When borrowers default under the terms of their loans, lenders often, in accordance with the loan documents, can assess late fees against the borrower. When lenders assess late fees around the time of or after a loan matures or is accelerated, however, the imposition of late fees has the potential to become usurious under Florida law. Because the penalties for violation of the Florida usury statutes are severe, lenders should tread carefully when dealing with transactions that have the potential to become usurious, and should take proactive steps to become informed as to which lending practices will or will not run afoul of Florida’s usury laws.
For example, under the terms of most loans, lenders are entitled to assess late charges on payments that are not made when due. Florida law expressly allows a lender to charge a late fee “on each installment which is in default for a period of not less than 10 days in an amount not in excess of 5 percent of such installment” and provides that such fee “shall not be deemed interest or a finance charge made incident to or as a condition to the grant of the loan or other extension of credit and shall not be included in determining the limit on charges, as provided in this section.” Lenders should note, however, that only one late fee may be assessed and collected in connection with any installment, regardless of the period during which it remains in default. Additionally, if a lender chooses to accelerate a loan, late fees may not continue to accrue after the date of acceleration.
If a lender charges late fees that do not comply with the statutory provision (for example, a late fee exceeding 5 percent of the installment amount, or assessed multiple times in connection with a single delinquent payment), or if a lender assesses late fees after the loan maturity or acceleration, then those amounts would likely be included in the usury calculation, and could subject the lender to penalties. Accordingly, lenders must exercise caution when charging late fees, and should consult counsel if unsure of whether charging a late fee in a particular instance may violate Florida’s usury statutes.