Legal Definitions - usura velata

Usura velata is a Latin term that translates to veiled or concealed usury. It describes a deceptive practice where a lender charges illegally excessive interest on a loan, but disguises this exorbitant interest by incorporating it directly into the stated principal amount of the loan. This makes it appear as though the entire sum is the original principal, thereby hiding the true, usurious interest rate and making the excessive charge difficult to detect.

Here are some examples to illustrate this concept:

• Example 1: Inflated Loan Principal

  Imagine a small business owner urgently needs a $10,000 loan. A lender agrees to provide the funds but drafts a loan agreement stating the principal amount is $13,000, to be repaid with a seemingly modest interest rate on that $13,000. In reality, the business owner only received $10,000 in actual funds, and the additional $3,000 was an upfront, usurious interest charge that was simply added to the principal amount. The lender never explicitly stated this $3,000 as interest.

  This illustrates usura velata because the excessive $3,000 interest is "veiled" by being presented as part of the original principal loan amount, rather than being disclosed as a separate interest charge. This conceals the true, much higher cost of borrowing the $10,000.

• Example 2: Disguised Purchase Price

  Consider a scenario where an individual wants to purchase a piece of equipment valued at $20,000 but cannot afford it outright. A financing company offers a "purchase agreement" where the total price of the equipment is listed as $35,000, to be paid in installments over time, with no explicit interest rate mentioned. The $15,000 difference between the actual value and the stated purchase price is, in fact, an exorbitant interest charge for the financing, but it is presented as part of the equipment's inflated purchase price.

  This demonstrates usura velata because the excessive interest is hidden within the inflated "purchase price" of the equipment. By embedding the usurious charge into the asset's cost, the financing company avoids transparently stating the high interest rate it is actually charging.

• Example 3: "Service Fees" as Hidden Interest

  A person needs a short-term cash advance of $2,000. A predatory lender provides the $2,000 but structures the agreement to include a mandatory "loan processing fee" of $800, which is immediately added to the principal, making the total repayment obligation $2,800 plus a small, stated administrative fee. The "loan processing fee" is disproportionately high for any actual service rendered and is, in essence, an upfront, excessive interest charge disguised as a fee.

  This is an example of usura velata because the "loan processing fee" serves as a cover for usurious interest. By labeling it as a fee and adding it to the principal, the lender obscures the true, excessive cost of the $2,000 cash advance, making it appear as a legitimate charge rather than an interest payment.