Business Loan Enforceable Even Though Rate Exceeds Criminal Usury Cap

Last October, a Pennsylvania trial court found a business loan contract to be enforceable even though the interest rate charged on the loan exceeded Pennsylvania’s criminal usury statute. The court found that because the civil usury cap provided an exception for business purpose loans, the loan at issue was authorized by law. Because the loan was authorized by law the court found that the criminal code did not apply. The defendant requested the court to reconsider its decision. The court, however, refused to alter its findings:

[The defendant] argues that both the Loan Agreement and the Assignment Agreement violate the Pennsylvania Crimes Code because the interest rates in both the agreements exceeded 25% and the agreements do not fall into any exception. I ruled that both agreements do in fact fall within the general exception to the Pennsylvania Crimes Code. I relied on an exception to the [civil] Usury Statute. The Usury Statute authorizes interest rates in excess of 25% if the loan is a business loan. It is undisputed that the Loan in dispute was a business loan. Accordingly, the Loan is permitted by law and does not violate the [civil] Usury Statute or the [criminal usury] statute.

The defendant corporation appealed the trial court’s decision. The defendant argued that because the loan agreement provide for a rate that exceeded the criminal usury rate, the contract was illegal and unenforceable. The appellate court issued it’s ruling earlier this month and again rejected the defendant’s argument:

We have reviewed the briefs of the parties, the relevant law, the certified record, and the well-written opinions from the able trial judge, the Honorable Albert John Snite, Jr. We conclude that the claims raised in Appellant’s brief are meritless and that Judge Snite’s opinions, filed on July 18, 2014 and December 31, 2014, meticulously and accurately explain why appellant’s claims fail. Therefore, we adopt the trial court’s opinions as our own.

The appellate court went on to note that even if the criminal usury rate had been found to apply to business loans, the defendant’s arguments would still have failed because Pennsylvania prohibits corporations from using usury as a defense in an action to collect payment.

First Sur. Fin., LLC v. Taylor Assocs. LP, 2015 Pa. Super. Unpub. LEXIS 3614 (Pa. Super. Ct. 2015)

About Patrick Siegfried

Patrick Siegfried is the author of the Usury Law Blog. Patrick is a practicing attorney in Bethesda, Maryland. Patrick’s work focuses on issues regarding alternative small business financing. He can be reached at
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