USURY - The civil or criminal wrong of
charging interest that is beyond the legal limit set by
a State. The illegal profit which is required and received
by the lender of a sum of money from the borrower for
its use. In a more extended and improper sense, it is
the receipt of any profit whatever for the use of money:
it is only in the first of these senses that usury will
be here considered.
To constitute a usurious contract the following are
the requisites: 1. A loan express or implied. 2. An
agreement that the money lent shall be returned at all
events. 3. Not only that the money lent shall be returned,
but that for such loan a greater interest than that
fixed by law shall be paid.
There must be a loan in contemplation of the parties
and if there be a loan, however disguised, the contract
will be usurious, if it be so in other respects. Where
a loan was made of depreciated bank notes to be repaid
in sound funds, to enable the borrower to pay a debt
he owed dollar for dollar, it was considered as not
being usur-ious. The bona fide sale of a note, bond
or other security at a greater discount than would amount
to legal interest, is not per se, a loan, although the
note may be endorsed by the seller, and he remains responsible.
But, if a note, bond; or other security be made with
a view to evade the laws of usury, and afterwards sold
for a less amount than the interest, the transaction
will be considered a loan and a sale of a man's own
note, endorsed by himself, will, be considered a loan.
lt is a general rule that a contract, which, in its
inception, is unaffected by usury, can never be invalidated
by any subsequent usurious transaction. On the contrary,
when the contract was originally usurious, and there
is a substitution by a new contract, the latter will
generally be considered usurious.
There must be a contract for the return of the money
at all events; for if the return of the principal with
interest, or of the principal only, depend upon a contingency,
there can be no usury; but if the contingency extend
only to interest, and the principal be beyond the reach
of hazard, the lender will be guilty of usury, if he
received interest beyond the amount allowed by law.
As the principal is put to hazard in insurances, annuities
and bottomry, the parties may charge and receive greater
interest than is allowed by law in common cases, and
the transaction will not be usurious.
To constitute usury the borrower must not only be obliged
to return the principal at all events, but more than
lawful interest: this part of the agreement must be
made with full consent and knowledge of the contracting
parties. When the contract is made in a foreign country
the rate of interest allowed by the laws of that country
may be charged, and it will not be usurious, although
greater than the amount fixed by law in this.
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