2020 Georgia Code
Title 7 - Banking and Finance
Chapter 4 - Interest and Usury
Article 1 - In General
§ 7-4-10. Usury Forfeits Entire Interest; Right of Setoff; How Forfeiture Discharged; When Time Bars Action or Defense

1. Any person, company, or corporation violating the provisions of Code Section 7-4-2 shall forfeit the entire interest so charged or taken or contracted to be reserved, charged, or taken. No further penalty or forfeiture shall be occasioned, suffered, or allowed.
2. The amount forfeited as provided in subsection (a) of this Code section may be pleaded as a setoff in any action for the recovery of the principal sum loaned or advanced by the defendant in said action.
3. No contrivance or arrangement between the parties to any such unlawful transaction or their privies, except an actual and full payment of the amount forfeited as provided in subsection (a) of this Code section, shall have the effect of discharging such forfeiture.
4. No plea or action for the recovery of such forfeiture shall be barred by lapse of time shorter than one year.

(Ga. L. 1875, p. 105, §§ 3, 4; Code 1882, §§ 2057b, 2057c, 2057d, 2057e; Civil Code 1895, §§ 2888, 2889, 2890, 2891; Civil Code 1910, §§ 3438, 3439, 3440, 3441; Ga. L. 1916, p. 48, §§ 1, 2; Code 1933, §§ 57-112, 57-113, 57-114, 57-115.)

- For article discussing methods of computation of finance charges in Georgia consumer credit contracts, see 30 Mercer L. Rev. 281 (1978). For note discussing problems with profits generated by escrow account, and proposing federal legislative reform, see 10 Ga. St. B.J. 618 (1974). For note discussing penalties for violations of the usury statutes, and procedures for invoking the usury defense, see 12 Ga. L. Rev. 814 (1978).

ANALYSIS

• General Consideration
• Forfeiture
• Setoff
• Statute of Limitations

General Consideration

Actual performance of usurious agreement not required.

- Taint of usury does not result from payment of usurious interest, but from agreement to do so, whether performed or unperformed. Duderwicz v. Sweetwater Sav. Ass'n, 595 F.2d 1008 (5th Cir. 1979).

Once there is usury, the usury infects any renewal note for the same debt or any part thereof unless the usury is purged. A determination as to the application of former O.C.G.A. § 7-4-7, which provided for no limit of interest rate on loans of $100,000.00 or more, cannot be decided without a complete accounting to purge all usurious interest (to be applied to principal, if paid) and then a determination made as to whether or not the principal of the original note was for $100,000 or more, which would insulate it against the defense of usury. McNair v. Gold Kist, Inc., 166 Ga. App. 782, 305 S.E.2d 478 (1983).

- Allegedly usurious loan transaction cannot be purged of usurious taint through unilateral action of the lender. Duderwicz v. Sweetwater Sav. Ass'n, 595 F.2d 1008 (5th Cir. 1979).

To purge contract of usury, the contract must be wholly abandoned or cancelled, and a new obligation undertaken containing no part of the usury. Duderwicz v. Sweetwater Sav. Ass'n, 595 F.2d 1008 (5th Cir. 1979).

- Before a borrower who has executed a deed infected with usury can have affirmative equitable relief, such as injunction to prevent exercise of power of sale by grantee in such security deed, the borrower must pay or tender to the grantee the principal sum due. McGraw v. Planters' Bank, 178 Ga. 580, 173 S.E. 643 (1934).

Since interest only is subject to forfeiture, principal amount of indebtedness must be tendered before equity will intervene to prevent foreclosure sale. Citizens & S.S. DeKalb Bank v. Watkins, 236 Ga. 759, 225 S.E.2d 266 (1976).

- Plaintiff did not forfeit any right to interest on an open account for seeking a higher interest rate than that allowed by law when, before trial, the plaintiff amended the plaintiff's pleadings to seek the statutorily permitted rate of interest on commercial accounts. Belvin v. Houston Fertilizer & Grain Co., 169 Ga. App. 100, 311 S.E.2d 526 (1983).

- When note is tainted with usury and judgment is obtained for amount advanced and for attorney's fees, as provided for in note, the judgment obtained does not bear interest. Taylor v. Merchants Mut. Credit Corp., 100 Ga. App. 634, 112 S.E.2d 188 (1959).

- Nothing in former Code 1882, § 2057 militated against the view that waiver of right of homestead and exemption, made as part of usurious contract, was void. Cleghorn v. Greeson, 77 Ga. 343 (1886).

- Federal savings and loan association doing business in this state is subject to operation of usury laws and in making loans must comply with provisions thereof. However, such association may require borrower to pay necessary initial charges in connection with making of loan. First Fed. Sav. & Loan Ass'n v. Norwood Realty Co., 212 Ga. 524, 93 S.E.2d 763 (1956).

Cited in Everett v. Planters' Bank, 61 Ga. 38 (1878); Finney v. Brumby, 64 Ga. 510 (1880); Gramling, Spalding & Co. v. Pool, 111 Ga. 93, 36 S.E. 430 (1900); Weed v. Gainesville, Jefferson & S. R.R., 119 Ga. 576, 46 S.E. 885 (1904); McIntosh v. Thomasville Real Estate & Imp. Co., 141 Ga. 105, 80 S.E. 629 (1913); Strickland v. Bank of Cartersville, 141 Ga. 565, 81 S.E. 886 (1914); Lee v. King, 142 Ga. 609, 83 S.E. 272 (1914); Kennedy v. Baggarley, 15 Ga. App. 811, 84 S.E. 211 (1915); King Bros. & Co. v. Moore, 147 Ga. 43, 92 S.E. 757 (1917); Young v. First Nat'l Bank, 22 Ga. App. 58, 95 S.E. 381 (1918); Laing v. Hinesville Bank, 31 Ga. App. 416, 120 S.E. 799 (1923); Poulk v. Cario Banking Co., 158 Ga. 338, 123 S.E. 292 (1924); Mitchell v. Southland Loan & Inv. Co., 161 Ga. 215, 130 S.E. 565 (1925); Bank of Lumpkin v. Farmers State Bank, 161 Ga. 801, 132 S.E. 221 (1926); Stewart v. Miller & Co., 161 Ga. 919, 132 S.E. 535, 45 A.L.R. 599 (1926); Flood v. Empire Inv. Co., 35 Ga. App. 266, 133 S.E. 60 (1926); Winder Nat'l Bank v. Graham, 38 Ga. App. 552, 144 S.E. 357 (1928); Bennett v. Lowry, 167 Ga. 347, 145 S.E. 505 (1928); Griggs v. Clemons, 44 Ga. App. 522, 162 S.E. 392 (1932); Cornwall v. Atlanta Trust Co., 177 Ga. 303, 170 S.E. 194 (1933); Folsom v. Continental Adjustment Corp., 48 Ga. App. 435, 172 S.E. 833 (1934); Bennett v. Bennett, 50 Ga. App. 34, 177 S.E. 90 (1934); Nash Loan Co. v. Dixon, 181 Ga. 297, 182 S.E. 23 (1935); Osborne v. National Realty Mgt. Co., 182 Ga. 892, 187 S.E. 56 (1936); Gore v. Industrial Loan & Sav. Co., 52 Ga. App. 401, 183 S.E. 499 (1936); Ellis v. Williams, 56 Ga. App. 181, 192 S.E. 491 (1937); National Bondholders Corp. v. Kelly, 185 Ga. 788, 196 S.E. 411 (1938); Lankford v. Holton, 187 Ga. 94, 200 S.E. 243 (1938); Peoples Bank v. Mayo, 61 Ga. App. 877, 8 S.E.2d 405 (1940); Newcomb v. Niskey's Lake, Inc., 63 Ga. App. 811, 12 S.E.2d 160 (1940); Hartsfield Co. v. Willis, 192 Ga. 219, 14 S.E.2d 735 (1941), later appeal, 195 Ga. 317, 24 S.E.2d 292 (1943); 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); Gersh v. Peacock, 89 Ga. App. 57, 78 S.E.2d 543 (1953); First Fed. Sav. & Loan Ass'n v. Lindsey, 99 Ga. App. 316, 108 S.E.2d 198 (1959); Plastics Dev. Corp. v. Flexible Prods. Co., 112 Ga. App. 460, 145 S.E.2d 655 (1965); Friend v. Bank of Eastman, 112 Ga. App. 756, 146 S.E.2d 110 (1965); Colter v. Consolidated Credit Corp., 115 Ga. App. 408, 154 S.E.2d 713 (1967); Waters v. Lanier, 116 Ga. App. 471, 157 S.E.2d 796 (1967); Fried v. Morris & Eckels Co., 118 Ga. App. 595, 164 S.E.2d 732 (1968); Hodges v. Community Loan & Inv. Corp., 234 Ga. 427, 216 S.E.2d 274 (1975); Flanders v. Columbia Nitrogen Corp., 135 Ga. App. 21, 217 S.E.2d 363 (1975); Gilbert v. Cherry, 136 Ga. App. 417, 221 S.E.2d 472 (1975); Thomas v. Estes, 139 Ga. App. 738, 229 S.E.2d 538 (1976); Family Home Servs., Inc. v. Taylor, 142 Ga. App. 386, 236 S.E.2d 28 (1977); Henson v. Columbus Bank & Trust Co., 144 Ga. App. 80, 240 S.E.2d 284 (1977); Roberts v. Cameron-Brown Co., 556 F.2d 356 (5th Cir. 1977); Motor Fin. Co. v. Harris, 150 Ga. App. 762, 258 S.E.2d 628 (1979); Peterson v. Newton, 151 Ga. App. 852, 261 S.E.2d 763 (1979); Commercial Credit Plan, Inc. v. Parker, 152 Ga. App. 409, 263 S.E.2d 220 (1979); Kellos v. Parker-Sharpe, Inc., 245 Ga. 130, 263 S.E.2d 138 (1980); Kennedy v. Brand Banking Co., 245 Ga. 496, 266 S.E.2d 154 (1980); Williams v. First Bank & Trust Co., 154 Ga. App. 879, 269 S.E.2d 923 (1980); Adamson v. Trust Co. Bank, 155 Ga. App. 646, 271 S.E.2d 899 (1980); Clark v. Kaiser Agric. Chems., 156 Ga. App. 251, 274 S.E.2d 648 (1980); Thompson v. Hurt, 159 Ga. App. 656, 284 S.E.2d 671 (1981); Dorfman v. Briah Assocs., 160 Ga. App. 359, 287 S.E.2d 75 (1981); Cornelius v. Auto Analyst, Inc., 222 Ga. App. 759, 476 S.E.2d 9 (1996); W. Sky Fin., LLC v. State of Ga. ex rel. Olens, 300 Ga. 340, 793 S.E.2d 357 (2016).

Forfeiture

Operation of subsections (a) and (d) of this section.

- Under former Code 1933, § 57-112, all interest on a usurious loan was forfeited and payments thereon go in reduction of principal, and any payments made after principal was paid off can be recovered, if paid within 12 months next before filing suit therefor. Hartsfield Co. v. Watkins, 67 Ga. App. 411, 20 S.E.2d 440 (1942); Duderwicz v. Sweetwater Sav. Ass'n, 595 F.2d 1008 (5th Cir. 1979).

Under former Code 1933, § 57-112, one who lends at usurious rate forfeits interest and other charges for making the loan. Childs v. Liberty Loan Corp., 144 Ga. App. 715, 242 S.E.2d 354 (1978).

- One who lends at a usurious rate forfeits only interest and other charges for making loan - not principal. Service Loan & Fin. Corp. v. McDaniel, 115 Ga. App. 548, 154 S.E.2d 823 (1967).

Usurious interest rate charged in a note did not void the entire transaction; thus, the interest, but not the principal was forfeited. Aikens v. Wagner, 231 Ga. App. 178, 498 S.E.2d 766 (1998).

- Any person charging more than maximum rate of interest forfeits entire interest. Murdock Acceptance Corp. v. Wagnon, 587 F.2d 764 (5th Cir. 1979).

- Interest contracted for but not yet paid is subject to forfeiture. Duderwicz v. Sweetwater Sav. Ass'n, 595 F.2d 1008 (5th Cir. 1979).

- Under former Code 1933, § 57-112 all money shown to have been paid in excess of principal amount of loan and not barred by statute of limitations was recoverable. Family Home Servs., Inc. v. Taylor, 142 Ga. App. 386, 236 S.E.2d 28 (1977).

- All interest is forfeited when loan is usurious and payments on such loan are applied to principal amount of debt. Hartsfield Co. v. Watkins, 67 Ga. App. 411, 20 S.E.2d 440 (1942).

- Prepaid finance charge for making a loan which is not paid to a separate legal entity but to a lender in the lender's own right is subject to the forfeiture provision of former Code 1933, § 57-112 when the loan is usurious. Childs v. Liberty Loan Corp., 144 Ga. App. 715, 242 S.E.2d 354 (1978).

- Deed executed by a borrower purporting to convey title to the lender to secure a debt infected with usury was not void because so infected with usury. The only penalty to be incurred, under Acts 1916, p. 48, was to forfeit entire interest charged or taken, or contracted to be reserved, charged, or taken. McGraw v. Planters' Bank, 178 Ga. 580, 173 S.E. 643 (1934).

Usurious interest paid may not be setoff against independent claims or recovered per se after lapse of one year after its payment. Feeney Hay Co. v. Suggs, 60 Ga. App. 42, 2 S.E.2d 806 (1939).

Suit to recover forfeiture must be brought within one year from payment. Baker v. Moultrie Banking Co., 53 Ga. App. 107, 184 S.E. 894 (1936).

Suits for recovery of forfeiture must be brought within 12 months from payment. Hartsfield Co. v. Watkins, 67 Ga. App. 411, 20 S.E.2d 440 (1942).

Forfeiture referred to in former Code 1933, § 57-115 (see now O.C.G.A. § 7-4-10(d)) was that provided for in former Code 1933, § 57-112 (see now O.C.G.A. § 7-4-10(a)). Duderwicz v. Sweetwater Sav. Ass'n, 595 F.2d 1008 (5th Cir. 1979).

- Rather than concluding that O.C.G.A. § 7-4-10(d) acts as a complete bar to actions filed more than a year after contract formation, the courts interpreting that section have held that the statute bars only actions to affirmatively recover interest paid more than a year before the action was instituted. Doyle v. Southern Guar. Corp., 795 F.2d 907 (11th Cir. 1986), cert. denied, 484 U.S. 926, 108 S. Ct. 289, 98 L. Ed. 2d 249 (1987).

- When a lender charges for use of money a greater rate of interest than is permitted by law, the whole charge for interest is forfeited, and all payments made by debtor may be claimed by the debtor as credits upon the principal sum loaned; to such claim, no matter when payments were made, statutory bar of one year is not applicable; and this is true even though the debtor may have given express direction that payments be applied to interest. Reconstruction Fin. Corp. v. Puckett, 181 Ga. 288, 181 S.E. 861 (1935).

- Plea alleging payment of debt infected with usury may be properly filed to an action on debt, notwithstanding more than 12 months have elapsed after payment before plea is filed. Haskins v. Bank of State, 100 Ga. 216, 27 S.E. 985 (1897), overruled on other grounds, Montgomery v. Reynolds, 124 Ga. 1053, 53 S.E. 576 (1906); Atlanta Sav. Bank v. Spencer, 107 Ga. 629, 33 S.E. 878 (1899); Lankford v. Peterson, 21 Ga. App. 1, 93 S.E. 499 (1917).

- Petition to recover usury cannot be amended by adding a count which seeks to recover for other usury paid on a date more than one year before tendering of amendment. Baker v. Moultrie Banking Co., 53 Ga. App. 107, 184 S.E. 894 (1936).

- Statutory limitation of two years in National Banking Act of June 3, 1864, c. 106, 13 Stat. 99, applies only to suit to recover penalty of double interest received or paid, and not to defense of usury to defeat recovery of interest, and begins to run from time of payment of usurious interest. Young v. First Nat'l Bank, 22 Ga. App. 58, 95 S.E. 381 (1918).

RESEARCH REFERENCES

Am. Jur. 2d.

- 44B Am. Jur. 2d, Interest and Usury, §§ 172 et seq., 196, 286 et seq.

- 47 C.J.S., Interest and Usury; Consumer Credit, §§ 286 et seq., 325, 400, 401.

- Right to have usurious payments made on previous obligation applied as payment of principal on renewal, 13 A.L.R. 1244.

Affirmative liability for usurious penalty or excess interest paid under usurious contract in event of assignment or transfer, 78 A.L.R. 408.

Right to have usurious payments of interest applied as credit on principal as affected by statute of limitations, 101 A.L.R. 741.

Validity or voluntary conveyance consideration for which was tainted by usury, 102 A.L.R. 483.

When does limitation commence to run against action, defense, or counterclaim based on usury, 108 A.L.R. 622.

Right of junior mortgagee to attack senior mortgage for usury, 121 A.L.R. 879.

Usury as affecting conditional sale contract, 152 A.L.R. 598.

Payment or offer to pay principal and interest as condition of relief in equity against usurious contract, 166 A.L.R. 458.

Availability of setoff, counterclaim, or the like to recover either penalty for usury in, or usurious interest paid on, separate transaction or instrument, 54 A.L.R.2d 1344.

Right, in absence of statute expressly so providing, to recover back usurious payments, 59 A.L.R.2d 522.

Validity, and applicability to causes of action not already barred, of a statute enlarging limitation period, 79 A.L.R.2d 1080.

Statute of limitations: effect of delay in appointing administrator or other representative on cause of action accruing at or after death of person in whose favor it would have accrued, 28 A.L.R.3d 1141.

Validity under usury laws of provision calling for repayment of principal which exceeds sum loaned by amount reflecting any decline in purchasing power of dollar, 90 A.L.R.3d 763.