New Jersey (“NJ”) interest rate laws are stated in NJ Annotated Statutes, Title 2C (NJ Code of Criminal Justice), Subtitle two (Specific Offences), Part 2 (Offence against Property), Chapter 21 (Forgery and Fraudulent Offences), and Title 31(Interest and Usury), Chapter one (Usury and Effect thereof).
Under Section 31:1-1, the state legal maximum interest rate is six percent per annum in the absence of a written agreement. If there is a written agreement between the lender and the borrower, the lender is permitted to charge 16 percent interest on the principal amount. Section 2C:21-19 permits interest rates in excess of 30 percent and not in excess of 50 percent, when the loan is made to a corporation, limited liability company or partnership.
Charging higher rate of interest than the permitted state legal maximum interest rate is usury. Under Section 31:1-3 excess interest charged is not enforceable, and the lender can only recover the principal amount. Under Section 2C:21-19 a person is guilty of criminal usury if found guilty of charging excess interest rate. Penalty of $250,000 is imposed for criminal usury.
Section 31:1-1 has exempted some transactions and institutions from the state prescribed interest rate. They are: loans over $50,000, loans by savings and loan associations, banking institutions, Department of Housing and Urban Affairs or other organizations authorized by the Emergency Home Finance Act of 1970 or by any state, federal government or quasi-governmental organizations.
N.J. Stat. § 31:1-1 reads in part:
“§ 31:1-1. Contract rate; rate on mortgages on dwellings and other loans; computation of interest or discount; determination of rates
(a) Except as herein and otherwise provided by law, no person shall, upon contract, take, directly or indirectly for loan of any money, wares, merchandise, goods and chattels, above the value of $ 6.00 for the forbearance of $ 100.00 for a year, or when there is a written contract specifying a rate of interest, no person shall take above the value of $ 16.00 for the forbearance of $ 100.00 for a year.”
N.J. Stat. § 2C:21-19 reads in part:
“§ 2C:21-19. Wrongful credit practices and related offenses
a. Criminal usury. A person is guilty of criminal usury when not being authorized or permitted by law to do so, he:
(1) Loans or agrees to loan, directly or indirectly, any money or other property at a rate exceeding the maximum rate permitted by law; or
(2) Takes, agrees to take, or receives any money or other property as interest on the loan or on the forbearance of any money or other interest in excess of the maximum rate permitted by law.
For the purposes of this section and notwithstanding any law of this State which permits as a maximum interest rate a rate or rates agreed to by the parties of the transaction, any loan or forbearance with an interest rate which exceeds 30% per annum shall not be a rate authorized or permitted by law, except if the loan or forbearance is made to a corporation, limited liability company or limited liability partnership any rate not in excess of 50% per annum shall be a rate authorized or permitted by law.”
N.J. Stat. § 31:1-3 reads:
“§ 31:1-3. Forfeiture of all interest; deduction from recovery
In all actions to enforce any note, bill, bond, mortgage, contract, covenant, conveyance, or assurance, for the payment or delivery of any money, wares, merchandise, goods, or chattels lent, and on which a higher rate of interest shall be reserved or taken than was or is allowed by the law of the place where the contract was made or is to be performed, the amount or value actually lent, without interest or costs of the action, may be recovered, and no more. If any premium or illegal interest shall have been paid to the lender, the sum or sums so paid shall be deducted from the amount that may be due as aforesaid, and recovery had for the balance only.”
“(e) Notwithstanding the provisions of paragraph (a) or (b) of this section, contracts for the following classes or types of loans may provide for any rate of interest which the parties agree upon, and interest at any such rate may be taken, notwithstanding that it exceeds a rate limited by paragraph (a) or (b) of this section:
(1) Loans in the amount of $ 50,000.00 or more, except loans where the security given is a first lien on real property on which there is erected or to be erected a structure containing one, two, three, four, five or six dwelling units, a portion of which structure may be used for nonresidential purposes. The rate of interest stated in such contract upon the origination of such loans may be taken notwithstanding that payments thereon reduce the amount outstanding to less than $ 50,000.00;
(2) Loans or advances of credit made by savings and loan associations, banking institutions, or any Department of Housing and Urban Affairs or Federal Housing Administration approved mortgages which are subsequently purchased, in whole or in part, by the Federal Housing Administration, Veterans Administration, Farmers Home Administration, Federal National Mortgage Association, Government National Mortgage Association, Federal Home Loan Mortgage Corporation, and any successor thereof or by any organization authorized by the Emergency Home Finance Act of 1970 to purchase such loans or by any State or Federal governmental or quasi-governmental organizations.”