Lender liability lawsuits

Lender liability lawsuits

Legal action of debtor against creditors that alleges unfair enforcement of loan covenants or violation of implied terms of a loan agreement.

Lender Liability Lawsuit

A lawsuit between a lender and a borrower alleging that the lender failed to fulfill the loan contract. For example, a customer may sue his/her bank for not providing a mortgage after the mortgage contract was signed. However, most lender liability lawsuits involve a person or firm suing a creditor for pursuing the debt so aggressively that it drove the person or firm into bankruptcy. Most suits derive from a claim that the creditor did not act in good faith, rather than a claim of specific violation of the lending agreement. During the 2008 credit crunch, it became increasingly common for construction companies to sue banks under lender liability for not providing promised funding.
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By 1989, more than 400 so-called lender liability lawsuits had been filed.