Usury Law Not Applicable to Judgment Creditor’s Forebearance Agreement

  In consolidated appeals, and in a lengthy opinion in Bisno v. Kahn, the First Appellate District concludes that California’s usury law does not apply to a judgment creditor’s agreement to forbear collecting on a judgment. Held: “Because the usury law does not expressly prohibit a party from entering into an agreement to forbear collecting on a judgment, usury liability does not extend to judgment creditors who receive remuneration beyond the statutory 10 percent interest rate in exchange for a delay in enforcing a judgment.”

  However, “any forbearance fee does not become part of the judgment and is not an amount that must be paid to satisfy the judgment under the Enforcement of Judgments Law [citation omitted]. Rather, a forbearance agreement is a contract between the judgment creditor and the judgment debtor that is separate from the judgment to which it applies. Consequently, a forbearance agreement must be enforced in a separate contract action and is subject to standard contractual defenses such as duress and unconscionability.”

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