Common Lender Liability Issues

As we’ve mentioned before, lender liability has grown to become a major issue for both lenders and clients of lenders. As lawmakers strive to create laws that empower borrowers, many lenders find themselves in situations where they are not upholding their end of lending agreements. When this happens, borrowers are entitled to bring lenders to court. Michael F. Richards has acted as a financial expert witness in many trials involving lender liability and has seen many different reasons why these unfortunate situations occur. Here are some common reasons for lender liability cases:

·         There Is a growing number of states that require a written promise to lend when the loan exceeds a certain amount. The best way to avoid problems at this stage is to have a detailed loan agreement in writing from the get-go. In clear, concise language, state what you agree and don’t agree to, and be sure to include details about what would invalidate the commitment.

·         Many times, lenders run into trouble due to poor documentation. It is extremely important to diligently take detailed notes throughout the loan process. Remember – stick to the facts. Everything you keep in your clients’ files should be able to be read out loud in a court of law.

·         This may seem like a no-brainer, but it is actually becoming a big problem. Cases involving lender liability are increasingly being built on confidentiality problems. Do not disclose any financial information about your clients.

Banking Policies and Procedures

It goes without saying that it is important for banks to adhere to strict policies and guidelines. Hundreds of thousands of dollars are exchanged every day through all different types of transactions, ranging from the simple to complex. Banks often find themselves in trouble when policies and procedures put in place to help protect themselves as well as their customers are not followed. This can happen for a variety of reasons – anything from a simple oversight to willful negligence can be the cause. When a bank is brought to court as a result of a policy violation, a banking expert witness can help sort out what can be considered a mistake and an intentional violation.

If you run a bank, you know how hard it can be to develop these rules. We’ve put together a quick list of things to consider when creating your bank’s policies and procedures.

·      There are plenty of pre-written documents easily available online. While these may be a good starting point, avoid using the documents outright. Take time to read through and customize. Remember, your banking policies should reflect your bank’s individual philosophy and best practices.

·      The easier your policies are to understand, the easier it will be to enforce them. Break down your information into easily digestible components.

·      Remember that your employees are the ones who will most likely know the best way to go about business, so be sure to brainstorm with them when developing your procedures.