Q: What is usury for interest charged on a $3,900 auto loan?
A friend, who is naïve and mentally-challenged received an auto loan with a principal amount of $3,900 at an interest rate of 47.99% with equally horrendous late charges. To date she has paid over $11,000 on the $3,900 and the lender is requiring $3,500 from her to pay it off. I want them to give her some of her money back or start a legal effort to do so. Is there a cause of action here?
A:
To my understanding, there is no limit on interest rates for loans over $2,500 from a duly licensed finance lender. See Financial Code section 22007 & 22303.
leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=FIN&division=9.&title=&part=&chapter=1.&article=1.
leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=FIN&division=9.&title=&part=&chapter=2.&article=3.
A: Tough call, but, while it's unsure if a car dealer is a licensed lender, it IS clear that one may not contract with someone who does not have "capacity" to contract, ie, 'mentally-challenged' and one can be hit hard with punitive damages for knowingly taking advantage of someone like this. She would have to have HORRIBLE credit to get such a rate and almost no one does. Sorry to hear this...
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