IVA Glossary
E
Extortionate Credit Transaction
A credit transaction is extortionate whenever the respective bargain requires from the borrower to pay unrealistic extra charges, or very high interest rates. It is many times the case that the lender does specify at the beginning of a credit term that the interest rate is fixed, but in time the lender may change that fixed interest rate into an adjustable one. If this shifting from a fixed to a variable rate is not well founded (meaning it is not specified within the contract that the credit comes with, and signed by the borrower), then the respective credit transaction is extortionate.
Certainly in order to prove this, there is need for a liquidator or an administrator to intervene in order to verify the sources. The overall aspects of the credit transaction are being inspected: the contract, all the transactions and their costs and the credit agreement itself. After having all these proofs a liquidator may challenge that respective transaction because it came with unfair terms and conditions for the borrower. Very high charges and interest rates are not justifiable especially if the borrower does not represent a great deal of risk for the lender.
Certainly in order to prove this, there is need for a liquidator or an administrator to intervene in order to verify the sources. The overall aspects of the credit transaction are being inspected: the contract, all the transactions and their costs and the credit agreement itself. After having all these proofs a liquidator may challenge that respective transaction because it came with unfair terms and conditions for the borrower. Very high charges and interest rates are not justifiable especially if the borrower does not represent a great deal of risk for the lender.
