Usury as a Cause of Action in New York

Usury laws in New York are designed to protect borrowers from excessively high interest rates. If a lender charges more interest than legally allowed, the borrower may be able to bring a usury claim. This type of case is not just about bad business practices — it’s about enforcing financial fairness and preventing exploitation. In New York, a claim for usury has two main elements that must be proven in court.

A Contract Founded on a Loan or Forbearance

The first element of a usury claim is that there must be a contract based on a loan of money or an agreement to delay collecting a debt, which is legally referred to as “forbearance.” This element makes clear that the law only applies to actual lending relationships — not to general business transactions, investments, or unpaid invoices. For example, if someone lends money with the understanding that it will be repaid with interest, or agrees to wait on collecting a debt in exchange for additional interest, then a contract has been formed that falls under usury laws.

This element focuses on the nature of the agreement. Courts will examine whether the transaction is, in substance, a loan, even if it is labeled as something else. Just calling a loan an “investment” or “advance” does not protect it from usury rules if the facts show that money was lent with an expectation of repayment plus interest.

An Intent to Charge More Than the Legal Interest Rate

The second element requires the borrower to prove that the lender intended to charge more than the maximum legal interest rate. In New York, the civil usury rate is 16 percent per year, and the criminal usury rate is 25 percent. If the interest charged exceeds these limits, the loan may be considered usurious.

Importantly, intent matters. The court must find that the lender knowingly agreed to terms that would result in illegal interest charges. This can often be proven by looking at the loan documents, including the interest rate, fees, payment structure, and any hidden charges that effectively increase the cost of borrowing beyond legal limits.

Conclusion

Usury is a serious claim that targets predatory lending practices in New York. To bring a successful case, a borrower must show that there was a loan or forbearance and that the lender knowingly charged interest above what the law allows. If proven, a usurious loan agreement may be voided or severely restricted, and in some cases, the lender may be denied the right to collect any interest at all. These protections help ensure that lenders operate fairly and that borrowers are not trapped by unreasonable debt terms.

Find the Law

“The elements of usury are (1) a contract founded on a loan of, or forbearance to collect, money and (2) an intent on the part of the lender to charge the borrower more than the legal rate of interest at the time the loan or forbearance agreement was made.” Beyer v. Cullinan, 2007 N.Y. Slip Op. 32992, 3 (N.Y. Sup. Ct. 2007)