Under Florida law, usury is defined as the willful and knowing charge or receipt of interest in excess of 18% per year for credit transactions involving less than $500,000 or between 25% and 45% per year in a credit transaction involving more than $500,000. The usurious nature of a contract is determined from the date of its inception. A mathematical computation alone is not sufficient; courts look beyond the form of the transaction and examine its substance to determine whether the transaction is, in fact, usurious.
Florida courts have developed a four-prong test to determine whether a transaction is usurious. There must be a (1) loan, express or implied, (2) an understanding between the parties that money loaned will be returned, (3) a greater rate of interest than is allowed by law was agreed to be paid, and (4) a corrupt intent to exact more than the legal rate of interest. The most disputed issue in usury cases is the requirement of a showing that the lender intended to charge interest in excess of the statutory maximum. A borrower need not demonstrate that the lender had any specific intent to violate the usury statutes, just that the lender intended to charge or exact interest in excess of the statutorily proscribed rates.
Lenders should always be alert for transactions that have the potential to become usurious, as the penalties available to a borrower under the usury statutes are severe and can involve forfeiture of the entire interest charged or contracted to be charged such that only the principal may be enforced. When unlawful usurious interest charges have actually been received, double the amount of usurious interest taken or received must be returned to the party from whom the interest was taken. Moreover, violation of the criminal usury statute may result in the forfeiture of the right to collect the entire debt. For this reason, some borrowers have raised usury as a defense to a mortgage foreclosure. Still, Florida cases have often permitted foreclosures in transactions “tainted with usury” by crafting alternate remedies, such as deducting the usury penalty from the principal balance of the loan.