. (NY Gen. Oblig. Law ("GOL") § 5-501 (2009).
Not surprisingly, the big banks and credit card companies have made enough political donations to make sure that they get the usury law exemptions, not individuals doing private contracts. The GOL provides that loans secured in accordance with Article 9 of the UCC, including discretionary or mandatory advances in the amount of $100,000 or more, are not subject to usury limitations, if on the date when the interest is charged or accrued, such interest is not greater then 8 percentage points over the prime rate. See , GOL § 5-526(1).
See a lawyer if you want an enforceable contract.
First, kudos to the Cali lawyer, who very succinctly explained the law in New York on usary. Your question leaves some unanswered questions, so I'm going to take a stab at what you might be getting at. If by "finance charge" you are referring to interest on a loan, then you have to be aware of usary laws. Interest rates at or above 25% are usurious (covered by the penal law) and therefore, would make your interest rate unenforceable. However, certain finance charges may be payable, but not as interest. You may also find § 5-521 of the Gen. Oblig. law useful, as it states that Corporations are prohibited from interposing a defense of usury.
Another consideration is Gen. Obl. Law 5-501(6)(b), which states: No law regulating the maximum rate of interest which may be charged, taken or received, including section 190.40 and section 190.42 of the penal law, shall apply to any loan or forbearance in the amount of two million five hundred thousand dollars or more. Loans or forbearances aggregating two million five hundred thousand dollars or more which are to be made or advanced to any one borrower in one or more installments pursuant to a written agreement by one or more lenders shall be deemed to be a single loan or forbearance for the total amount which the lender or lenders have agreed to advance or make pursuant to such agreement on the terms and conditions provided therein.
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