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N Cal Attorney
N Cal Attorney, Attorney
Category: Business Law
Satisfied Customers: 9330
Experience:  Since 1983
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What are the circumstances that require a relationship between

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What are the circumstances that require a relationship between a lender and a borrower to be regulated by the government? For example, the relationship between institutional lenders such as banks and individuals is subject to consumer protection laws. Are there instances when the relationship between private individuals lending to each other -- such as friends lending money to friends, or parents lending money to their children -- is also regulated? Similarly, will a business that facilitates the tracking of debts and their payment between individuals be subject to particular laws or a type of banking regulation?
Submitted: 7 years ago.
Category: Business Law
Expert:  N Cal Attorney replied 7 years ago.
You asked
Are there instances when the relationship between private individuals lending to each other -- such as friends lending money to friends, or parents lending money to their children -- is also regulated?
Such loans between private parties are regulated by the California usury laws.

Similarly, will a business that facilitates the tracking of debts and their payment between individuals be subject to particular laws or a type of banking regulation? If the business is handling money it sounds like it is acting as an escrow company. If not it sounds like it is acting as an accountant.
Customer: replied 7 years ago.
The nature of the business is to account for borrowing and payments between individuals and to provide standard, non-cash means to handle payments (via PayPal, credit card etc.) while charging a flat or percentage fee for the service. Based on this description, can you suggest the main legal questions that you would advise me to investigate further.

Also, if you can suggest an online or off-line resource to learn more about California usury laws, this would be helpful.

Thank you.
Expert:  N Cal Attorney replied 7 years ago.
The usury law is in Article 15 of the California Constitution and in Deering's California uncodified statutes (1917), available at your county law library. See
http://ag.ca.gov/consumers/general/usury.php and
http://www.yourlegalcorner.com/articles.asp?cat=biz&id=97

You need to consult a business formation attorney about starting this type of business. You can get a free consultation from some of the California business lawyers listed by location at
http://lawyers.findlaw.com/lawyer/practicestate/Business-Organizations/California

I would ask if this requires licensure as an accountant, or as a bank if you are actually handling customer funds.
N Cal Attorney and 5 other Business Law Specialists are ready to help you
Expert:  N Cal Attorney replied 7 years ago.
Thank you for accepting my answer.