2020 Georgia Code
Title 7 - Banking and Finance
Chapter 4 - Interest and Usury
Article 1 - In General
§ 7-4-1. "Usury" Defined
The term "usury" means reserving and taking or contracting to reserve and take, either directly or indirectly, a greater sum for the use of money than the lawful interest.
(Orig. Code 1863, § 2023; Code 1868, § 2024; Code 1882, § 2051; Civil Code 1895, § 2877; Civil Code 1910, § 3427; Code 1933, § 57-102.)
Law reviews.- For note discussing the reservation of interest at highest lawful rate as constituting usury, see 1 Ga. L. Rev. No. 2 p. 38 (1927). For note discussing whether a holder in due course takes free of claims of violations of the usury laws, see 12 Ga. L. Rev. 814 (1978).
JUDICIAL DECISIONSANALYSIS
- General Consideration
- Intent
- Application
- Parol Evidence
General Consideration
Policy of state.
- It is the policy of laws of this state to inhibit taking of usury under every and any pretense or contrivance whatsoever. McGehee v. Petree, 165 Ga. 492, 141 S.E. 206 (1928); Public Fin. Corp. v. State, 67 Ga. App. 635, 21 S.E.2d 476 (1942).
Construction and application of section with § 7-4-18. - Former Code 1933, §§ 57-102, 57-117 and 57-9901 (see now O.C.G.A. §§ 7-4-1 and7-4-18) are to be construed and applied as one law. Wall v. Lewis, 192 Ga. 652, 16 S.E.2d 430 (1941).
"Usury."
- Usury is excess over legal interest charged by lender to borrower for use of lender's money. Sledd v. Pilot Life Ins. Co., 52 Ga. App. 326, 183 S.E. 199 (1935).
Four requisites of usurious transactions.
- There are four requisites of every usurious transaction: (1) a loan or forebearance of money, either express or implied; (2) upon understanding that principal shall or may be returned; (3) that for such loan or forebearance a greater profit than is authorized by law shall be paid or is agreed to be paid; and (4) that the contract was made with intent to violate the law. Bailey v. Newberry, 52 Ga. App. 693, 184 S.E. 357 (1935).
Substance of transaction is focus in determining whether transaction is usurious.
- It is duty of court to look, not at form and words, but at substance of transaction. Rushing v. Worsham & Co., 102 Ga. 825, 30 S.E. 541 (1898); Young v. First Nat'l Bank, 22 Ga. App. 58, 95 S.E. 381 (1918).
Usurious original transaction infects renewal.
- Contract for usurious loan not purged of usury by renewal note when original contract continues. Hammond v. Buys, 1 Ga. 416 (1846).
If there was usury in the original loan which was not purged out when renewal was given, they are contaminated just as original contract was, and all payments made in interval are to be treated not as payments of usury, but payments made on original debt. Archer v. McCray, 59 Ga. 546 (1877); McGee v. Long, 83 Ga. 156, 9 S.E. 1107 (1889); Lockwood v. Muhlberg, 124 Ga. 660, 53 S.E. 92 (1906).
When original transaction was usurious, the usury infects any renewal note for the same debt or any part thereof, if the usury was never purged. Hartsfield Co. v. Watkins, 67 Ga. App. 411, 20 S.E.2d 440 (1942).
Usurious contract not cured by compromise and settlement for less.
- Since usury consists not only in reserving and taking but in contracting to reserve and take more than legal rate, fact that agreed excess was compromised and settled for a less amount would not free a transaction from usury. Lankford v. Holton, 187 Ga. 94, 200 S.E. 243 (1938), later appeal, 195 Ga. 317, 24 S.E.2d 292 (1943).
When undisputed pleadings show usurious scheme, judgment on pleadings appropriate.
- When facts show without dispute a device to extract more than legal rate of interest for use of money, such question need not be submitted to the jury. Accordingly, when undisputed pleadings show such a scheme, it is not error for the trial court to grant the plaintiff's motion for judgment on the pleadings under provisions of § 12(c) of the Civil Practice Act (see now O.C.G.A. § 9-11-12(c)). Cook v. Young, 225 Ga. 26, 165 S.E.2d 727 (1969).
If usury is found, all usurious interest is void. Gilbert v. Cherry, 136 Ga. App. 417, 221 S.E.2d 472 (1975).
Usury laws did not apply to an investment contract.
- Trial court properly granted summary judgment to a purchaser in a breach of contract suit against a developer as the award the purchaser obtained, which included interest, was not usurious under O.C.G.A. § 7-4-1 as the developer failed to show that the contract involved was a loan to which the usury laws applied as the record established it as an investment contract. Golden Atlanta Site Dev., Inc. v. Tilson, 299 Ga. App. 646, 683 S.E.2d 166 (2009).
Cited in Scott v. Saffold, 37 Ga. 384 (1867); Shealy v. Toole, 56 Ga. 210 (1876); Easterlin v. Rylander, 59 Ga. 292 (1877); Wofford v. Wyly, 72 Ga. 863 (1884); Neel v. Young, 78 Ga. 342 (1886); Reynolds v. Neal, 91 Ga. 609, 18 S.E. 530 (1893); Cook v. Equitable Bldg. & Loan Ass'n, 104 Ga. 814, 30 S.E. 911 (1898); Green v. Equitable Mtg. Co., 107 Ga. 536, 33 S.E. 869 (1899); Stewart v. Slocumb, 120 Ga. 762, 48 S.E. 311 (1904); McGehee v. Petree, 165 Ga. 492, 141 S.E. 206 (1928); Graham v. Lynch, 206 Ga. 301, 57 S.E.2d 86 (1950); McConnell v. Shropshire, 80 Ga. App. 677, 57 S.E.2d 293 (1950); Pickens Inv. Co. v. Jones, 82 Ga. App. 850, 62 S.E.2d 753 (1950); M.B. Dale, Inc. v. Dawson County Bank, 112 Ga. App. 560, 145 S.E.2d 619 (1965); Vezzani v. Tallant, 121 Ga. App. 67, 172 S.E.2d 858 (1970); Roberts v. Cameron-Brown Co., 556 F.2d 356 (5th Cir. 1977); Murdock Acceptance Corp. v. Wagnon, 587 F.2d 764 (5th Cir. 1979); Laminoirs-Trefileries-Cableries de Lens, S.A. v. Southwire Co., 484 F. Supp. 1063 (N.D. Ga. 1980); Southern Fed. Sav. & Loan Ass'n v. Lyle, 249 Ga. 284, 290 S.E.2d 455 (1982).
Intent
Essential element is intent, at time contract is executed, to take unlawful interest.
- To constitute usury, it is essential that there be, at the time the contract is executed, an intent on the part of the lender to take or charge, for use of money, a higher rate of interest than that allowed by law. Bellerby v. Goodwyn, 112 Ga. 306, 37 S.E. 376 (1900); Loganville Banking Co. v. Forrester, 143 Ga. 302, 84 S.E. 961, 1915D L.R.A. 1195 (1915); Harrison v. Arrendale, 113 Ga. App. 118, 147 S.E.2d 356 (1966), later appeal, 117 Ga. App. 463, 160 S.E.2d 653 (1968); Williams v. First Bank & Trust Co., 154 Ga. App. 879, 269 S.E.2d 923 (1980); McCrory v. Young, 158 Ga. App. 678, 282 S.E.2d 163 (1981).
Mistake or inadvertence does not make a loan usurious.
- To constitute usury it is essential that there be, at the time the contract is executed, an intent on the part of the lender to take or charge for use of money a higher rate of interest than that allowed by law. If the intent be to take only legal interest, a slight and trifling excess, due to mistake or inadvertence, will not taint the transaction with usury. Cook v. Young, 225 Ga. 26, 165 S.E.2d 727 (1969).
Mistake in calculation or by inadvertence, not shown to be part of a usurious design or otherwise intentional, does not make a loan usurious. Sumner v. Adel Banking Co., 244 Ga. 73, 259 S.E.2d 32 (1979).
If the intent be to take only the legal interest, a slight and trifling excess, due to mistake or inadvertence, will not taint the transaction with usury. Williams v. First Bank & Trust Co., 154 Ga. App. 879, 269 S.E.2d 923 (1980).
Intent that excess interest be paid.
- Transaction is usurious when lender and borrower mutually intend that excess interest be paid. Union Sav. Bank & Trust Co. v. Dottenheim, 107 Ga. 606, 34 S.E. 217 (1899).
Intent implied when note usurious on note's face.
- Intent to charge usurious rates may be implied if all other essential elements are expressed upon the face of the contract. Harrison v. Arrendale, 113 Ga. App. 118, 147 S.E.2d 356 (1966).
When the note calls for usurious interest on the note's face, usurious intent will be implied, although the lender may negate it. Williams v. First Bank & Trust Co., 154 Ga. App. 879, 269 S.E.2d 923 (1980).
Intent to take unlawful interest demands verdict of usury.
- If it appears that the lender intended to take for use of money more than the lawful rate of interest, a verdict of usury is demanded. Simpson v. Charters, 188 Ga. 842, 5 S.E.2d 27 (1939).
Jury question.
- Question of usurious intent and truth of transaction is generally for jury determination, but whe contract is usurious on the contract's face, the intent to violate usury law may be implied. McCrory v. Young, 158 Ga. App. 678, 282 S.E.2d 163 (1981).
Rebuttal of intent by evidence of honest mistake.
- Implication of usurious intent arising from taking or reserving of interest greater than legal rate may be rebutted by evidence that excess was the result of an honest mistake and that usury was not intended. But when evidence is clear, this question can be decided as a matter of law. McCrory v. Young, 158 Ga. App. 678, 282 S.E.2d 163 (1981).
Application
Price never considered usury.
- One may sell one's credit, one's responsibility, one's goods, or one's lands; and if the person deals fairly, the person may take as large a price for either as the person can get, and there can be no usury in the case. Rushing v. Worsham & Co., 102 Ga. 825, 30 S.E. 541 (1898).
Cash price and time price.
- Seller may make a difference in the seller's cash price and the seller's time price for property. Bowen v. Consolidated Mtg. & Inv. Corp., 115 Ga. App. 874, 156 S.E.2d 168 (1967).
Higher time price than cash price for property is not a loan; thus, usury laws are inapplicable. Bowen v. Consolidated Mtg. & Inv. Corp., 115 Ga. App. 874, 156 S.E.2d 168 (1967).
Conditional-sale contract for amount termed time-price is not usurious, even though in a given instance the difference in cash price and term price may exceed eight percent interest. Newkirk v. Universal C.I.T. Credit Corp., 93 Ga. App. 1, 90 S.E.2d 618 (1955).
Property received as interest permissible unless value exceeds lawful rate.
- Creditor has right to demand payment of the creditor's debt with legal interest; and if the creditor receives property, the value of which does not exceed the creditor's lawful demand, the creditor has not received any usury, although the creditor may have agreed with the debtor that the property was of greater value than the sum the creditor was lawfully entitled to exact. First Nat'l Bank v. Davis, 135 Ga. 687, 70 S.E. 246, 36 L.R.A. (n.s.) 134 (1911).
Note permitting acceleration of all liabilities not usurious on the note's face.
- Clause in secondary security deed on realty permitting acceleration of all liabilities does not render note usurious on its face. Goodwin v. Trust Co., 144 Ga. App. 787, 242 S.E.2d 302 (1978).
Note usurious when acceleration clause allows more than lawful interest.
- Promissory note containing acceleration clause permitting collection of more than allowable interest constitutes usurious contract to reserve and take more than lawful interest. Goodwin v. Trust Co., 144 Ga. App. 787, 242 S.E.2d 302 (1978).
Payment of sum exceeding lawful rate under guise of rent usurious.
- When vendee of property is to pay a vendor 10 percent on purchase money until it is settled in full, under name of rent, such contract is usurious on the contract's face. Scofield v. McNaught, 52 Ga. 69 (1874).
Payment of rents from property exceeding lawful rate, as consideration for loan, constitutes usury.
- If money is loaned for purpose of enabling borrower to buy certain shop, upon agreement that for use of money lender shall receive from borrower one half of specified rents from property, which amounts to more than highest legal rate of interest per annum, the transaction will be usurious. Reese v. Bloodsworth, 146 Ga. 355, 91 S.E. 120 (1917).
Paying taxes on bonds, in addition to lawful interest, is usurious.
- Stipulation in bonds to pay, in addition to lawful interest, a percentage of federal income taxes that might be imposed upon the bonds is usurious. Newcomb v. Niskey's Lake, Inc., 190 Ga. 565, 10 S.E.2d 51, answer conformed to, 63 Ga. App. 811, 12 S.E.2d 160 (1940).
Commission, in addition to full rate of lawful interest, usurious.
- Under former Code 1933, § 57-102 (see now O.C.G.A. § 7-4-1), charge by a lender as a commission of $8,000.00, deducted from a loan of $80,000.00 evidenced by bonds of a borrower, which carrying full rate of lawful interest (eight percent per annum) is usury. Newcomb v. Niskey's Lake, Inc., 190 Ga. 565, 10 S.E.2d 51, answer conformed to, 63 Ga. App. 811, 12 S.E.2d 160 (1940).
Agreement to forbear collection of judgment in consideration of usurious interest unlawful.
- If a judgment not tainted with usury is transferred, and the transferee agrees with the defendants to forbear its collection for a term of time, in consideration of usurious interest paid the defendants, such subsequent agreement is usurious. Troutman v. Barnett, 9 Ga. 30 (1850).
Requirement that borrower keep certain sum on deposit makes loan usurious.
- Requirement that borrower shall keep on deposit a certain sum, if made a condition precedent to the loan of money, infects the loan with usury; for reason that the borrower thus pays interest on money which the borrower does not receive or have use of. Bank of Lumpkin v. Farmers State Bank, 161 Ga. 801, 132 S.E. 221 (1963); Reid v. National Bank, 149 Ga. App. 834, 256 S.E.2d 82 (1979).
Excess interest may be paid for considerations beyond use of money.
- When excess over legal interest is paid for other good and valuable considerations beyond mere use of money, it is not usury. Atlanta Mining & Rolling Mill Co. v. Gwyer, 48 Ga. 9 (1873); Sledd v. Pilot Life Ins. Co., 52 Ga. App. 326, 183 S.E. 199 (1935); Simpson v. Charters, 188 Ga. 842, 5 S.E.2d 27 (1939).
Lender's 49 percent economic interest.
- In a class action suit seeking to hold a lender liable for payday loans, the trial court did not err in concluding that genuine issues of material fact existed as to whether the lender was the true lender of the loans made after May 14, 2004, because evidence was presented sufficient to create a genuine issue of material fact regarding whether the lender actually received only a 49 percent economic interest for the lender's services and even if the lender did so, whether the lender nevertheless, by contrivance, device, or scheme, attempted to avoid the provisions of O.C.G.A. § 16-17-2(a). Ga. Cash Am. v. Greene, 318 Ga. App. 355, 734 S.E.2d 67 (2012).
Premium for insurance required as collateral security for loan not charge for use of money. Sledd v. Pilot Life Ins. Co., 52 Ga. App. 326, 183 S.E. 199 (1935).
Interest on overdue interest and attorneys' fees lawful.
- It is lawful to contract for interest on interest overdue and for payment by debtor of reasonable attorneys' fees on sums, both principal and interest, which have to be collected by suit. Merck v. American Freehold Land Mtg. Co., 79 Ga. 213, 7 S.E. 265 (1887); Young v. First Nat'l Bank, 22 Ga. App. 58, 95 S.E. 381 (1918).
Inclusion of past due interest in note not usurious.
- Contention that, because a sum of past due interest was included in the note, the transaction was thereby tainted with usury, on the theory that the interest cannot be collected on interest, was without merit. Walton v. Johnson, 213 Ga. 108, 97 S.E.2d 310 (1957).
Interest recoverable on annual interest installments from time interest become due.
- Upon contract to pay interest annually, interest may be recovered on annual installments of interest from time interest became due. Calhoun v. Marshall, 61 Ga. 275, 34 Am. R. 99 (1878); Ray v. Pease, 97 Ga. 618, 25 S.E. 360 (1895); Haley v. Covington, 19 Ga. App. 782, 92 S.E. 297 (1917).
Loan not usurious if used to pay usurious loan.
- Paying old usurious loan with new, nonusurious loan does not necessarily render new loan usurious. Lott v. Peterson, 23 Ga. App. 458, 98 S.E. 361 (1919).
When lender of money neither charges nor receives more than legal rate of interest, fact that money was, with the lender's knowledge, borrowed for purpose of paying debt infected with usury due by borrower to third person does not make loan usurious. Thompson v. First State Bank, 99 Ga. 651, 26 S.E. 79 (1896); Carter v. Brooks, 144 Ga. 852, 88 S.E. 209 (1916).
Facts warranting finding that transaction is merely device to cover agreement to pay usurious interest.
- See Kennedy v. Baggarley, 15 Ga. App. 811, 84 S.E. 211 (1915).
Parol Evidence
Introduction to show contract was cover for usury.
- Parol evidence may be introduced to show written contract was a cover for usury. McDaniel v. Bank of Bethlehem, 22 Ga. App. 223, 95 S.E. 724 (1918).
Admissible for testing validity of a transaction.
- Law abhors usury and will search every fact and circumstance and allow introduction of parol evidence to test the validity of the real transaction of parties. Bailey v. Newberry, 52 Ga. App. 693, 184 S.E. 357 (1935).
OPINIONS OF THE ATTORNEY GENERAL
"Usury."
- Usury is not the taking of interest from a borrower at an unlawful rate, but rather it is receiving from any source a greater sum for use of money than the lawful interest. 1969 Op. Att'y Gen. No. 69-53.
When interest plus points or loan discount exceed legal limit, loan usurious.- When interest rate charged borrower coupled with points or loan discount collected from seller exceed legal limit, such loan is usurious; the standard charges in a loan transaction are not included in this computation if those charges are expended in a bona fide manner. 1969 Op. Att'y Gen. No. 69-53.
Carrying charges limited to legal rate plus actual expenses.- When no distinction is made between cash price and time price of an article, carrying charges are limited to legal rate of interest, plus any actual expense incurred by vendor incident to the sale, such as fee for recording a security instrument and reasonable protective insurance. 1954-56 Op. Att'y Gen. p. 448.
RESEARCH REFERENCES
Am. Jur. 2d.
- 44B Am. Jur. 2d, Interest and Usury, §§ 1 et seq., 64 et seq.
Proof of Violation of State Usury Consumer Loan Law, 75 POF3d 103.
C.J.S.- 47 C.J.S., Interest and Usury; Consumer Credit, §§ 1 et seq., 184, 185.
ALR.
- Effect on indebtedness originally valid of usurious forbearance, renewal, or extension, 3 A.L.R. 877.
Waiver of usury by renewal or other executory agreement, 13 A.L.R. 1213; 74 A.L.R. 1184.
Provision in statute or ordinance limiting rate of interest per annum as precluding requirement of payment at maximum rate at intervals of less than a year, 29 A.L.R. 1109.
Validity of agreement to pay interest on interest, 37 A.L.R. 325; 76 A.L.R. 1484.
Usury: expenses or charges (including taxes) incident to loan of money, 53 A.L.R. 743; 63 A.L.R. 823; 105 A.L.R. 795; 52 A.L.R.2d 703.
Noncompliance with conditions prescribed by statute as affecting validity of contract, under usury laws, for payment of premium on loan of building and loan association, 74 A.L.R. 973.
Waiver of usury by renewal or other executory agreements, 74 A.L.R. 1184.
Delay in paying over proceeds of loan to borrower as affecting question of usury, 76 A.L.R. 1467.
Right of a purchaser assuming a mortgage debt, with the authorization of the mortgagor, to set up usury in mortgage as a defense or rely upon it as a ground of relief in equity, 82 A.L.R. 1153.
Parol-evidence rule as affecting extrinsic evidence to show or to negative usury, 82 A.L.R. 1199; 104 A.L.R. 1261.
Taking of usury or excessive interest as subject of criminal conspiracy, 89 A.L.R. 830.
Obligations covering deferred payments of purchase money, or extension thereof, as loan or forbearance within usury laws, 91 A.L.R. 1105.
Usury as predicable on agreement by which lender is to receive something other than money for his loan, 95 A.L.R. 1231.
Validity, construction, and effect of express agreement releasing cause of action or defense based on exaction of usury, 99 A.L.R. 600.
Conflict of laws as to usury, 125 A.L.R. 482.
Note or other obligation payable on demand for an amount in excess of amount actually loaned as usurious, 127 A.L.R. 460.
Finance charge in connection with conditional sale contract as usury, 143 A.L.R. 238.
Transaction in form a sale, but accompanied by an agreement or option for repurchase by the vendor or a third person previously interested, as a loan, as regards usury law, 154 A.L.R. 1063.
Computing interest on basis of 360 days in year, 30 days in month, or the like, as usury, 35 A.L.R.2d 842.
Usury: expenses or charges (including taxes) incident to loan of money, 52 A.L.R.2d 703.
Taking or charging interest in advance as usury, 57 A.L.R.2d 630.
Statute denying defense of usury to corporation, 63 A.L.R.2d 924.
Admissibility, in civil case involving usury issue, of evidence of other assertedly usurious transactions, 67 A.L.R.2d 232.
Usury as affected by repayment of, or borrower's option to repay, loan before maturity, 75 A.L.R.2d 1265.
Payments under (ostensibly) independent contract as usury, 81 A.L.R.2d 1280.
Practice of exacting usury as a nuisance or ground for injunction, 83 A.L.R.2d 848.
Usury: liability for the statutory penalty of persons other than the offending lender in a usurious loan transaction, 4 A.L.R.3d 650.
Usury as affected by mistake in amount or calculation of interest or service charges for loan, 11 A.L.R.3d 1498.
Advance in price for credit sale as compared with cash sale as usury, 14 A.L.R.3d 1065.
Provision for interest after maturity at a rate in excess of legal rate as usurious or otherwise illegal, 28 A.L.R.3d 449.
Reformation of usurious contract, 74 A.L.R.3d 1239.
Contingency as to borrower's receipt of money or other property from which loan is to be repaid as rendering loan usurious, 92 A.L.R.3d 623.
Leaving part of loan on deposit with lender as usury, 92 A.L.R.3d 769.
Application of usury laws to transactions characterized as "leases,", 94 A.L.R.3d 640.
