In the California First Appellate Court case of Hardwick v. Wilcox, Wilcox made a series of usurious loans to Hardwick that Hardwick had, for the most part, paid. Wilcox, however, wanted more and tried to foreclose on property that secured the loans. Hardwick filed suit to recapture the usurious payments and stop the foreclosure.
Wilcox argued Hardwick had waived his usury claims since he had, in the past, paid the usurious interest rates demanded by Wilcox under the notes. The Appellate Court held usury cannot be “waived by the voluntary payment of excessive interest by the borrower.” The Court of Appeals, however, left open the possibility of waiver of a claim of usury in a written settlement agreement.
The Appellate Court also concluded that a debtor is not barred from recovering usurious interest payments that the debtor has already made at the time a lawsuit is filed. Such payments are held to apply to the reduction of principal. The Court further affirmed that “[w]here the lender brings an action to recover an indebtedness, none of the usurious payments, nor payments on renewal notes, are barred by limitation so as to preclude their use in the reduction of the principal debt.
Pursuant to California law, non-exempt lenders (the average individual) can charge a maximum of: (i) 10% interest per year (.8333% per month) for money, goods or things used primarily for personal, family or household purposes and (ii) for other types of loans (home improvement, home purchase, business purposes, etc.), the greater of 10% interest per year, or 5% plus the Federal Reserve Bank of San Francisco’s discount rate on the 25th day of the month preceding the earlier of the date the loan is contracted for, or executed. In other
words, the general rule is that a nonexempt lender cannot charge more than 10% per year (.8333% per month), unless there is an applicable exemption, and there are many.
If you charge or are being charged more than ten percent (10%) interest on any loan obligation, check with your legal counsel to determine whether you are a victim of usury.
The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.
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