The laws of virtually every state prohibit lenders from charging interest on loans in excess of the "usury rate" - the maximum interest rate permitted under the laws of the state. However, usury statutes vary greatly from state to state. Not only do the maximum interest rates vary, but some states exempt certain loans, some count origination and other fees in the calculation of interest, etc.

As a result, simply stating an interest rate that, on its face, is less than the maximum rate permitted in a particular state is not always a guarantee that the rate is not usurious. In February, the Rhode Island Supreme Court decided NV One, LLC v. Potomac Realty Capital LLC. The case turned on the enforceability of a usury savings clause that, on its face, was both well drafted and typical of the clauses found in virtually all commercial loan documentation.

Whether or not one agrees with the court's reasoning, writes business attorney Bill Miller in a Rhode Island Lawyers Weekly commentary, the practical implications are clear. Read Attorney Miller's insightful explanation of the ruling and the issues now faced by some commercial lenders in the publication's March 31 edition by clicking on the link below.

Source:Ruling to create major concerns for some commercial lenders

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