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Will you return loan money mistakenly repaid early

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  • Will you return loan money mistakenly repaid early

    Story on planet money

    https://www.npr.org/2021/07/23/1019909860/banque-worms
    https://www.npr.org/transcripts/1019909860


    tl:dr

    Group of lenders give money to Revlon in 2016 and Citibank administered the loan. It paid the interest periodically. But due to human error one day in 2019 it repaid the whole amount back early. The lenders took it. The next day Citi discovered its mistake and demanded the money back. Some gave back but others refused. After persuasion failed Citi sued in court and lost. Now it is appealing to higher court.

    The most important reason the lenders do not want to give back the principal is because Revlon has acted shadily, is unlikely to repay the loan and Citi has aided and abetted them and the lenders don't trust either one.


    But if you're a struggling company, there are things you can do with your loans that help you fail more slowly. So that's what Revlon started doing, like stripping out the collateral from some loans, pitting lenders against each other. It gets really complicated, but that's kind of the point. All of this loan stuff gets shady. The super complicated, multi-step transaction that Citibank had to do where they made this mistake in the first place - that was because of all of these loan shenanigans.

    So the lenders are watching Revlon pull all these shenanigans, watching Citibank help them do it, and they're not happy. To them, Revlon is breaking promises and stealing from them. They're still getting these little interest payments, but those are nothing compared to the whole loan. It's seemingly less and less likely that these lenders are ever going to get paid back anything close to the full amount. So they start organizing as a group and hire some lawyers and get ready to fight.
    What would you do if you were one of the lenders. Keep. or return



    8
    Yes I would return mistaken principal payment, on principle
    0%
    0
    Yes, I would return it in order to continue doing business with the bank
    0%
    0
    No, it is my money and it looks I might not get it back
    100.00%
    8

  • #2
    I would assess it like a new loan application and decide whether or not I wanted to give them another loan. It sounds like probably not. I don't know if the borrower can sue the intermediary though for paying it off early.

    Comment


    • #3
      “But if you're a struggling company, there are things you can do with your loans that help you fail more slowly. So that's what Revlon started doing, like stripping out the collateral from some loans, pitting lenders against each other.”

      This is a little misleading. Affirmative and negative covenants are voluminous and critical to obtaining a loan. Violations are an event of default. Can be waived or the lenders can call the loan. “Stripping our collateral”? Was it collateral what were the terms? Poor excuse.

      Mistake or not, if prepayment was allowed and executed, it’s done. Zero obligation to return any prepayment.

      Comment


      • #4
        I too would not give it back. I loaned in good faith and expect the borrower and the administrator of the loan to act in good faith and try and return it. If they collude to make it less and less likely I will see my money back, I would definitely fight it.

        Citi has been and will always be a slime ball. cheap bank and credit card company, that unfortunately has taken over Costco CC business from Amex. I hope they lose this appeal.

        Comment

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