What is the exposure if this agreement's interest rate turns out to be over the Florida limit?
Florida's ceiling is tiered by size. Under Fla. Stat. § 687.02(1) a contract for interest above the equivalent of 18 percent per annum simple interest is usurious. The subsection has its own reach: § 687.02(2) applies the amendment that produced it only to loans, advances of credit or lines of credit made on or after July 1, 1979, and to earlier ones where the lender has the legal right to require full payment or to adjust or modify the rate by renewal, assumption, reaffirmation, contract or otherwise. If the loan, advance, line of credit, forbearance or obligation exceeds $500,000, the contract is usurious only if the rate exceeds the rate prescribed in § 687.071. There, willfully and knowingly charging, taking or receiving interest above 25 percent (up to 45 percent) is a second-degree misdemeanour, and above 45 percent a third-degree felony. The civil penalty under § 687.04 falls on a person WILLFULLY violating § 687.03: forfeiture of the entire interest charged or contracted for, with only the actual principal enforceable, and, where usurious interest was taken, reserved or paid, forfeiture to the borrower of double that interest. Those penalties do not apply if, before the borrower sues, pleads usury or gives written notice, the lender notifies the borrower, refunds the overcharge with interest and adjusts the account (§ 687.04(2)). Under § 687.071(7) no extension of credit made in violation of the criminal usury section is an enforceable debt in Florida's courts. The four requisites of a usurious transaction include a corrupt intent to take more than the legal rate for the use of the money loaned (Dixon v. Sharp).
The trap
Usury in Florida is not arithmetic alone. The fourth requisite is a corrupt intent to take more than the legal rate, and Dixon v. Sharp addressed whether intent could be established by mathematical computation alone. The opinion quotes a district court's statement that, in its own words, the difference between a lawful transaction and a usurious one is the difference between "good faith" and "bad faith", gathered from all the circumstances. That is a defence for the lender who miscalculated, and a burden for the borrower who has only the rate, and in Dixon the lenders won: the Court held the Fourth District erred in affirming a judgment that found the requisite intent from the mathematical consequences of the agreement alone, quashed that decision, and directed that the trial court's judgment in the lenders' favour be reinstated, over two dissents. The other trap is the § 687.04(2) safe harbour, which only works if the lender acts BEFORE the borrower sues, pleads usury or gives written notice.
12 authorities
- statuteFla. Stat. § 687.02enactment date not established
The words that state the rule
(1) All contracts for the payment of interest upon any loan, advance of money, line of credit, or forbearance to enforce the collection of any debt, or upon any obligation whatever, at a higher rate of interest than the equivalent of 18 percent per annum simple interest are hereby declared usurious. However, if such loan, advance of money, line of credit, forbearance to enforce the collection of a debt, or obligation exceeds $500,000 in amount or value, then no contract to pay interest thereon is usurious unless the rate of interest exceeds the rate prescribed in s. 687.071.
- statuteFla. Stat. § 687.04enactment date not established
The words that state the rule
Any person, or any agent, officer, or other representative of any person, willfully violating the provisions of s. 687.03 shall forfeit the entire interest so charged, or contracted to be charged or reserved, and only the actual principal sum of such usurious contract can be enforced in any court in this state, either at law or in equity; and when said usurious interest is taken or reserved, or has been paid, then and in that event the person who has taken or reserved, or has been paid, either directly or indirectly, such usurious interest shall forfeit to the party from whom such usurious interest has been reserved, taken, or exacted in any way double the amount of interest so reserved, taken, or exacted.
- statuteFla. Stat. § 687.04enactment date not established
The words that state the rule
However, the penalties provided for by this section shall not apply: (1) To a bona fide endorsee or transferee of negotiable paper purchased before maturity, unless the usurious character should appear upon its face, or unless the said endorsee or transferee shall have had actual notice of the same before the purchase of such paper, but in such event double the amount of such usurious interest may be recovered after payment, by action against the party originally exacting the same, in any court of competent jurisdiction in this state, together with an attorney’s fee, as provided in s. 687.06; or (2) If, prior to the institution of an action by the borrower or the filing of a defense under this chapter by the borrower or receipt of written notice by the lender from the borrower that usury has been charged or collected, the lender notifies the borrower of the usurious overcharge and refunds the amount of any overcharge taken, plus interest on the overcharge taken at the maximum lawful rate in effect at the time the usurious interest was taken, to the borrower and makes whatever adjustments in the appropriate contract or account as are necessary to ensure that the borrower will not be required to pay further interest in excess of the amount permitted by s. 687.03.
- statuteFla. Stat. § 687.071enactment date not established
The words that state the rule
(2) Unless otherwise specifically allowed by law, any person making an extension of credit to any person, who shall willfully and knowingly charge, take, or receive interest thereon at a rate exceeding 25 percent per annum but not in excess of 45 percent per annum, or the equivalent rate for a longer or shorter period of time, whether directly or indirectly, or conspires so to do, commits a misdemeanor of the second degree, punishable as provided in s. 775.082 or s. 775.083.
- statuteFla. Stat. § 687.071enactment date not established
The words that state the rule
(3) Unless otherwise specifically allowed by law, any person making an extension of credit to any person, who shall willfully and knowingly charge, take, or receive interest thereon at a rate exceeding 45 percent per annum or the equivalent rate for a longer or shorter period of time, whether directly or indirectly or conspire so to do, commits a felony of the third degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084.
- statuteFla. Stat. § 687.071enactment date not established
The words that state the rule
(7) No extension of credit made in violation of any of the provisions of this section shall be an enforceable debt in the courts of this state.
The words that state the rule
The Four requisites of a usurious transaction are, (1) There must be a loan express or implied; (2) An understanding between the parties that the money lent shall be returned; (3) That for such a loan a greater rate of interest than is allowed by law shall be paid or agreed to be paid, as the case may be; and (4) There must exist a corrupt intent to take more than the legal rate for the use of the money loaned.
- statuteFla. Stat. § 687.03enactment date not established
The words that state the rule
(1) Except as provided herein, it shall be usury and unlawful for any person, or for any agent, officer, or other representative of any person, to reserve, charge, or take for any loan, advance of money, line of credit, forbearance to enforce the collection of any sum of money, or other obligation a rate of interest greater than the equivalent of 18 percent per annum simple interest, either directly or indirectly, by way of commission for advances, discounts, or exchange, or by any contract, contrivance, or device whatever whereby the debtor is required or obligated to pay a sum of money greater than the actual principal sum received, together with interest at the rate of the equivalent of 18 percent per annum simple interest. However, if any loan, advance of money, line of credit, forbearance to enforce the collection of a debt, or obligation exceeds $500,000 in amount or value, it shall not be usury or unlawful to reserve, charge, or take interest thereon unless the rate of interest exceeds the rate prescribed in s. 687.071.
The words that state the rule
If a mere mathematical computation is determinative of intent then the words "intent" and "willfully and knowingly" have no force or effect and might just as well be deleted from the statute. For the defense of usury to be established, the circumstances surrounding *821 the entire agreement must be proved, and they must be carefully scrutinized by the court.
The words that state the rule
The court explicitly asserted in River Hills, Inc. v. Edwards, Fla.App., 190 So.2d 415, 423 , as follows: "The intent is not fully determined by whether or not the lender actually gets more or charges more than the law permits but by whether or not there was an improper motive in his mind to get more than the legal interest (Clark v. Grey, supra; Stewart v. Nangle, supra; Shaffran v. Holness, Fla.App., 102 So.2d 35 ) at the time the loan agreement is entered and, if usurious at that time, no subsequent transaction will purge it. (Shorr v. Skafte, Fla., 90 So.2d 604 ) The difference between a lawful transaction and usurious one, therefore, is the difference between "good faith" and "bad faith". The parties are permitted to testify as to their purposes and intentions, and the question of intent is to be gathered from the circumstances surrounding the entire transaction.
The words that state the rule
We find that the District Court of Appeal, Fourth District, in its decision entered July 24, 1972, reported at 265 So.2d 105 , erred in affirming the Final Judgment of the trial court finding that requisite intent can be determined solely from mathematical consequences of the agreement entered into between the parties. Corrupt intent should be determined from all the circumstances surrounding the transaction rather than being determined by an inflexible rule which measures the mathematical result. The Final Judgment of the trial court entered on September 18, 1970, after hearing testimony of all the witnesses, in favor of the Dixons was a proper disposition of this cause. All subsequent proceedings inconsistent with that judgment were either moot or erroneous. Accordingly, the decision of the District Court of Appeal, herein sought to be reviewed, is quashed and this cause is returned to that court with directions to remand the cause to the trial court with instructions to reinstate the judgment entered by the trial court on September 18, 1970. Beverly Beach Properties v. Nelson, 68 So.2d 604 (page 607) (Fla. 1953). It is so ordered. CARLTON, C.J., and ADKINS, McCAIN and DEKLE, JJ., concur. ERVIN, J., dissents with opinion. BOYD, J., dissents with opinion.
- statuteFla. Stat. § 687.02enactment date not established
The words that state the rule
(2) As amended by chapter 79-592, Laws of Florida, chapter 79-274, Laws of Florida, which amended subsection (1):(a) Shall apply only to loans, advances of credit, or lines of credit made on or subsequent to July 1, 1979, and to loans, advances of credit, or lines of credit made prior to that date if the lender has the legal right to require full payment or to adjust or modify the interest rate, by renewal, assumption, reaffirmation, contract, or otherwise; and (b) Shall not be construed as diminishing the force and effect of any laws applying to loans, advances of credit, or lines of credit, other than to those mentioned in paragraph (a), completed prior to July 1, 1979.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.