Thursday, July 31, 2008

Loan Shark?

John Singleton Copley, Watson and the Shark

The recent arrest of Radovan Karadzic by the International Criminal Tribunal for crimes against humanity and the indictment of Republican Senator Ted Stevens of Alaska for receiving an unreported $250,000 gift from an oil company suggests the machinery of justice is at work at the international and national level. But the mistreatment of the 70-year-old Karol Craft and her son in the county, state, and municipal courts raises the suspicion that in Ohio it is the Halls of Injustice, not the Halls of Justice, that sometimes prevail.

According to Mrs. Craft, the injustice for her started in the halls of the Scioto County Courthouse, on the third floor, on Feb. 9, 2006. Mrs. Craft’s son was facing jail for nonpayment of child support. Under those high-pressure circumstances, Timothy Lyons' attorney Michael Mearan brokered a “disastrous” deal by which Mearan’s former business associate, Joe Lester, loaned Mrs. Craft and her son $3,000 at $1,000 interest so her son could pay his back child support. The loan was to be paid back in six months. Mrs. Craft’s home, which was valued at $57,500 by the County Auditor, was put up as collateral. When Mrs. Craft could not pay Lester’s loan, she lost her house to Lester’s assignee. (In addition to the $4,000 Mrs. Craft and her son owed Lester for the loan, Mearan added an additional $1,700 to the their indebtedness, for a total of $5,700, making it even harder for them to repay Lester’s loan.

The hastily written handwritten document Mearan drew up listed $3,000 on one line for Lester and on the next line an additional $1000 for him, presumably as interest.

$1,000 is 33% of $3,000, but since the O.R.C. stipulates that interest is calculated per annum, the interest on Lester’s loan was actually 66%. As a reader of RiverVices who works in the banking industry pointed out in an email he sent to me at, the Ohio Revised Code limits the percentage of interest that can be charged on a loan. Ohio Revised Code 2905.21-H defines criminal usury as “illegally charging, taking, or receiving any money or other property as interest or an extension of credit at a rate exceeding twenty-five per annum or the equivalent rate for a longer or shorter period . . .” (At the time Lester made the loan, the legal limit was 21% interest.) The website claims that if a personal loan agreement above the O.R.C. interest limit “is brought before a court in that state, the agreement will be declared illegal. The net effect of such a judicial declaration is that the loan agreement will be voided. Once voided by the court, it no longer is enforceable. In other words, the borrower will no longer be obliged to make payments pursuant to the loan agreement. The borrower is off the proverbial hook.” If this statement is correct, the whole long process by which Mrs. Craft lost her home was illegal from the start. The question of whether Mrs. Craft and her son subsequently signed a deed transferring their property to Joe Lester or his assignee would be moot.

If Mrs. Craft could take Mearan and Lester to court, as Karadzic and Senator Stevens are being taken to court, she might presumably find a measure of justice. But lawyers cost money, a lot more than she gets from Social Security each month. After talking with a minister, she came up with the idea of appealing to the public by placing collection jars in stores and businesses, but the sheriff’s office told her raising money that way was panhandling, which is against the law.

Mrs. Craft holding collection jar

Against the law! If only she can raise the money to hire an attorney to take her case, perhaps she can get the courts to enforce the law against criminal usury. There is a more familiar name for criminal usury: it is called loan sharking. Whether Mrs. Craft was a victim of criminal usury, or loan sharking, is something that could, that should, be settled in court.