The Statute: North Dakota Century Code 12.1-31-02
12.1-31-02. Criminal usury – Penalty.
- A person is guilty of engaging in criminal usury if they knowingly:
- Charge, take, or receive an interest rate exceeding the maximum legal limit in exchange for a loan or extension of credit.
- Finance, control, manage, or supervise a business or enterprise engaged in criminal usury.
- Criminal usury does not apply to charges, fees, or interest rates that comply with state and federal law.
- Engaging in or financing a criminal usury business is classified as a Class C felony.
Overview of Criminal Usury and Its Elements
Criminal usury involves charging excessive interest rates or financing operations that do so. North Dakota’s law seeks to protect consumers and businesses from predatory lending practices while distinguishing between lawful lending and exploitative schemes.
Key Elements of the Crime
- Knowingly: The individual must have knowledge that the interest rates exceed legal limits.
- Interest Rates: The charged or received interest rate must surpass the state’s allowable maximum.
- Financing Criminal Usury: Individuals who fund or control businesses engaged in usury are equally culpable.
- Exclusions: Legal financial institutions and lenders adhering to state and federal guidelines are excluded.
Penalties for Engaging in or Financing Criminal Usury
Engaging in criminal usury is a serious offense in North Dakota and is classified as a Class C felony. Here are the penalties:
Class C Felony Penalties
| Penalty Category | Details |
|---|---|
| Maximum Period of Incarceration | 5 years |
| Minimum Period of Incarceration | None specified |
| Maximum Fines | $10,000 |
| Minimum Fines | None specified |
| Court Administration Fees | $400 |
| Minimum Length of Probation | None specified |
| Maximum Length of Probation | Up to 5 years supervised probation |
| Supervised Probation Required | No |
| 85% Rule Applies | No |
| Offender Registration Requirements | Not applicable |
| Offender Against Children Requirements | Not applicable |
Real-Life Examples of Criminal Usury
- Predatory Payday Loans: A lender charges exorbitant interest rates far above state limits for short-term loans targeting vulnerable borrowers.
- Loan Shark Operations: An individual provides illegal loans to small businesses with interest rates designed to trap them in perpetual debt.
- Hidden Fees in Contracts: A business includes excessive fees disguised as service charges, effectively increasing the interest rate beyond legal limits.
- Financing Usurious Loans: An investor knowingly funds an enterprise that engages in criminal usury practices.
- Cross-Border Usury Schemes: A lender operates in multiple states to exploit borrowers with unlawful interest rates.
Defenses Against Charges of Criminal Usury
Lack of Knowledge
Knowledge is a required element of criminal usury. If the accused can demonstrate they were unaware the interest rates exceeded legal limits, this defense can negate the charges. For instance, an employee following employer instructions without full knowledge of the rates might lack the requisite intent.
Compliance with Law
A defendant may argue that the rates charged were compliant with applicable state and federal laws. Proper documentation, including loan agreements and interest calculations, can substantiate this claim.
Disputed Interest Calculations
The prosecution must prove that the effective interest rate exceeded legal limits. By disputing the method or accuracy of the interest calculation, the defense can undermine the prosecution’s case. Errors in how interest rates or fees were computed can lead to dismissal.
No Direct Involvement
To be convicted of financing a criminal usury business, the prosecution must show active participation or control. Defendants may argue they had no involvement in setting interest rates or managing operations. For instance, a passive investor unaware of the enterprise’s usurious practices might use this defense.
Procedural Violations
If law enforcement failed to follow proper procedures during the investigation or arrest, this could serve as a defense. Examples include lack of probable cause or failure to obtain necessary warrants.
How a Lawyer Can Help
An attorney can provide vital assistance in criminal usury cases by:
- Evaluating Evidence: Identifying weaknesses in the prosecution’s case, such as errors in interest rate calculations.
- Challenging Charges: Arguing lack of intent or compliance with lending laws.
- Representing in Court: Advocating for the defendant during hearings and trials.
- Negotiating Resolutions: Seeking reduced charges or alternative penalties, such as fines or restitution.
- Protecting Rights: Ensuring fair treatment and adherence to due process.
Frequently Asked Questions About Criminal Usury
What is criminal usury?
Criminal usury involves charging or receiving interest rates that exceed the maximum allowed by law. It also includes financing or managing businesses engaged in such practices.
What are the penalties for criminal usury in North Dakota?
Criminal usury is a Class C felony, punishable by up to 5 years in prison, a $10,000 fine, and $400 in court administration fees.
Are banks and financial institutions exempt from criminal usury laws?
Yes. Licensed financial institutions that comply with state and federal regulations are excluded from criminal usury laws.
How can I determine if an interest rate is illegal?
Interest rate limits are established under North Dakota law. Consulting legal or financial professionals can help determine compliance.
Can I be charged for unknowingly financing criminal usury?
No. Knowledge is a required element. However, it is crucial to review business practices to avoid unintentional involvement.
What constitutes evidence of criminal usury?
Evidence may include loan agreements, interest rate calculations, witness testimony, and financial records demonstrating excessive rates.
Can a business be charged with criminal usury?
Yes. Businesses and their representatives may face charges if they engage in or finance usurious practices.
Is criminal usury a federal offense?
While usury laws vary by state, federal laws also regulate interest rates in specific contexts, such as loans insured by federal agencies.
Can I sue for damages if I was charged illegal interest rates?
Yes. Victims of criminal usury may have grounds for a civil lawsuit to recover damages and void unlawful agreements.
Are there defenses against criminal usury charges?
Yes. Common defenses include lack of knowledge, compliance with the law, and disputes over interest calculations.
Can criminal usury charges be dismissed?
Yes. Charges can be dismissed if the evidence is insufficient, the actions were lawful, or procedural violations occurred during the investigation.
How can I avoid criminal usury charges as a lender?
Ensure all loans comply with state and federal interest rate limits. Maintaining accurate records and consulting legal professionals can help prevent violations.
What should I do if I am accused of criminal usury?
Consult an attorney immediately to evaluate the charges, review evidence, and develop a defense strategy.
How does North Dakota’s law define interest rates?
Interest rates include the cost of borrowing, such as fees, penalties, and other charges, in addition to the stated annual percentage rate (APR).
What is the role of intent in criminal usury cases?
Intent is a key element. The prosecution must prove the accused knowingly engaged in or financed criminal usury practices.
Are there alternative penalties to incarceration for criminal usury?
Yes. Courts may impose fines, restitution, or probation in lieu of incarceration, depending on the circumstances.
Can a criminal usury conviction be expunged?
Expungement eligibility depends on North Dakota’s laws and the specifics of the case. An attorney can advise on the process.
What is the statute of limitations for criminal usury in North Dakota?
The statute of limitations may vary depending on the nature of the offense. Consulting legal counsel is recommended for specific timelines.
Can criminal usury charges apply to online lenders?
Yes. Online lenders operating in North Dakota must comply with state usury laws to avoid criminal liability.
Why is legal representation important in criminal usury cases?
An attorney ensures your rights are protected, provides strategic defense, and works to minimize the impact of charges on your life and business.