Same - Effect Of National Banking Act

By the national banking act, national banks are authorized to exact interest at the rate permitted to individuals or to state banks of issue in the state in which they are located; and where no rate is fixed by state laws they may charge at the rate of seven per cent.1 The act also provides that the penalty for the charging of usurious interest by a national bank shall be a forfeiture of the entire interest, and that if the interest has been paid twice the amount may be recovered. This act governs all loans by national banks, to the exclusion of state laws, and such banks may not be subjected to any penalties for usury other than those prescribed by the act.2

96 Lloyd v. Scott, 4 Pet. 205, 7 L. Ed. 833. See "Usury," Dec. Dig. (Key-No.) § 12; Cent. Dig. §§ 23, 2k, 146.

97Cottrell v. Southwick, 71 Iowa, 50, 32 N. W. 22; Exley v. Berryhill, 37 Minn. 182, 33 N. W. 567; McDonald v. Aufdengarten, 41 Neb. 40, 59 N. W. 762; Levey v. Allien, 72 Hun, 321, 25 N. Y. Supp. 352. If, however, a usurious contract is mutually abandoned by the parties, and the securities canceled or destroyed, so that they may not become the foundation of an action, and the borrower then makes a contract to pay the amount actually received by him, this last contract will not be tainted with the original usury. Sheldon v. Haxtun, 91 N. Y. 125; Levey v. Allien, supra; Porter v. Jefferies, 40 S. C. 92, 18 S. E. 229. See "Usury," Dec. Dig. (Key-No.) §§ 66, 67; Cent. Dig. §§ 189-141.

98 Armstrong v. Middaugh, 74 Misc. Rep. 45, 133 N. Y. Supp. 647. See "Usury;' Dec. Dig. (Key-No.) §§ 66, 67; Cent. Dig. §§ 139-141.

99Cottrell v. Southwick, 71 Iowa, 50, 32 N. W. 22; Vaught v. Rider, 83 Va. 659, 3 S. E. 293, 5 Am. St. Rep. 305; France v. Smith, 87 Iowa, 552, 54 N. W. 366. Contra, where the transaction is a mere cover for a usurious loan. Luckens v. Hazlett, 37 Minn. 441, 35 N. W. 265. See "Usury," Dec. Dig. (Key-No.) §§ 66, 67; Cent. Dig. §§ 189-141.

1 Rev. St U. S. (1872) §§ 5197, 5198 (Act June 3, 1864, c. 106, § 30, 13 Stat 108 [U. S. Comp. St 1901, p. 3493]); Farmers' & Mechanics' Nat Bank v. Dearing, 91 U. S. 29, 23 L. Ed. 196. In New York, where by statute the exaction of usury by an individual makes a contract void, state banks and private banks and bankers have been put by statute upon the same basis as national banks and subject only to the same penalties. If, therefore, a note originally between individuals is void as to them because of usury, it is nevertheless valid and enforceable when discounted by a state or national bank before maturity and without notice of the usury. Schlesiuger v. Gilhooly, 189 N. Y. 1, 81 N. E. 619, 12 Ann. Cas. 1138. Contra, if the bank acquired the instrument with knowledge of the usury. Schlesinger v. Lehmaier, 191 N. Y. 69, 83 N. E. 657, 16 L. R. A. (N. S.) 626, 123 Am. St. Rep. 591. See "Banks and Banking," Dec. Dig. (Key-No.) § 270; Cent. Dig. §§ 1023-1053.