Knowing When to Walk Away
Buying and selling distressed debt is common today. When buying promissory notes, buyers (i.e., future holders) may overlook whether they can actually charge the interest rate(s) charged by the note seller after closing. This issue comes up most when an individual or private company investor wants to buy a Bank asset or portfolio. At least inTennessee, the maximum allowable interest rate that may be charged depends on the person/entity charging it. However—and good news for investors and portfolio purchasers and servicers —under Tennessee law a buyer may charge whatever rate(s) charged by original holder so long as was not usurious in the hands of original holder. See J&B Investments, LLC v. Surti, 258 S.W.3d 127 (Tenn. Ct. App. 2007).