Understanding Usury: Limits on Interest Rates for Loans in Mexico

When a loan is granted, it is common for the creditor to establish an ordinary interest rate and another moratorium, but what are the rules to establish this interest? Is there a maximum percentage? To continue; the details.

READ: HOW USURY IS CONSTITUTE IN A PROMISSORY NOTE

Mexican legislation recognizes the contractual freedom of the parties to order their legal relationships; However, this freedom is not absolute, since it has as limits the norms, public order and good customs.

Thus, although the default interest agreement is initially at the discretion of the parties, these can never be excessive or disproportionate, since they will configure usurya practice prohibited in Mexico.

How to know if a loan is usurious

Although there is no official rate from which all interest is declared usurious, there are some parameters that serve as a guide to assess its excessive nature, such as the following:

• destination or purpose of credit
• type of relationship between the parties
• quality of the subjects involved in the contract and if the activity of the creditor is regulated
• interest rates of banking institutions for operations similar to those being analyzed
• amount and term of credit
• existence of guarantees for payment
• variation of the national inflationary index during the real life of the debt, and
• market conditions

Consequences of committing usury

Although usury is not expressly criminalized, article 387 of the Federal Criminal Code equates it to the crime of fraud by providing:

To the one who, using the ignorance or the bad economic conditions of a person, obtains from this user advantages through contracts or agreements in which revenues or profits are stipulated higher than the usual ones in the market

The sanction for committing usurious acts will be punished with the following penalties:

• with imprisonment from three days to six months or from 30 to 180 the UMA, when the value of the defrauded does not exceed 10 times the UMA
• with imprisonment from six months to three years and a fine from 10 to 100 times a fine, when the value of what was defrauded exceeds 10, but not 500 times the UMA, and

With imprisonment from three to 12 years and a fine of up to 120 times the UMA or, if the amount defrauded is greater than 500 times the UMA