Otterbourg Prevails in Upholding Usury Savings Clause
March 9, 2011
In a New York Supreme Court decision, Otterbourg prevailed on behalf of its client in obtaining a summary judgment against a defaulting borrower on fifteen of seventeen counts.
In awarding summary judgment, the Court dismissed the defendants' criminal usury defense finding that the intent necessary to establish to criminal usury was precluded by a "savings clause" that unequivocally disclaimed any intention by the client to charge or collect interest in excess of the lawfully permitted rate. The Court also found that there was no legal or factual support for the defendants' assertion that the closing fee should be taken into account in determining whether the criminal usury threshold under New York penal law had been exceeded.
The defendants also asserted that there was an oral modification of the obligation to use the proceeds of the loan in the manner specified in the loan documentation. The Court said this defense that was precluded by both N.Y.G.O.L. 15-301 and by the express "no oral modification" provision in the loan agreement itself.
The Court's decision can be found here.