That seems incorrect to report this type of interest as a 1099INT
Reporting items under 1099INT makes it subject to Net Investment Income Tax and this particular "interest" is not that type of interest
8. What is included in Net Investment Income?
In general, investment income includes, but is not limited to: interest, dividends, capital gains, rental and royalty income, non-qualified annuities, income from businesses involved in trading of financial instruments or commodities and businesses that are passive activities to the taxpayer (within the meaning of section 469). To calculate your Net Investment Income, your investment income is reduced by certain expenses properly allocable to the income (see #13 below).
https://www.irs.gov/newsroom/questions-and-answers-on-the-net-investment-income-tax
The person lending money in this situation, who is also receiving the "interest" is not receiving the interest from a business involved in trading financial instruments or commodities.
This "interest" income would just be reported under Misc, other reportable income.
