Challenging high interest rates: How much interest is too much?

From time to time, borrowers may turn to "lenders of last resort" for many reasons. Frequently, the reason is a short-term cash flow crisis which is seen as temporary and to be corrected by a later refinancing of the loan or an injection of cash from a sale or disposal of an asset. The interest rates on such loans are often much higher than standard bank rates and contain high penalty interest for defaults.

Such borrowers can have unexpected delays on their exit plans from these loans and later challenge the rates payable.

A recent decision of Huynh v Ledinh Sovereign Super Pty Ltd [2024] NSWCA 78 considered this issue and the impact of the unfair contract provisions of the Contracts Review Act 1980 (NSW) – ss 7, 9 .