Under California usury law, an interest rate charged on a loan that is later found to be usurious is treated as:
Correct Answer
B) Illegal, with all interest (not just the excess) being forfeited by the lender
A usurious interest rate renders ALL interest on the loan illegal and subject to forfeiture. The lender does not merely lose the excess above the legal rate; the entire interest component is forfeited. This is a punitive measure designed to deter usurious lending practices.
Why This Is the Correct Answer
A usurious interest rate renders ALL interest on the loan illegal and subject to forfeiture. The lender does not merely lose the excess above the legal rate; the entire interest component is forfeited. This is a punitive measure designed to deter usurious lending practices.
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