Is a 90+% interest rate charged even legal?
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Is a 90+% interest rate charged even legal?
My friend’s father bought a house with no credit from a man about 15 years ago at a rate of 90% interest. Is that even legal? On a $600 month mortgage payment only 5 dollars and some change goes to the principal. The property was bought for about $60K. Are there any legal actions that they can take? It seems so wrong to take advantage of someone like that just because you know they can’t do any better.
Asked on June 11, 2012 under Real Estate Law, California
Answers:
M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
Many state's laws provide that you cannot lend money at an interest rate in excess of a certain statutory maximum. This is a "usury limit." The usury limit which is stated as the general usury limit is the rate that can be charged by one person or corporation to another, in other words, if you lend your next door neighbor $ 100.00, the rate stated is the limit. To charge more you must get a banking, pawnbroking, or whatever license. Banks and credit card companies, as you know, can charge a higher rate of interest. In California the limit is as follows:
the legal rate of interest is 10% for consumers; the general usury limit for non-consumers is more than 5% greater than the Federal Reserve Bank of San Francisco's rate.
Please get your friend's Dad some legal help ASAP. There may be a statute of limitations question but if the payments are on going it may be extended or "tolled." Good luck.
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