Legal Definitions - ubi aberat animus foenerandi

Ubi aberat animus foenerandi is a historical legal principle originating from Latin, which translates to "where the intention of taking usurious interest was absent." This concept was significant in older legal systems, particularly concerning laws against usury (charging excessively high interest rates).

The principle held that a lender could not be found liable for usury if they did not possess the specific, deliberate intent to charge an illegally high interest rate. In other words, merely having a usurious rate appear in a contract was not always sufficient to prove wrongdoing; the lender's conscious purpose to exact excessive and unlawful interest had to be established.

• Example 1: Clerical Error in Loan Documentation

  Imagine a small credit union that offers personal loans. A loan officer, while preparing the final documents for a borrower, accidentally inputs an interest rate of 22% into the system instead of the approved 12% due to a simple typing mistake. The state's usury law caps interest at 18%. When the error is later identified during a routine compliance review, the credit union promptly corrects the loan terms to the intended 12% and refunds any overcharged interest to the borrower.

  Explanation: In this situation, the credit union did not possess the animus foenerandi, or the specific intent to charge a usurious interest rate. The excessive rate was a result of an inadvertent error, not a deliberate plan to exploit the borrower or violate usury laws. Therefore, under the principle of ubi aberat animus foenerandi, the credit union would likely not have been held liable for usury, as the necessary malicious intent was absent.

• Example 2: Miscalculation by a Non-Professional Lender

  Consider a scenario where a retired individual, Ms. Davies, lends a sum of money to her neighbor, Mr. Patel, to help him cover unexpected medical expenses. They agree on a repayment schedule that includes a small amount of interest. Ms. Davies, not being a professional lender and unfamiliar with the intricacies of local usury laws or complex interest calculations, uses a basic online calculator to determine the interest. Unbeknownst to her, the effective annual interest rate she calculated, while seemingly modest, slightly exceeds the legal limit for private loans in their jurisdiction.

  Explanation: Ms. Davies' primary intention was to assist her neighbor in a time of need, not to profit excessively or violate the law. The slightly usurious rate was a consequence of an innocent miscalculation and a lack of specific legal knowledge, not a deliberate attempt to exact unlawful interest. Her animus foenerandi was absent, meaning she lacked the specific intent to engage in usury, which would be a crucial defense under the principle of ubi aberat animus foenerandi.

• Example 3: Unforeseen Market Changes Affecting a Flexible Rate

  A business owner takes out a variable-rate loan from a private investor, with the interest rate tied to a specific market index plus a fixed margin. At the time the loan is originated, the total interest rate is well within legal limits. However, due to an unexpected and dramatic spike in the market index several months later, the variable interest rate on the loan temporarily rises above the state's usury cap for a short period. The investor had no control over the market index fluctuations and did not anticipate such an extreme increase when the loan agreement was made.

  Explanation: At the inception of the loan, the investor's intent was not to charge a usurious rate; the initial rate was legal and based on standard market practices. The subsequent increase in the rate above the usury cap was a result of unforeseen and uncontrollable market forces, not an original or deliberate intent to exact unlawful interest. The principle of ubi aberat animus foenerandi would suggest that without the specific intent to charge usury from the beginning, the investor might not be held liable, even if the effective rate technically exceeded the legal limit due to external market dynamics.