Loan Sharking or Usury
Loan sharking is defined as when a borrower is charged interest above an established legal rate. Depending on the state, lenders typically cannot charge more than 60% interest per year. Loan sharking is also commonly referred to as usury.
Loan sharking involves the following elements:
- Making or conspiring to make any extortionate extension of credit
- Willful advancement of money or property to an individual
- Intent to extort extensions of credit
- Intent to charge the debtor more interest that permitted by either state or federal law
Loan sharking is both a federal and a state offense. Federal jurisdiction does not in any way preempt state jurisdiction. The federal government has the power to enact legislation involving loan sharking due to its power to regulate interstate commerce. The federal government has the power to initiate investigations and prosecutions of individuals involved in loan sharking activities without showing that the individual’s advancement of money affected interstate commerce.
Loan Sharking and the Racketeering and Influenced and Corrupt Organizations Act of 1970 (RICO)
The defendant may be charged with the offense of loan sharking or usury under RICO. The federal government may claim that the defendant incurred or contracted in a gambling activity that was in violation of federal or state laws or contracted to incur a debt that was in violation of usury laws.
Penalties associated with a conviction for loan sharking vary depending upon whether the defendant was convicted in federal or state court. The penalties for a loan sharking conviction may include time in prison and/or the imposition of a fine. If the defendant has been previously convicted of loan sharking or usury activities, the penalty assessed may be more severe and will most likely include prison time.
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