Banking
Jun. 13, 2014
Default rate interest — valid under California law?
Default rate interest provisions are standard language in business loan agreements, and constitute an additional amount to be paid upon default and is viewed, under California law, as a liquidated damages provision. By David Kupetz
Default rate interest provisions are standard language in business loan agreements. Default interest constitutes an additional amount to be paid upon default and is viewed, under California law, as a liquidated damages provision. See Cal. Bank Trust v. Shilo Inn, 2012 U.S. Dist. LEXIS 163134, *7 (D. Ore. 2012). Whether an amount to be paid upon default is to be treated as valid liquidated damages or as an unenforceable penalty is a question...
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