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.