Minnesota’s Usury Law codified in Minnesota Statutes Chapter 334, sets limits on the amount of interest that can be charged on any particular type of debt. Chapter 334 also does not allow collection of interest that exceeds the statutorily allowed rate and renders some of these contracts with a higher rate invalid. Determining the maximum allowed interests depends on the type and amount of the loan ranging from no limit for loans exceeding $100,000 to a low of 8%. Minn. Stat. § 334.01, subd. 1, 2. In Minnesota, the usury statutes exist for individuals that are being sued for enforcement of usurious contracts to use in defense. In other words, Chapter 334 is meant not necessarily to bring a cause of action but to defend against the enforcement of a contract that violates the statutes. Strickland v. First State Bank of Balaton, 202 N.W. 727,729 (Minn. 1925).
A usury defense is only available to a borrower and not to a lender and is also not available to a corporation, government, government subdivision or agency, trust estate, partnership, joint venture, cooperative, limited liability company or association. Minn. Stat. § 334.022.
Elements of Usury
1. The loan of money or forbearance of debt,
2. Agreement between parties that principle shall be repayable absolutely,
3. Exaction of greater amount of interest or profit than is allowed by law, and
4. Presence of intention to evade law at inception of transaction.
Chapter 334 has a general 8% usury cap on interest rates. However, there are many exceptions to this 8% cap. Some of the more notable exceptions are credit organizations, any credit for loan in amount of $1,000 or more, contracts for the loan or forbearance of money in amount of less than $1,000 for businesses or agricultural purposes, interests on verdicts, judgments and awards, and retail installment sales of motor vehicles.
Any bond, bill, not, mortgage, or other contract or agreement is void as to the holder if it is usurious. Minn. Stat. § 334.03. A lender who operates under a usurious contract can lose interest on the money loaned and can also stand to lose the principle. Minn. Stat. § 334.03. There have been cases however, that limit recovery to the collection of interest only.