What Is the Maximum Legal Interest Rate in Florida

In some cases, an agreement may provide that a lender receives not only transaction fees, but also an amount related to the value of the business to which they lend money. Examples include stock options, profit-sharing or residual values. For bonds above the $500,000 threshold, these amounts are excluded from the calculation of interest. All charges, including interest, that exceed the total amount of all fees approved and permitted under this Chapter are a violation of Section 687, which governs interest and usury, and penalties in this Chapter apply. In the event of an error in good faith, the Licensee will reimburse the Borrower the amount of the surcharge without undue delay, but within 20 days of the discovery of the error. One of your regular clients, Carey Capital, asks you to take a few minutes to review the terms of a transaction in which he plans to make a small investment. They check his handwritten notes. The essential conditions are simple and seem trivial: “Mr. Capital agrees to lend $25,000 to Sally Sweat to finance the creation of an Internet company. Ms. Sweat agrees to repay the loan at a 10 percent interest rate.

Mr. Capital will keep partnership books, assist in the office and advise Ms. Sweat on business. Ms. Sweat will manage day-to-day operations. Mr. Capital is entitled to 10% of the company`s profits. The agreement is discreet, a small loan becomes a partnership agreement. Her biggest concern is whether Ms. Sweat or the internet company has assets that can serve as collateral for the loan.

I hope you do not neglect usury laws when advising Mr. Capital. “If usury is invoked as a defence, the borrower must assert and prove the four elements of a usury transaction with clear and satisfactory evidence.” Rollins v. Odom, 519 So. 2d 652, 657 (Fla. 1st DCA 1988) (citations omitted). In other words, “the fact that the creditor intentionally and with corrupt intent demanded or accepted more than the prohibited interest must be expressly and affirmatively asserted and proven by clear and satisfactory evidence.” (Citation omitted). “There is intent to bribe when the evidence indicates that the lender knowingly charged or received interest that was excessive having regard to all the circumstances of the transaction.” Oregrund Ltd.

P`ship v. Sheive, 873 So. 2d 451, 459 (Fla. 5th DCA 2004) (reference omitted). See also Jersey Palm-Gross, Inc. v. Paper, 639 So. 2d 664, 668 (Fla.

4th DCA 1994) (“[T]he requisite intent was demonstrated by evidence that the lender knew the amount of interest receivable and the intention to receive the amount charged.”). Therefore, in some cases, the mere documentation of the transaction may be “sufficient to support the assertion that [the lender] knowingly intended to obtain an interest rate above the legal allowable interest rate.” Oregrund Ltd. P`ship, 873 So. 2d to 459. The regulation of interest rates is generally governed by consumer protection legislation. Florida also criminalizes charging extremely high interest rates. In all cases, interest is lost by the lender and is repaid twice. Charging interest rates of 25 to 45 per cent is an offence punishable by up to 60 days` imprisonment and a $500 fine. Imposing an interest rate higher than 45% is a Class 3 crime. Keeping the books of a loan with an interest rate greater than 25% is a first-degree offense.

This means that record holders are also responsible for reporting high interest rates. You may first want to contact the Florida Attorney General`s Office, Division of Consumer Protection. It is possible that such high rates are legal. However, even if they are, this does not make it appropriate for every person to take out such a loan. While good credit is required to qualify for a personal loan, the rate on that loan is so high that you should see if there is a violation of the Florida Deceptive and Unfair Marketing Practices Act (TRUTF). Preparing hybrid debt/equity agreements Lawyers should be aware that Florida courts have jointly interpreted partnership ownership and interest on a loan to determine whether a loan is usurable.31 Therefore, lawyers must inform their clients of the unintended consequences of taking an equity interest in a loan agreement. Lawyers should carefully draft partnership and loan agreements to avoid future litigation. Florida`s usury law does not prohibit the use of compound interest; However, statutory rates are based on simple interest rates. Therefore, lenders should be careful when calculating compound interest to ensure that the total amount does not exceed legal interest limits.

For example, a lender who charges 17% interest on a one-year loan of $500,000 compounded monthly will receive $91,946 from the borrower by the end of the year. The simple calculation of subsequent interest gives an interest rate of 18.39% ($91,946 / $500,000), which exceeds the amount allowed by law. In Florida, the legal interest rate is 12%. The general wear limit is 18%. For loans over $500,000, the maximum rate is 25%. See Florida CHAPTER 687: INTEREST AND USURY; LENDING PRACTICES to quote the chapter of the law and the verse. Courts consider a variety of factors to assess the nature of a loan agreement, including the wording of the agreement, the transfer of risk between the two parties, and how they recognize the transaction on their books. If it is determined that an agreement is a purchase of equity interests and not a loan with a debt obligation, usury laws do not apply and there are no limits to the amount of a “return” that the buyer (lender) can charge the seller (borrower).

Many people in Florida may pay interest on credit cards or car payments that are higher than the maximum interest rate listed. This does not mean that your lender is necessarily breaking the law. The maximum interest rate does not apply to domestic banks. These are banks with “National” or “N.A.” in their name. Even people licensed as pawnshops or small credit companies have other rules that apply. In general, the maximum interest rate applies to loans between individuals or businesses, not between banks. Imagine you need a loan quickly. Maybe you haven`t had as many shifts as you need and you have to pay rent. Maybe you`ve seen a good price on a car and now you need money to get the deal.