The Rutland daily globe. [volume] (Rutland, Vt.) 1873-1877, 1875-10-28
PENALTY FOR UsURY.

PENALTY FOR UsURY. go
The laws of the several states provide
the per cent. that may be required for the
forbearance of money loaned, and that per
cent. we are accustomed to call the legal
rate ofinterest, and any per cent. taken
beyond that as usury. Esch state, also,
provides penalty for the taking of usury,
and such penalty, or some remedy for
the party paying the same, is necessary 80
long as we assume to regulate the rate of
interest, otherwise usury laws could never
be of any avail. In Vermont, the legal
rate of interest is six per cent, and the
taking of a larger amount subjects the
lender only to the liability of repaying the
excess taken over and above the legal rate
of interest with interest thereon from the
date OF payment. In Now York, the legal
rate Is seven per cent. and the penalty for
taking usury is very severe, being no less
than the forfeiture of all the interest paid,
the legal interest as well as the excess, but
also the entire principal. These facts are,
undoubtedly, familiar to our readers but
they by no means exclusively regulate and
control the loaning of money, the rate OF
interest thereon, or the penalty for taking
usury even among law-abiding citizens OF
the same state.
The act 10 provide for national cur
rency, known as the national banking law,
also provides penalty for the taking of
usury, which is much less severe than that
of New York and more so than that of
Vermont. II is to the effect that in note
or bill of exchange involving an agreement
to pay usurious interest, the borrower may
refuse to pay the interest when due, or, il
the usury has been paid in advance, then
double the amount of interest SO paid may
be recovered in an action brough. for that
purpose. Under this law, one of the Buff
Drew, charging and deductng a rate of in
terest in excess of that allowed by law.
Upon the maturity of the note, he refused
payment, whereupon suit for the reeov-
cry of the amount was brought in the state
courts of New York and, under the state
laws, a judgment rendered for the defend
ant, the court holding that, on account of
the usury, both the principal and interest
of the note were forfeited The case was
then taken, by appeal, to the supreme
court of the United States and decision
rendered in favor of the bank for the
amount of the principal Of the note. '.
q The court held that in the matter of
leaning money and the taking of interest,
national banks were solely governed by the
laws of the United States, the former being
paramount to the latter. Whatever sur
prise may be caused by this decision and
we apprehend that it will be a matter of
considerable surprise-ought to be dis
PEELED by brief reference to the constitu.
ton of the United States. & The second
clause of o the sixth article thereof reads at
follows; This constitutions. and the lawt
of the United States which shall be made
in pursuance thereof shall be the
supreme law of the land and the judges
4 sin every state shall be bound thereby
amy thing in the constitution or laws Of
q any state to the contrary notwithstand
ting 1t being determined then, as Il
has been, that the national banking law il
constitutional7tha is, that it is a law
made in pursuance of the constitutional
must follow that the penalty for the taking
nf praacrihpI tharatn pball
all cases of loaning money by banks Great
ed, or authorized, by said act-and this il
all that this decision establishes. The only
matter of surprise is not that the court
have so decided, but that the question hai
not been determined until thirteen year,
after national banks came into existence
but the explanation probably is, that very
few persons can be found who are willinl
to agree to pay more than the legal rate OF
interest and then to avoid it by taking ad
vantage of the penalty prescribed fol
taking it.
Practically, the decision may not amount
to much, for, as we have intimated, very
few persons can be found to invoke The
penalty for taking usurious interest-whici
shows the folly of endeavorng to regulat,
the rate of interest by law instead of al
lowing the demand and supply to regulate
it as, in effect, it actually does as we'll al
everything else. If, however, it is of an,
practical consequence, The benefit is will
the people, that is the borrower rathe
than with the lender. In most states, no
tably so in Vermont, the penalty for tax
ing usury Is far greater under the nationa
banking law than under the state law, an(
discrimination is made against banks an(
IN favor of individuals. In New York, toe
where the penalty is reduced from the for
feiture of principal and interest to for
feture of the interest alone or, as in som,
cases, double the interest, 1t is said that i
VIII work for the benefit of the genera
public. 1t is said In New York financia
circles, that the effect of the decision will
be that, in times of monetary stringency
monied men will take the risk of loaninf
money, through safe and honorable bank
ing houses, at higher rate of Interest
than seven per cent, and thus 'defeat al
:" speculative Vaccinations and combina