What is an extortionate credit transaction?

A transaction is extortionate if, having regard to the risk accepted by the person providing the credit, the terms of it are, or were, such as to require grossly exorbitant payments to be made, whether unconditionally or in certain contingencies, in respect of the provision of the credit, or it.

Which section defines the extortionate transactions?

Section 50(2)
As per the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, a transaction can be called extortionate under Section 50(2) of the IBC Code, wherein the debtor had to make exorbitant payments w.r.t the credit or the terms were unconscionable under the principles of law relating to …

What is extortionate extension of credit?

(6) An extortionate extension of credit is any extension of credit with respect to which it is the understanding of the creditor and the debtor at the time it is made that delay in making repayment or failure to make repayment could result in the use of violence or other criminal means to cause harm to the person.

What is the meaning extortionate?

1 : characterized by extortion. 2 : excessive, exorbitant extortionate prices.

When is an extension of credit an extortionate transaction?

According to 18 U.S. Code section 892, an extension of credit is presumed to be an extortionate credit transaction if the repayment of the extension of the credit or the promise given in exchange for the extension of credit would be illegal in the jurisdiction where the debtor lives or is incorporated.

Can a credit card company be charged with extortion?

There are laws in place in the United States that restrict the types of loans that can be provided and the terms of credit transactions. When those laws are violated and a credit transaction is considered to be an extortionate transaction, this can result in criminal charges on the federal level or on the state level.

What is the penalty for an extension of credit?

If any of these circumstances exist and an extension of credit is considered to be an extortionate extension of credit, a defendant could be convicted under 18 U.S. Code section 892 and could face penalties that could include a maximum of 20 years imprisonment as well as a fine.