state usury law: does it apply to late fee on lease payment?

[richtaira]

Hi all, I have a pretty basic question. I am an accountant for my employer locatd in California and from time to time get invoices from our leasing compoanies that include late fees reflecting delayed monthly equipment lease payments in the prior month. Depending on leases, the late fee can be $150 for the motnhly lease payment of, say, $1,700, just becase the company missed the due date by one or two days. In this situation, is the state usury law potentially applicable? or is the law sorely for loan type of transactions? I am not familiar with these laws but it seems to me, in a sense, it can depend on whether this "late fee" is considered as a "finance charge" or a "fixed penalty." If it is considered as a finance charge, $150 for one or two days delay for $1,700 should be sertainly outrageous, and I would be inclined to say that the late fee should be prorated based on the number of days for whcih the payment was delayed. Otherwise, financially speaking, it would be pretty stupid to pay one or two days after the due date. One would rather delay 30 days once s/he would know that the payment would miss the due date. Your sharing knowledge on this would be much appreciated.

 

[Michael Wechsler]

It may very well be usury but the law varies from state to state.

It may pay to challenge the late "fee" and see what happens. After all, it seems that having an amicable relationship is not the lessor's concern.

 

[richtaira]

Thank you for the response. After posting my question, I happned to read something about collection laws, and there explains some implications of state usury laws. It appears that usury laws only apply to financial transactions especially lending/borrowing, and the situation that described in my question maight be a little bit outside of the scope of application of the usury laws....

 

[Michael Wechsler]

Originally posted by richtaira
Thank you for the response. After posting my question, I happned to read something about collection laws, and there explains some implications of state usury laws. It appears that usury laws only apply to financial transactions especially lending/borrowing, and the situation that described in my question maight be a little bit outside of the scope of application of the usury laws....

Late fees applied in certain transactions may not be considered usury because of the lack of a 'debt transaction' such as in a residential lease. You aren't really lending money in that situation. With regard to credit cards it is a different confusing story. My understanding is that the obligations under the agreement are made as taking place within another state that permits late fees to be charged and not being considered usury. Looking at late fees in relation to a credit card loan as a whole, I'm not sure that for discussion purposes that 'late fees' -- or whatever term you choose to call them or how you wish to perceive them -- is any different than that of your neighborhood loan shark and is a good question. But there are some differences in application, as you can see.

 

[wjnwjn]

Late fee

I see this topic is similar to what I posted on another topic. Still trying to get an answer?

Question: Even though my Credit Union sends a check in a post marked envelope 10 dates before the 15th of the month before a late fee can be charged to my mortgage holder, can I still be charge a late fee?

Also who would govern? State or Fed regulations and can I fill anything with someone?

 

[Michael Wechsler]

Re: Late fee

Originally posted by wjnwjn
I see this topic is similar to what I posted on another topic. Still trying to get an answer?

Question: Even though my Credit Union sends a check in a post marked envelope 10 dates before the 15th of the month before a late fee can be charged to my mortgage holder, can I still be charge a late fee?

Also who would govern? State or Fed regulations and can I fill anything with someone?

I would think that it is governed by the terms of your agreement with them. If they claim a late fee based upon late receipt then you should question such a claim because of the postmark on the envelope and likelihood of their mistake given the proof of when sent. What is the basis for the late fee?

 

[wjnwjn]

Response

They claim they received it late, so they have a right to charge a late fee.

Is there an agency that can help with a matter like this?

 

[Scooter]

Generally a lease is not a loan, so usury would not apply.

Some leases are considered loans, depending on the financial aspects of the lease. For example dollar buyout leases are generally considered loans. So are leasebacks. But fair market value leases are not considered loans.

Even if the lease is a loan, many usury laws are simply inapplicable where the entity is state regulated (like a state bank), federally regulated (like a federally chartered bank) or has a specific state statute exemption, like a Lenders License which allows the entity to charge whatever it wants. Finally, some states only apply usury to consumer deals.