What is the definition of 'Maximum Rate' in the Boulder Designs promissory note?
Boulder_Designs Franchise · 2025 FDDAnswer from 2025 FDD Document
"Maximum Rate" means the maximum lawful rate of interest permitted by applicable usury laws now or hereafter enacted which interest rate shall change when and as said laws change, to the extent permitted by law, effective on the day such change in said laws becomes effective.
If demand is made or if the maturity of this Note shall be accelerated for any reason or if any of the principal of this Note is prepaid, and as a result thereof the interest or finance charge received for the actual period of existence of the loans evidenced by this Note exceeds the Maximum Rate, the holder of this Note shall, at its option, either refund to Debtor the amount of such excess or credit the amount of such excess against the principal balance of this Note then outstanding, and thereby shall render inapplicable any and all penalties of any kind provided by applicable law as a result of such excess interest. If PAYEE or any other holder of this Note shall collect monies and/or any other thing of value which are deemed to constitute interest which would increase the effective interest rate on this Note to a rate in excess of the Maximum Rate, all such sums deemed to constitute interest in excess of the Maximum Rate shall, upon such determination, at the option of the holder of this Note, be either immediately returned to Debtor or credited against the principal balance of this Note then outstanding, in which event any and all penalties of any kind under applicable law as a result of such excess interest shall be inapplicable.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to Boulder Designs' 2025 Franchise Disclosure Document, the 'Maximum Rate' within the context of the promissory note refers to the highest lawful interest rate permitted by applicable usury laws. This rate can fluctuate based on changes in these laws, and the adjusted rate will take effect on the day the legal changes are implemented.
Boulder Designs ensures that neither the debtor nor any associated parties will be required to pay interest or finance charges exceeding this Maximum Rate. This provision takes precedence over any conflicting terms in the promissory note or related documents. The franchisor also disclaims any intention to charge or collect excessive unearned interest if the note's maturity is accelerated.
If, due to accelerated demand or prepayment, the interest or finance charges collected surpass the Maximum Rate, Boulder Designs has the option to either refund the excess to the debtor or credit it against the outstanding principal balance. Similarly, if any collected monies are deemed to constitute interest that would push the effective interest rate above the Maximum Rate, those sums will be either returned to the debtor or credited against the principal balance. This ensures compliance with usury laws and avoids any penalties associated with excessive interest charges.