If you're a bank borrower, you might think your relationship with your lender is, well, a tad one-sided. That's particularly true in the current environment: when bankers say, Jump! customers inquire, How high? But there are legal boundaries bankers are supposed to honor, and their failure to do so can be grounds for litigation. In the mid-1980s a raft of companies dragged their bankers into court, charging fraud or other malfeasance, and some won big. Here are some of the standards courts have established for lender liability:

* Written commitments carry weight. If a bank says it will make a loan and then reneges on its commitment, the borrower may have a case. But an oral agreement may not be enough, notes Troy L. Daugherty, a lawyer with the Kansas City, Mo., firm of Wirken & King. "I recommend you put agreements in writing, even if all you do is send the banker a letter confirming your conversation." To sue on breach of contract, Daugherty says, you need to have spelled out amounts, interest rates, and repayment terms.

* Bankers' misleading statements or misrepresentations can be used against them. Basically, lenders are subject to the same standards of fraud that apply to those who take part in other commercial dealings. They can't imply one thing when they mean another, without risking legal action. According to Daugherty, lenders must, for example, disclose all loan terms and conditions, and must not knowingly present false information that may bring harm to the borrower.

* Lenders can't interfere with a customer's business relationships with third parties. Bankers have a duty of reason-able care, notes Daugherty. If a company has a contract with another business (or is in the process of negotiating one), lenders must avoid actions that undermine the transaction. If the relationship suffers as a result of something the bank does, that bank can be held accountable for damages.

* Breaches of good faith can be penalized. The courts don't generally view lender-borrower relationships as fiduciary in nature, but there are plenty of circumstances in which that can change. If, for instance, a banker offers bad advice to an inexperienced businessperson which, in turn, leads to financial losses, the bank may be held liable. Other examples of fiduciary misconduct: a banker's assuming an informal or formal management role, or imposing controls over credit policies or budgets.

* Banks have an implied covenant of confidentiality concerning customer accounts. Banks may be asked to disclose information about a borrower's condition when the borrower's customers inquire. If they do divulge information, courts have said, that information must be correct. Giving out false information or omitting relevant facts, a federal court has ruled, can result in punitive damages if it can be shown that the misinformation damages the borrower.

Jumping into litigation can be both costly and time-consuming. But if you want to investigate a claim against a bank, the best way to start is by contacting the Lender Liability Litigation Group of the American Trial Lawyers Association, which can be reached at 816-753-6666.

-- Bruce G. Posner

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