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09-25-2014, 12:05 PM #1
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OnDeck and usury laws?
I know that most MCA lenders structure the transaction as a purchase of future receivables, but OnDeck promotes their lending as a traditional loan on their website, despite the high and technically usurious interest rates.
Does anyone know how they do not violate usury laws by doing so? I thought this was one of the big problems that AdvanceMe faced.
Any guidance or help would be appreciated. Doing research for a legal article. Thanks.
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09-25-2014, 12:16 PM #2
A company that buys future receivables is not a lender but rather a purchaser.
As for OnDeck, many states do not have usury caps on commercial loans and for ones that do, I suggest you read up on the rate export model to understand how financial institutions can lend in states at rates that exceed state laws.
State-chartered, federally insured banks claim the right to export home state interest rates. They issue the loans and then immediately sell them to the non-bank "lenders" to service.
This is standard operating procedure in the lending world.
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09-25-2014, 03:02 PM #3
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09-25-2014, 03:34 PM #4
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09-25-2014, 03:46 PM #5
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Chambo,
Thanks for the info. Just so I understand, the rates for the loans are within the limits of the usury laws, but the fees rolled into the loan increase the interest rate above the usury limit? Any additional information is greatly appreciated. I'm doing a research project so any sources or explanations would be very helpful.
Thanks for the info!
BK
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09-25-2014, 03:53 PM #6
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09-25-2014, 03:59 PM #7
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09-25-2014, 12:16 PM #8
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I've wondered about that too, any insight would be great.
nvm, didn't see that it had already been answered.
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