Casa Academy

Reviewed by Casa Academy and updated July 29, 2026 using the current DBPR checklist and Pearson VUE scheduling guidance.

Usury

Usury is charging interest above the maximum rate allowed by state law, making the excess interest unenforceable or exposing the lender to civil penalties, license discipline, or criminal liability depending on jurisdiction.

Exam context

Usury = interest above legal maximum. Varies by state and loan type. Excess interest may be forfeited. Distinct from TILA APR disclosure violations.

Legal limits and exemptions

Each state sets its own usury ceiling for different loan types (consumer, commercial, junior liens). Federally chartered banks may follow alternate federal rules. Licensed mortgage lenders operating under specific statutes often have higher permitted rates than private individuals. Courts look at the effective annual rate including fees characterized as interest.

Real estate practice impact

Owner-financed deals and land contracts carry higher usury risk when parties skip licensed lender channels. Agents should refer clients to compliant loan documents and counsel when structuring creative financing. A usurious note may be voidable or reformed to the legal rate, affecting investor returns and foreclosure rights.

Examples

  • Private note

    An individual lends $50,000 secured by a deed of trust at 18% where state law caps consumer loans at 10%. The borrower may defend foreclosure by asserting usury, and a court may reduce enforceable interest.

  • Licensed lender

    A state-licensed mortgage company charges 9% on a purchase loan where the usury ceiling for licensed lenders is 12%. The rate is lawful because the lender falls within a statutory exemption class.

Keep studying

Practice usury questionsEnroll in pre-licensing

Related terms

Related resources

Sources