The concept of usury goes back to Biblical times — in fact, many religions banned usury, the definition of which in ancient times was charging any amount of interest. Today, a usurious loan is one in which a higher interest rate is charged than allowed by law.
What is considered usurious is determined by each state; in Arizona, the interest rate is set by statute at 10 percent per annum “unless a different rate is contracted for in writing, in which event any rate of interest may be agreed to.” While this could be interpreted as Arizona having essentially no usury law, that is not quite right. In Wieman v. Roysden, the Arizona appellate court found that:
“When the legislature removed the interest rate ceiling in the general usury statute, allowing the parties to contract in writing for any interest rate, the legislature also amended the forfeiture provision to provide for forfeiture of all interest if a person contracted for, reserved or received, directly or indirectly, an amount greater than the ‘maximum permitted by law’.”
In other words, any additional interest charged above and beyond the contracted rate would be considered usurious. One example is a lender that charges additional late fees that were not part of the original loan contract. Lenders must act intentionally to be found in violation of Arizona usury laws; if the act is unintentional (in error) and the lender corrects it, there is no cause for action.
Under Arizona law, a licensed consumer lender — a bank, credit union, savings and loan, or finance company — may institute a finance charge of no more than 36 percent for a consumer loan with an original principal amount of $3,000 or less. For larger loans, the finance charge can be no more than 36 percent for the first $3,000 of the original principal amount and no more than 24 percent on the remaining principal amount over $3,000.
Violating Arizona usury laws is a class 1 misdemeanor, with a maximum penalty of six months in jail and a fine of no more than $2,500. A lender who is found liable for usurious lending practices could also forfeit all interest. Victims of usury may sue to recover the total interest paid and may also be entitled to punitive damages if the courts find the lender intentionally and with full awareness caused harm to the borrower.
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