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  1. #1
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    Angry Private Seller Charging Interest After Final Payment

    My question involves a consumer law issue in the State of: Texas

    My wife bought a car from her (now former) boss, they made an oral agreement to pay $200 a month (total cost $1800). When my wife mailed the final payment (certified mail with money order) she enclosed a note asking when the title and extra set of keys would be sent. This was done around 6/21/19. Today she got a letter (non certified) saying "before I send the title out to you I will need an additional payment of $400 for interest owed This amount is still owed due to breach of our contract." Is there anything I can do orwill we have to pay this.

  2. #2
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    Default Re: Private Seller Charging Interest After Final Payment

    Tell her to have him send the contract showing he was charging interest.

    absent that, have him provide any supporting proof the oral agreement included interest.

    If he cannot prove his claim he was charging interest, he will lose any law suit regarding that.


    But what is this breach of contract statement the seller has made? What is the claimed breach?

  3. #3
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    Default Re: Private Seller Charging Interest After Final Payment

    We have no Idea what the breach could be, we are going to contact her tomorrow and try and find out.

  4. #4
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    Default Re: Private Seller Charging Interest After Final Payment

    You might remind her that the IRS requires interest to be charged on loans and you'll have to report the interest payment as income to her for which she will have to report and pay taxes on.

  5. #5
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    Default Re: Private Seller Charging Interest After Final Payment

    Quote Quoting adjusterjack
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    You might remind her that the IRS requires interest to be charged on loans and you'll have to report the interest payment as income to her for which she will have to report and pay taxes on.
    The IRS does not require interest to be charged on loans. In fact that isn’t even within their purview of the law. They can impute interest income on a below market rate loan where none was charged but they don’t and can’t mandate interest be charged. Regardless of that, I don’t think that applies here for a couple different reasons.. Hopefully taxing matters addresses this thread and your statement.

  6. #6
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    Default Re: Private Seller Charging Interest After Final Payment

    Quote Quoting jk
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    The IRS does not require interest to be charged on loans. In fact that isn’t even within their purview of the law. They can impute interest income on a below market rate loan where none was charged but they don’t and can’t mandate interest be charged. Regardless of that, I don’t think that applies here for a couple different reasons.. Hopefully taxing matters addresses this thread and your statement.
    Imputing interest is kind of mandating it.

    However, the OP is certainly free to issue a 1099-INT for any interest paid to the boss.

    OP, I would suggest that you require the boss to fill out and give you a W-9 before you pay him any interest as you will need that form in order to issue a 1099-INT.

    Then, I suggest that your wife sue him in small claims court for the title and keys, or alternately her money back since the ex-boss refuses to hand over the title and keys. I am pretty sure that he will refuse to give you the W-9.

    I suspect that the "breach" (in the boss's eyes) is the fact that your wife quit the job. However, at 200.00 a month it would only take 9 months to pay off the car. If your wife did not take more than 9 months to pay off the car then $400.00 in interest might violate the local usury laws as well. 20% interest on a 9 month loan would only be $148.00. So $400.00 in interest would be pushing 50%.

  7. #7
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    Default Re: Private Seller Charging Interest After Final Payment

    Quote Quoting llworking
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    Imputing interest is kind of mandating it.

    However, the OP is certainly free to issue a 1099-INT for any interest paid to the boss.

    OP, I would suggest that you require the boss to fill out and give you a W-9 before you pay him any interest as you will need that form in order to issue a 1099-INT.

    Then, I suggest that your wife sue him in small claims court for the title and keys, or alternately her money back since the ex-boss refuses to hand over the title and keys. I am pretty sure that he will refuse to give you the W-9.

    I suspect that the "breach" (in the boss's eyes) is the fact that your wife quit the job. However, at 200.00 a month it would only take 9 months to pay off the car. If your wife did not take more than 9 months to pay off the car then $400.00 in interest might violate the local usury laws as well. 20% interest on a 9 month loan would only be $148.00. So $400.00 in interest would be pushing 50%.
    Not at all. Interest would be paid to the creditor. Demanding it would mean the creditor would receive the interest. All the irs is doing is saying; we don’t believe you are not recieving interest so we are going to recalculate your income and insert (impute) some amount of income for what we believe you are probable recieving.

    The irs cannot force somebody to charge interest and nothing they are doing even comes close to that.

    So, unless they are demanding the contract be rewritten and it include interest to the creditor, no, they are not requiring interest be charged. That is a very different claim than imputing an income presuming interest is being paid.


    and $400 interest on an $1800 loan for 9 months is 29.6% interest. Still exceeds the 20% but not really that close to 50%.


    your means of determining the interest rate is also faulty.

    Depending on the terms of the loan, it could be the $400 doesn’t amount to usury. One would have to know the terms of the loan to determine that.

  8. #8
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    Default Re: Private Seller Charging Interest After Final Payment

    Quote Quoting jk
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    Not at all. Interest would be paid to the creditor. Demanding it would mean the creditor would receive the interest. All the irs is doing is saying; we don’t believe you are not recieving interest so we are going to recalculate your income and insert (impute) some amount of income for what we believe you are probable recieving.

    The irs cannot force somebody to charge interest and nothing they are doing even comes close to that.

    So, unless they are demanding the contract be rewritten and it include interest to the creditor, no, they are not requiring interest be charged. That is a very different claim than imputing an income presuming interest is being paid.
    OK, jk we can agree on the technicality.


    and $400 interest on an $1800 loan for 9 months is 29.6% interest. Still exceeds the 20% but not really that close to 50%.
    50% annually is 4.16% per month:

    Month one: 1800.00 x 4.16% is 74.88
    Month two: 1600.00 x 4.16% is 66.56
    Month three: 1400.00 x 4.16% is 58.24
    Month four: 1200.00 x 4.16% is 49.92
    Month five: 1000.00 x 4.16% is 41.16
    Month six: 800.00 x 4.16% is 33.28
    Month seven: 600.00 x 4.16% is 24.96
    Month eight: 400.00 x 4.16% is 16.64
    Month nine: 200.00 x 4.16% is 8.32

    Total: 373.96

    I wasn't too far off. I don't know how you came up with your calculation.

  9. #9
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    Default Re: Private Seller Charging Interest After Final Payment

    Quote Quoting llworking
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    OK, jk we can agree on the technicality.
    it has nothing to do with a technicality. The simple fact is the irs doesn’t and can’t require a person to charge interest. They really don’t care if you charge interest or not but they will treat your income as if you did regardless. Stating the IRS requires one to charge interest is simply an incorrect statement.



    50% annually is 4.16% per month

    the type of interest charged will depend on the contract. You are obviously using a different type of interest calculation than I am.

    Oh, and in your calculation you never accounted for the increased debt due to the accrued interest each month. As an example, in your first month, the actual payment to principal would be only $125.12 or in the inverse calculation if you want to use a set payment amount of $200, your. Debt at month two would be $1674.88. Then, in month 3 your principal would be $1674.88+ 4.16% of that. You have completely disregarded the interest itself in your calculation. It would add to the amount of debt each month.




    Regardless of how you want to calculate the interest, I have found this which does appear to allow the seller to demand interest payment presuming no interest was included in the terms of the contract


    Texas finance code 302.002

    If a creditor has not agreed with an obligor to charge the obligor any interest, the creditor may charge and receive from the obligor legal interest at the rate of six percent a year on the principal amount of the credit extended beginning on the 30th day after the date on which the amount is due.  If an obligor has agreed to pay to a creditor any compensation that constitutes interest, the obligor is considered to have agreed on the rate produced by the amount of that interest, regardless of whether that rate is stated in the agreement.
    so, while it appears the interest rate charged far exceeds the allowable rate, to determine that definitively one would need the terms of the original contract.



    Again, I’m still not sure this even applies. There is a difference between a loan and an installment payment plan, especially since title was not transferred until the payment in full was made. I don’t know if it takes it outside the perview of the finance laws. I suspect it may.

  10. #10
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    Default Re: Private Seller Charging Interest After Final Payment

    Quote Quoting jk
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    it has nothing to do with a technicality. The simple fact is the irs doesnít and canít require a person to charge interest. They really donít care if you charge interest or not but they will treat your income as if you did regardless. Stating the IRS requires one to charge interest is simply an incorrect statement.
    Again, lets stop beating a dead horse.






    the type of interest charged will depend on the contract. You are obviously using a different type of interest calculation than I am.

    Oh, and in your calculation you never accounted for the increased debt due to the accrued interest each month. As an example, in your first month, the actual payment to principal would be only $125.12 or in the inverse calculation if you want to use a set payment amount of $200, your. Debt at month two would be $1674.88. Then, in month 3 your principal would be $1674.88+ 4.16% of that. You have completely disregarded the interest itself in your calculation. It would add to the amount of debt each month.
    The loan was without interest to start with so that would not apply. The boss specifically said he was charging interest because he believed the contract had been breached. The boss admits that the principle has been paid in full. If it was a payment plan with the interest included the loan period would be much longer than 9 months and therefore my calculation would not apply at all. Of course 400.00 would have represented a lower interest rate if the period of the loan was much longer. I was quite specific that my calculation was based on a nine month loan.




    Regardless of how you want to calculate the interest, I have found this which does appear to allow the seller to demand interest payment presuming no interest was included in the terms of the contract


    Texas finance code 302.002



    so, while it appears the interest rate charged far exceeds the allowable rate, to determine that definitively one would need the terms of the original contract.



    Again, Iím still not sure this even applies. There is a difference between a loan and an installment payment plan, especially since title was not transferred until the payment in full was made. I donít know if it takes it outside the perview of the finance laws. I suspect it may.
    All of which is specifically why I said that it "might" violate the usury laws.

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