Monday, October 29, 2007

Release Won't Shield Lender From Usury Claim Of Borrower

In Massachusetts, Massachusetts Lawyers Weekly reports:

  • A defaulting borrower should be allowed to proceed with its usury claim against a lender, even where language in a forbearance agreement purported to release the lender from any prior obligation or default, a Superior Court judge has ruled. The borrower argued that the release did not cover its underlying claim because statutory causes of action enacted out of public-policy concerns, like the state's criminal usury statute, cannot be waived by contract. Judge Allan van Gestel agreed, granting partial summary judgment to the borrower. "Where a statute 'rests on grounds of public policy, it is not the power of one who may be directly affected by it to contract in advance that it may be disregarded,'" wrote van Gestel. "[The usury law] is sufficiently infected with public policy such that it cannot be the subject of any ordinary release or waiver." [...] Van Gestel looked to the Supreme Judicial Court's 1980 decision in Begelfer v. Najarian, which held that the usury statute was a clear statement of Massachusetts policy that was a "matter of grave legislative concern." Because the usury statute was effectively entrenched in public policy, it could not be subject to an ordinary release or waiver, van Gestel ruled.

For more, see Release won't shield lender from usury claim of borrower (Public policy can't be waived by agreement).

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