Regarding Owed Interest

[Godbodied]

Thanks in advance for anyone who can assist.

I live in MARYLAND. I loaned $1000 to a borrower (LLC) on 3/11/16 as part of a real estate investment.
We both signed a promissory note.

The note states "the interest rate on this Note shall be a rate of interest equal to twenty (20%) percent per month on each of 5 months after a one month Capital Placement Interest Accrual Moratorium during a 6 month term."

There is a waiver clause in which "The borrower waives presentment, demand, notice of dishonor, notice of default or delinquency, notice of protest and nonpayment, notice of costs, expenses or losses and interest thereon, notice of interest and late charges, and diligence in taking any action to collect any sums owing under this Note, including (to the extent permitted by law) waiving the pleading of any statute of limitations as a defense to any demand against the undersigned. Acceptance by the investor or holder of this note of any payment differing from the designated lump-sum payment listed above does not relieve the undersigned of the obligation to honor the requirements of this Note."

According to the note, the entire payment was due on or before 9/11/16, and interest due 9/11/16. Forty percent (40%) of the principal was returned on 10/12/18 (through CashApp), and the remainder was returned 4/8/19 (through Venmo). I have not received interest as of 10/1/2019.

We've communicated through text message regarding statements like "Any information on my return?" etc. The agreement does state that any notice should be in writing and given in person, by mail or overnight courier.

How much am I owed? Is it worth filing judgment? If any more information is necessary, please let me know. This is my first time having a legal issue.

 

[quincy]

The volunteers on this forum cannot personally review and analyze the terms of contracts. That is considered the practice of law and beyond the scope of what we can offer. Contract review requires the services of an attorney licensed to practice in your own jurisdiction.

Sorry.

I can tell you that all communications should be in formal letters not through text messaging.

Good luck.

 

[Zigner]

I would be surprised if the OP is able to collect anything for interest based on the seemingly usurious interest rate.

 

[quincy]

I would be surprised if the OP is able to collect anything for interest based on the seemingly usurious interest rate.

I agree that the 20% is questionable.

 

[Zigner]

I agree that the 20% is questionable.

20% per month.

 

[quincy]

20% per month.

Yup. Seems a bit high, huh?

 

[Taxing Matters]

How much am I owed?

It appears none. In Maryland any interest charges in excess of 24% per year on a written contract is usury. The term usury means interest charged that exceeds of what the law allows. And to be able to charge 24% a number of conditions must be met, otherwise the highest rate of interest allowed is 18% per year. The interest you charged was effectively 200% per year, far exceeding what Maryland law permits. By statute, if your contract charges usurious interest you owe the borrower three times the actual interest you collected or $500, whichever is greater. So since you haven't collected any interest on the loan, what you'd owe to the borrower right now is $500. In short, if you sue for the interest, not only would you not get the interest, you'd end up owing the borrower $500. So assuming that it is Maryland law that will apply here I think your best bet is to let this go and hope the borrower doesn't wise up and sue you for the $500. And next time you lend, check the state usury laws that will apply and make sure your loan conforms to those laws.

 

[quincy]

This is a good example of why people should seek legal assistance when drafting legal agreements.

 

[Taxing Matters]

This is a good example of why people should seek legal assistance when drafting legal agreements.

I'll also guess the OP got the note he or she used from the internet or some forms book or something. Just the part that was quoted was written with outdated language in the kind of overly verbose manner that older contracts tended to use. Overall, IMO, it is badly drafted and I shudder to think what the rest of it looks like. Getting a well drafted note to use is another benefit of getting a lawyer to advise on such things. I understand that if the only loan made is $1,000 that the fees for the lawyer would not make it worthwhile, but if lending is going to be done routinely it is critical to get good legal advice. Even for a one off loan, though, the lender at the very least needs to check the state usury laws.

 

[quincy]

I'll also guess the OP got the note he or she used from the internet or some forms book or something. Just the part that was quoted was written with outdated language in the kind of overly verbose manner that older contracts tended to use. Overall, IMO, it is badly drafted and I shudder to think what the rest of it looks like. Getting a well drafted note to use is another benefit of getting a lawyer to advise on such things. I understand that if the only loan made is $1,000 that the fees for the lawyer would not make it worthwhile, but if lending is going to be done routinely it is critical to get good legal advice. Even for a one off loan, though, the lender at the very least needs to check the state usury laws.

It often can be better for people to write out simple IOUs rather than to try to get all fancy with legal language neither party really understands.

 

[Godbodied]

This is a good example of why people should seek legal assistance when drafting legal agreements.

I didn't write this promissory note. So it is evident that you're here for forum points rather than to assist. On the other hand, everyone else has been very helpful.

These terms were provided by the borrower for a real estate investment that I shouldn't have done in the first place. It is what it is. Thanks for the assistance everyone.

 

[Zigner]

I didn't write this promissory note. So it is evident that you're here for forum points rather than to assist.

You probably picked one of the top 3 most helpful responders here when you made your rude comment.

Whether you drafted it or not is largely irrelevant because the point is that you should get legal assistance before signing a document that you simply don't understand.

 

[Taxing Matters]

These terms were provided by the borrower for a real estate investment that I shouldn't have done in the first place. It is what it is. Thanks for the assistance everyone.

Yikes, then the borrower picked a pretty badly worded document to use. Did the borrower propose the interest rate, too?

 

[quincy]

I didn't write this promissory note. So it is evident that you're here for forum points rather than to assist. On the other hand, everyone else has been very helpful.

These terms were provided by the borrower for a real estate investment that I shouldn't have done in the first place. It is what it is. Thanks for the assistance everyone.

I am sorry you were upset by what I said. I never claimed YOU were the one who created the note. It just wasn't well-written - and, had you had it reviewed by an attorney prior to ageeing to the terms, the flaws no doubt would have been caught and corrected.

Good luck.

Thanks, Zigner.

As an additional note: Forum "points" (whatever you might think those are) apparently have no value (at least any value that I have been able to discern).

 

[Mass_Shyster]

I think the borrower owes $1000. From my reading, the interest only accrued during May,June,July,August, and September of 2016, "each of 5 months after a one month Capital Placement Interest Accrual Moratorium (whatever that means) during a 6 month term. " No interest rate is specified beyond each of those five months.

I think you'll have a hard time collecting it.