A usury savings clause is a provision in a loan document that attempts to negate any other provisions therein that might result in the extraction of an illegal interest rate. Common examples of savings clauses includes the following:

  • Notwithstanding any provisions in this note to the contrary, no interest, charges, or other payments in excess of those permitted by law shall accrue or become payable hereunder and any excessive payments which may be made shall be applied to principal in reduction of the balance of this note.
  • In no event shall the amount of interest due or payment in the nature of interest payable hereunder exceed the maximum rate of interest allowed by applicable law, as amended from time to time, and in the event any such payment is paid by the undersigned or received by the Holder, then such excess sum shall be credited as a payment of principal, unless the undersigned shall notify the Holder, in writing, that the undersigned elects to have such excess sum returned to it forthwith.

Historically, Florida’s District Courts of Appeal recognized savings clauses as valid and enforceable and a complete defense to a charge of usury, usually finding that the savings clause negates the element of intent. While those cases remain good law, the Florida Supreme Court has held more narrowly. The Court reasoned that a usury savings clause is just one factor to consider in the overall determination of whether a lender intended to exact a usurious interest rate and that the usury savings clause alone will not absolutely insulate a lender from a finding of usury. It recognized that savings clauses serve a legitimate function in commercial loan transactions and should be enforced in appropriate circumstances, such as where the actual interest charged is close to the legal rate, where the transaction is not clearly usurious at the outset but may become usurious upon the happening of a future contingency or in more complex transactions where inadvertent errors are likely to occur.

For these reasons, lenders should continue to use well-drafted usury savings clauses in their loan documents, but they must be aware that the mere existence of such a clause will not serve as a complete defense against a claim of usury.