LOANSHARKINGLOANSHARKINGLOANSHARKINGLOANSHARKINGLOANSHARKING
Criminal usury, or loansharking, is defined as an
unauthorized agreement to loan, loaning, agreement to
take, taking, or receiving money or other property at an
interest rate in excess of the maximum rate permitted by
law. N.J.S.A. 2C:21-19a.
Notwithstanding any law of the state permitting the
parties to a loan to agree on the interest charged, the
criminal usury rate generally is 30% per annum. See
N.J.S.A. 2C:21-19a(2); Daly v. Daly, 179 N.J. Super.
344, 349 n. 2 (App. Div. 1981). For corporations,
limited liability companies and limited liability
partnerships, the maximum interest rate is 50% per
annum. See N.J.S.A. 2C:21-19a(2).
Criminal usury constitutes a crime of the second
degree if the interest rate exceeds 50%. It is a crime of the
third degree if the interest rate charged is less than 50%
and the amount involved is greater than $1000. All other
violations of N.J.S.A. 2C:21-19a(1) or a(2) constitute a
disorderly persons offense. These provisions apply only
to loans made to a “person,” not to corporations or other
limited liability business entities.
Engaging in the “business of criminal usury” is a
crime of the second degree and carries a fine of up to
$250,000. N.J.S.A. 2C:21-19b. To obtain a conviction,
the State must prove that the person “knowingly
engage[d] in the business of making loans at an interest
rate in excess of that permitted by statute. Ibid. In State
v. Tillem, 127 N.J. Super. 421 (App. Div.), certif. den. 65
N.J. 557 (1974), cert. denied, 419 U.S. 900 (1974),
renewed petition for certif. denied, 66 N.J. 335 (1974), the
court held that a similar phrase, “engages in the business
of making loans” in the predecessor statute, N.J.S.A.
2A:119A-3, was not void for vagueness.
The Tillem court also held that the trial court was not
required to charge the jury that scienter and criminal
intent were elements of the crime since a legislature may
declare such an act unlawful without proof of wrongful
intent. Id. at 425-426. However, the Code of Criminal
Justice provides that, where no intent element is
specifically identified, “knowingly” is the intent element
which must be proven. N.J.S.A. 2C:2-2c(3). See also
N.J.S.A. 2C:21-19b which uses the word “knowingly”.
Tillem further held that where various usurious loans
are made as a part of a continuing criminal “impulse,” the
individual transactions merge into the greater offense of
engaging in the business of criminal usury. Id. at 428-- Finally, the prosecutor’s comments during
summation, which likened defendant to Shakespeare’s
Shylock in exacting a “pound of flesh,” were justifiable.
The court deemed the comments to be harmless in light
of the trial court’s instruction to base the verdict on the
evidence. Id. at 426.
In Dopp v. Yari, 927 F.Supp. 814 (D.N.J. 1996), the
court held that N.J.S.A. 2C:21-19 did not apply to a
contract for financing a litigation in exchange for division
of the proceeds of the litigation. The agreement was more
in the nature of a joint undertaking than a loan, especially
since collection of the entire interest depended on the
outcome of the litigation. “Generally, in order to prove
usury, a party must establish three elements: (1) a loan
of money, (2) an absolute obligation to repay the
principal and (3) the exaction of a greater compensation
than that allowed by law for the use of the money.” Id.
at 820.Under New Jersey law, the burden of proof is upon
the one who asserts a claim of usury. Ibid.; Ditmars v.
Camden Trust Co., 10 N.J. 471, 498 (1952). The civil
remedy for a usurious loan is to sever the interest portion
of the loan and permit recovery only of the principal.
Dopp v. Yari, supra; Schuran, Inc. v. Walnut Hill Associates,
256 N.J. Super. 228, 233 (Law Div. 1991). Statutes
regulating usury impose duties or establish rights not
recognized by common law. They are therefore to be
interpreted strictly so as to effectuate only the plainly
expressed legislative intent. Schuran, Inc. v. Walnut Hill
Associates, supra.In Green v. Continental Rentals, 292 N.J. Super. 241
(Law Div. 1994), the court held that the difference
between the cash price and the total amount of
installments under a business’ rent-to-own agreement
with consumers was forbearance with interest rates
exceeding 30% per annum. Consequently, the interest
rates constituted an unconscionable practice and were in
violation of the Consumer Fraud Act, N.J.S.A. 56:8-1 et
seq.See also extortion (N.J.S.A. 2C:20-5), coercion
(N.J.S.A. 2C:13-5), harassment (N.J.S.A. 2C:33-4),
pawnbrokers (N.J.S.A. 2C:39-11), forgery and fraudu-
lent practices (see generally N.J.S.A. 2C:21) and
racketeering (N.J.S.A. 2C:41-1). N.J.A.C. 3:1-1.1 et seq.
sets forth maximum permissible interest rates.