The phrase “offshore lender” is a blanket term used in the U.S. to describe many direct, traditional and online lenders and creditors who are based in another country, but operate within the U.S. Conversely, it is also used in other nations to describe lenders practicing in a country that are based outside of that country’s borders.
Offshore lenders operate in a variety of financial niches from consumer finance to commercial lending. Many businesses turn to offshore lenders for commercial loans, especially when they’re unable to arrange sufficient financing from local or US banks and lenders. Depending on the loan product, transaction type and specific locale of the borrower, collateral property or financial transaction, the offshore lender may need to be licensed.
The internet and computer revolution have given many financial institutions the option of effectively basing their company and business operations outside of the United States, while still marketing and servicing customers in the U.S. The web allows many of these lenders to offer online loans without being located in the country or state of the borrower.
However, because offshore lenders are not regulated by the state, that individual may have more challenges and difficulties with pursuing complaints against such offshore lenders.
Over the past decade, there have been more initiatives for increasing the regulations on offshore lenders and banks. In the U.S., for example, the IRS has created the “qualified intermediary” requirements. This means that the names of those who receive United States sourced investment income should be passed along to the IRS for tax purposes.
In addition, the USA Patriot Act allows United States authorities to seize the assets of a financial institution that is believed to be holding assets for a suspected criminal.
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