Legal Question in Investment Law in California

Loan reinvestment

I was loaned money in $5000 monthly increments. I signed a very binding contract. Not in the contract, but orally, and then via email, the person who loaned me the money became very specific that, if the $5000 increments were to continue, then I must reinvest 20%, or $1,000 per month, in coachng sessions with the person who loaned me the money's business partner. It was portrayed as a way to ensure my success (via coaching). When I refused to continue with these sessions, the loan installments were stopped. Have any laws been broken?


Asked on 8/02/06, 9:49 pm

1 Answer from Attorneys
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Loan reinvestment

Answering this question with certainty would require seeing the loan agreement and analysis of its terms, especially with respect to what restrictions were placed on your right to use the proceeds, the interest provisions, and the qualifications of the lender.

However, based on the limited information given, I get a whiff of usury. Usury is the offense of charging illegally-high interest. Some lenders are exempt from the usury laws, e.g. national banks, licensed loan brokers, and a few others. Most other are limited to charging no more than 10%. Exceeding that is not only criminal, it subjects the lender to possible treble damages on the usurious interest collected.

Please contact me with specifics if you would like a further free analysis.

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Answered on 8/02/06, 10:10 pm


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