I have a loan with a purpose of "to pay legal settlement". The customer is a professional who lost on a covenant not to compete suit. The new company is willing to have payments taken from its General Operating account. So, in summary, the loan was made to the individual but her employer is making the payments.

Since the debt is closely related to her line of work - can you use that as an exemption from Reg Z?

I'd say there's nothing about the purpose that's personal, family, or household use.

Really? She was sued as an individual. If we hadn't given her the loan, the settlement would be paid from her personal assets. Maybe I am taking this one too far. Is your conclusion based on the fact her new employer is paying a portion of the settlement or because she wouldn't be in the situation if not for her employment? (Just trying to straighten it out in my head.)

She's a consumer, but the nature of her debt is professional, not personal.


Other options for discharging her debt have no effect on the purpose of the loan.


The latter. She needs the money to resolve a debt arising from her profession, not her personal life.

Ok - I can agree with that. Thanks for taking the time to help me out!