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  1. #1
    Sanyo80 is offline Junior Member
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    usury laws/debt collection

    What is the name of your state (only U.S. law)? Massachusetts

    I lent an associate $500 with a signed promissory note, indicating a one time fee of $125 for the use of my money. The payment of the interest and principle ($625) was due after three months. The payment date has passed without receiving any money. A clause in the promissory note stated that if he defaulted on the loan he would have to pay me $10 a day until the full payment was received. Under Massachusetts law can I take him to small claims court for the accrued interest and principle to this day?
  2. #2
    justalayman is offline Senior Member
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    A bit of research shows that Mass has set the maximum interest at 20%. Above that and it is usury.

    You have far surpassed that point. I suspect a court will see the "fee" as a hidden interest.

    [url=http://www.usurylaw.com/state/massachusetts.php]Massachusetts Usury Laws | Usury[/url]

    As a general rule, in part because of the liberality of the usury ceiling in the Commonwealth, courts in Massachusetts tend to be very restrictive in their interpretation of loan agreements that contain interest rates above the 20% mark. In the vast majority of instances, when a court in Massachusetts is faced with a situation in which in the interest rate on a personal loan agreement exceeds the 20% mark, the court will:

    -- deem the loan agreement itself illegal

    -- void the loan agreement

    -- conclude that all provisions in that loan agreement (and not just the provision dealing with the interest rate) to be unenforceable.

    In some rarer instances, depending on the facts at hand in a given situation, a court might reformat the loan agreement and thereby enforce the agreement with a lowered interest rate established by the court in conformity with the usury laws that are on the books in the Commonwealth.
    btw; that 20% is annual percentage rate
  3. #3
    Sanyo80 is offline Junior Member
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    So in reality I could take him to court for $600? $500*.2=100... 100+500=600

    + court fees


    Ya I read that website but was just confirming.. I don't know that much about law as you tell. It's been a learning experience. There isn't anything for losing opportunity to invest? "opportunity cost".. I mean what if I had wanted to invest that money based on the fact that I thought I would get the money on a specific date>
    Last edited by Sanyo80; 01-13-2009 at 07:28 PM.
  4. #4
    justalayman is offline Senior Member
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    no. that 20% is (still) an APR. That would equate to about 1.67% monthly (actually a little less due to the compounding. 1.67% would result in greater than 20% actually.)

    so, for loaning $500 for 3 months, you would be due around $525. Just a wee bit less than the exhorbitant and usurious amount you come up with. (this is for 3 months)

    If the other guy is lucky and considering the extreme finance fee you are seeking, a judge may simply void his debt totally, as in the guy owes you nothing, including the original loan.

    Being a loan shark does have its' risks.

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