Legal Question in Real Estate Law in California

A promissary note claims to be 12% interest . However based on the number of payments, payment amounts, and payment term length the interest rate is actually 16.003% {the closest percentage that could be worked out to fit the terms of the note}. Is this note void as the terms cannot be worked out as stated or fraudulent or voidable?

Asked on 10/20/11, 10:23 am

3 Answers from Attorneys

George Shers Law Offices of Georges H. Shers

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I do not understand what you mean by the terms not being such as to be worked out. If the note is with a private individual, it is void as being in violation of the California usury laws [banks and some other lending institutions are excepted].

Answered on 10/20/11, 10:32 am

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Bryan Whipple Bryan R. R. Whipple, Attorney at Law

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Violating the usury laws does not make the note void. The principal is still due. Only the provisions calling for usurious interest are void. If usurious interest has been paid, the victim (person making the payment) may sue the person receiving the interest for treble damages. See Civil Code sections 1916-2 and 1916-3. Also, the list of exempt lenders and loan arrangers is fairly extensive, and includes real estate brokers.

Answered on 10/20/11, 10:53 am

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