In New Jersey, the rate of interest upon the loan or forbearance of any money, wares, merchandise, goods or chattels may not exceed 6% per year, or when there is a written contract specifying a rate of interest, 16% per year. N.J.S.A. § 31:1-1.
That is, in New Jersey, when the agreement is oral, charging interest of more than 6% per year is civil usury. In New Jersey, when there is a written agreement and the agreement specifies the interest rate, charging interest of more than 16% per year is civil usury.
A lender who charges a rate of interest higher than the applicable rate which N.J.S.A. § 31:1-1 allows forfeits all interest and is entitled to recover only the principal of the loan. N.J.S.A. § 31:1-3. Further, if the borrower has paid interest in excess of the applicable rate which N.J.S.A. § 31:1-1 permits, that illegal interest is deducted from the principal of the loan owed to the usurer. N.J.S.A. § 31:1-3.
N.J.S.A. § 2C:21-19 makes it a criminal offense to charge, take from, or receive, from any individual, interest at a rate exceeding 30% per year. Further, N.J.S.A. § 2C:21-19 renders it a criminal offense to charge, take from, or receive, from any corporation, limited liability company (an “LLC”), or limited liability partnership (an “LLP”), interest at a rate exceeding 50% per year.
In other words, in New Jersey, charging, taking from, or receiving, from any individual, interest of more than 30% per year is criminal usury. So, too, in New Jersey, charging, taking from, or receiving, from any corporation, LLC, or LLP, interest of more than 50% per year is criminal usury.
Criminal usury is a crime of the second degree if the rate of interest on the loan is more than 50% per year. N.J.S.A. § 2C:21-19(a). Criminal usury is a crime of the third degree if the interest rate on any loan made to any individual is more than 30% per year but less than 50% per year. Id. § 2C:21-19(a).
There are numerous exemptions from New Jersey’s (6% or 16%) civil usury provisions, but few exemptions from the Garden State’s (30% or 50%) criminal usury provisions. The below-discussed exemptions from New Jersey’s civil usury limitations are illustrative but not exhaustive.
Corporations, limited liability companies, and limited liability partnerships borrowing money cannot interpose the defense of civil usury in a civil action. N.J.S.A. § 31:1-6.
Loans or forbearances of $50,000 or more, except for loans secured by a first lien on residential real property, are exempt from the (6% or 16%) civil usury statute. N.J.S.A. § 31:1-1(e)(1).
The New Jersey courts have held that purchases under revolving credit accounts, installment loan purchases, and purchases under credit card accounts are exempted from the State’s civil usury statute under what is termed the “time-price differential” doctrine. See, e.g., Steffenauer v. Mytelka & Rose, Inc., 87 N.J. Super. 506, 510-517, 210 A.2d 88 (N.J. App. Div. 1965) (installment agreement and note, in the principal amount of $12,480, for purchase and sale of coin-operated dry cleaning equipment is exempted from New Jersey’s civil usury statute), aff’d per curiam, 46 N.J. 299, 216 A.2d 585 (N.J. 1966)
However, the interest rates charged in retail installment contracts for the purchase of goods having a cash price of $10,000 or less are regulated by the New Jersey Retail Installment Sales Act, N.J.S.A. §§ 17:16C-1 – 17:16C-61. See N.J.S.A. §§ 17:16C-1(b), 17:16C-1(l), 17:16C-41.