Why Bank Personal Guarantees Are Hard To Enforce

Why Bank Personal Guarantees Are Hard To Enforce

 

            In dealing with bank personal guarantee cases for seven or so years now, I can safely say that generally, personal; guarantee implementation and enforcement is not generally the strong point of the UK banking industry. They often fail to keep original documents of relating to the guarantees or the finance to which they relate, or forget to obtain the personal guarantee holder’s signature on essential documents or have them witnessed properly, thus often calling into question the validity of the personal guanratee. If the principle documents for the case are not valid, enforcing them is going to be nigh impossible.

           

The process of enforcing personal guarantees can be a long and arduous for the banks, for unlike Consumer Credit Act Agreements, they cannot assume proof of debt- they have to go through a court process to eventually obtain that and need to be seen to be acting properly before that.

 

Some banks may simply grow tired with the correspondence, and settle for a lower overall payment. Others may choose to take the case to court, but even at this stage the enforcement of the guarantee is difficult.

 

Banks have shown sloppy practice regarding important documentation, and in court, electronic or scanned documents are considered more remote than the originals, as they can be manipulated easily. Many banks have slipped into the bad practice of depending entirely on such documents, carelessly destroying or losing the originals, and for the electronic documents to be considered by the courts with the same regard they have to contain a number of details, such as the author's name; the date the document/record was stored; the names of anyone who has accessed or made changes to the document; details of the changes made to the document and version control….and the list goes on. This is a complex task for the banks to manage, and helps personal guarantee claims to no end as the likelihood of the banks complying with these rules is very small indeed, thus weakening their case substantially.

 

RBS/Natwest- how they operate 1.

Commonly, but not always, easier personal guarantees to contest than other banks due to the rarity of positively ensuring their customers to get legal advice. They also tend to scan and/or microfiche documents rather than keeping originals.

 

 They, like most banks argue vehemently that they are not required to keep originals so this matter has to be handled sensitively if you are not going to end up with having the expense and trauma of dealing with solicitors acting on their behalf.

 

They have a customer service centre based in Telford that deals with personal guarantee and overdue debt issues, which is often haphazard in their communications.

 

For more information, have a look at our website at www.personal-guarantee.co.uk

Lloyds - how they operate 1

Their centre for dealing with most personal guarantee issues is in Bristol. Local bank managers normally send the first letter or set of communications and often try and get a deal done- however, they have limited power to negotiate.

 

Lloyds do the right things, by offering fixed repayment figures over periods of time as part of their demand or follow up letter.

 

 They also tend to perform better than other banks in preparing PG documentation, but don’t use that as a reason to cave in- they are by no means perfect!

 

 For more information, have a look at our website at www.personal-guarantee.co.uk

Barclays- how they operate 1.

Their central base for dealing with pg issues is in Cardiff, sometimes a bit quick off the mark going legal, particularly if they think there are some assets to grab. Tend to be better at ensuring clients get solicitors advice at the outset but again, inconsistent in this as well as other areas.

There may be some initial communications form the local branch but for the most part it is Cardiff that do the bulk of the chasing.

Tend to get a bit feisty when asked for original documents, strongly denying the need for them to be produced.

For more information, have a look at our website at www.personal-guarantee.co.uk

HSBC- how they operate.

In the last 15 months or so, we have seen a department allegedly based in Canary Wharf but actually based in India manage collections regarding PGs- the long Indian names and .in email addresses tend to give them away. However, they are difficult to contact and relatively slow to respond, which is great under normal circumstances if you are fighting a war of attrition but dreadfully frustrating if you actually want to do a deal. We have seen a recent move by HSBC to use their internal Birmingham based resource, Metropolitan Debt Collection Services and DG Solicitors, but again find they can be just as ineffective in pursuing on behalf of the bank. For more information, have a look at our website at www.personal-guarantee.co.uk

GOOD MONEY AFTER BAD?

Are you even getting a salary from your business? Is the answer No, I wish. 
 
Alright then, here's another for you- are you in fact propping your business up by doing any of the following?:- 
 
* borrowing against your house 
* depleting your personal savings 
* using your spouses income or income from elsewhere 
* loading up personal credit cards 
* taking out personal loans. 
 
As a one off considered decision as part of a plan of action, then fine, 
 
but is it happening monthly? weekly? 
 
Then you need to ask this question- When will it stop? 
 
If this is what you are doing, it is probably because your business is losing money, and three things will inevitably happen. 
 
1. You will turn around the business so it starts paying you. 
2. The business will fail, taking down all the money you put into it and possibly you. 
3. You run out of personal funds, taking both you and your business down. 
 
But it doesn't have to be that way. 
 
You can break the cycle, and there is more help than you can ever imagine to help you solve the problem. 
 
Go talk to someone (me if you like)- there is plenty of support around (some good, some bad, but you got to start somewhere)- find people who have been through what you have been through and come out the other side- you'll be surprised how many people will tell you their story. 
 
But don't go and drain more of your depleted personal resources unless you know how you are going to get it back- it is the road to ruin.

For more information visit personal-guarantee.co.uk

Is it really so bad? Why me?

How about is it out there? Well, pretty bad actually. Banks are reducing facilities and increasing margins at the expense to their clients. Businesses are falling like flies. Orders are getting cancelled. 
 
Bad isn't it? 
All the banks fault, isn't it? 
Why us? 
 
Well, 
yes, 
probably, and 
why us? 
 
For many of us, we do have essentially profitable businesses. 
 
But do all of us? 
Have we made any real money? 
Or even during the good times, when markets were good, were we just getting by? 
Were we (and are we still) always moaning about how bad it is? 
How many of us talk ourselves into a hopeless state? 
 
My experience, and this is experience forged out of 2 recessions, is that if you have essentially a good business (do you?), you can and will get through this, providing you do enough of the right things. 
 
What are enough of the right things? 
 
There are many, but let's take 5 to stir your emotions. 
 
1. Is your and your business cloth cut accordingly? Really? 
2. Do your clients know you are still here? Are you sure? 
3. When your competitors go down, where are their clients going? To you? 
4. How do you value and make the most of the one real commodity you have- time? 
5. Are you confusing motion with action? 
 
Answer those questions, honestly, really honestly, and you might be on the way to getting through this and, just as many businesses I work with, actually buck the trend and make some good money.

For more information visit www.personal-guarantee.co.uk

You couldn't make it up -- unless you are a bank

Lenders routinely mislay the card and loan agreements their customers originally sign; however more astonishingly, if there has been a dispute later on, the lenders have used computer software to "recreate" the original documents, sometimes with less than accurate results. Being able to recreate agreements in this way helps banks pursue borrowers over debts, but there is growing evidence that when lenders "recreate" contracts they often do not stick to the original terms. The result is that borrowers who are often already in financial trouble are left in worse difficulties. Document "recreation" is in the spotlight after a court case last month involving a number of borrowers with credit cards issued by HBOS, Barclaycard, MBNA and HSBC. Part of the case, was to assess the circumstances in which banks could "reconstitute" lost agreements. Judge David Waksman concluded that in future, lenders would have to explain why they did not have the original agreements. He said they would have to prove that the recreated document was a true copy of the original contract.

At the end of this month the Office of Fair Trading will circulate this guidance among banks and other lenders, driving home the message that "any reconstituted copy must be a true copy, containing any terms and conditions contained in the original, and giving the terms and conditions applicable at the time the contract was signed."

The result of this is that the banks have yet more hoops to jump through, making it more likely that they will make mistakes, only benefiting the case of the personal guarantee holder.

 

 

For more information visit www.personal-guarantees.co.uk

 

Source: Investing.businessweek.com

Validity of electronic documents

For most companies, it is among the worst things that could happen: a lawyer's letter lands on the managing director's desk informing them that a personal guarantee case is now being taken to court. The pressure is now on to assemble evidence - and quickly. But in many cases, that evidence is not held in paper files, but in a myriad of electronic formats: emails, human resources or customer management systems, scanned-in faxes and application forms.

Many banks are confused as to what extent electronic documents will be accepted by a court of law as irrefutable evidence that the company was in the right all along. Rejection of a company's electronic documents by a court can be disastrous for a company's legal case.

The court will give most credence to the best evidence available, such as original documents or oral testimony. Evidence that is not original - for example, a printout of an electronic document or a scanned-in version of a paper original - is considered more remote and needs to have demonstrations of authenticity and reliability because electronic evidence can be easily manipulated.

For an electronic document to be valid the document should include: the author's name; the date the document/record was stored; the names of anyone who has accessed or made changes to the document; details of the changes made to the document and version control; details of movement of the document from medium to medium and from format to format... and the list goes on.

This is a complex task for the banks to manage, and helps personal guarantee claims to no end as the likelihood of the banks complying with these rules is very small indeed, thus weakening their case substantially.

 

 

For more information see personal-guarantee.co.uk

Source: information-age.com/articles

Receipt of court summons or statutory demand.

If you receive these documents, get them dealt with right up front. Burying your head in the sand will not make them go away, and fees increase exponentially if judgements have to be unwound.
Furthermore, burden of proof switches away from them and more on to you
It is also best to use good legal advice. It might appear cheaper to do it yourself, but you eouldn’t have a gynaecologist do brain surgery, would you?
So don’t put yourself financially at risk by trying to do it yourself if it is not your area of expertise.
However, I would emphasise the word GOOD in good legal advice- that can be hard to find, ask around, go on personal recommendations based on similar situations if you can.
If you receive these documents, get them dealt with right up front. Burying your head in the sand will not make them go away, and fees increase exponentially if judgements have to be unwound.
Furthermore, burden of proof switches away from them and more on to you.
It is also best to use good legal advice. It might appear cheaper to do it yourself, but you wouldn’t have a gynaecologist do brain surgery, would you?
So don’t put yourself financially at risk by trying to do it yourself if it is not your area of expertise.
However, I would emphasise the word GOOD in good legal advice- that can be hard to find, ask around and go on personal recommendations based on similar situations if you can.
For more information, take a look at our website personal-guarantee.co.uk, or give us a call on 0845 055 8457

Personal Guarantee debt is part of a large unaffordable accumulation of debt that you owe.

If this is the case, you really need to consider whether it is best to use some form of debt management or insolvency process to wipe the slate clean and to get on with your life.
Easier said done as old prejudices are hard to ignore, but the insolvency rules were radically changed in 2003 to make it easier for good, honest people to dust themselves and start again- much more akin to the US system and attitudes on the matter.
It is important to get good advice if this is a route you need to consider- a personal referral from someone you know can go a long way to getting the right advice.
This is a rewrite of the post on the 1st of February, apologies for the previous post which came up as gobbldeygook, sorry about that the computer has a mind of it's own somtimes!

For more information personal-guarantee.co.uk

Don’t expect an early resolution to a PG claim against you.

The only route to an early resolution is to repay it in full.

So if you want to minimise the amount paid, you have to be prepared to sweat it out.

The best way to illustrate this is by way of example- two people owed the same organisation, one £25k, one £60k. The organisation went into administration, the banker to the organisation appointed their own solicitors to collect. The solicitors went heavy handed, issuing statutory demands and winding up orders.

The judge kicked both winding up orders out. Due to the time elapsed, the bank and solicitors decided only to go for the larger debts. The guy who owed £25k got away without paying anything, the £60k guy got it settled for £25k payable over a period of time.

So elapsed time can be a great healer, best to use it to your advantage.

For more information, take a look at our website personal-guarantee.co.uk, or give us a call on 0845 055 8457 0845 055

 

Banks solicitors and how they work.

Solicitors are often on very much reduced hourly rates when contracted by banks. This has a number of implications if you are on the receiving end of a personal guarantee claim.

Firstly, the solicitors try and ensure most of the work is executed by the lowest paid staff possible. Secondly, by taking court action they can get a quick return by getting judgement and pursuing that.

However, if you are getting sound legal advice, this can stop these types of actions in their tracks. With a good solicitor acting on your behalf, they have to be careful how they tread and not be too pre-emptive in their court action, as wasting the courts time could result in costs against them.

However, if you represent yourself, they have nothing to loose in taking you through the court process- they rarely get costs against them in these cases and they normally win, so why wouldn’t they?

For more information, take a look at our website personal-guarantee.co.uk, or give us a call on 0845 055 8457 0845 055

Personal Guarantee debt is part of a large unaffordable accumulation of debt that you owe.

If this is the case, you really need to consider whether it is best to use some form of debt management or insolvency process to wipe the slate clean and to get on with your life.
Easier said done as old prejudices are hard to ignore, but the insolvency rules were radically changed in 2003 to make it easier for good, honest people to dust themselves clean and start again- much more akin to the US system and attitudes on the matter
It is important to get good advice if this is a route you need to consider- a personal referral from someone you know can go a long way to getting the right advice.
For more information, take a look at our website personal-guarantee.co.uk, or give us a call on 0845 055 8457

NEW DEVELOPMENT AS BANKS USE MORE DEBT MANAGEMENT COMPANIES.

 

There has been an interesting development since the 1st January in that the banks (Barclays, HSBC, LloydsTSB and RBS/Natwest) in particular have begun to dump personal guarantee cases to external debt management. This is good news for a number of reasons:-

1. It is a reflection of the fact that they are struggling with the workload of personal guarantee claims. They are probably overloaded with cases generally, as most bank departments and their subsidiary debt management and solicitor firms also deal with normal consumer credit act agreement defaults (eg loans, credit cards and overdrafts), and these are probably being passed to the debt management companies as well.

2. It actually reflects good banking practice- old uncollected debt is both a burden on their balance sheet and resources, so they have to make decisions at some time as to what to do with this. A reason why we say buying time is something that works in your favour.

3. It is unclear as yet if the debt management companies are for the most part acting as agents for the banks or whether they have actually bought the debt from the banks. In either case, with regard to personal guarantee claims this creates a further barrier to them collecting- this is because defaulted personal loans, overdrafts and credit cards have a set process as they effectively have proof of debt- not so necessarily with PGs.

4- If they have purchased the debt, then it starts to be a home run for the personal guarantee holder- they rarely have all the documentation to hand and when they try and get them off the bank, the banks are notoriously bad at providing the necessary information to them (as they can be to us), often citing the fact that the debt management company have bought the debt and it is there issue now.

For more information on Personal Guarantees and what we can do to help go to personal-guarantee.com

 

Personal guarantees with a charge on a personal property.

If the bank took a charge on a property at the time of or as part of a personal guarantee being put in place, they have a duty of care to ensure that a co-owner (not intricately involved in the business) of that property is fully informed on the situation. So, for example, if the financials of the company are not in good shape, the bank needs to ensure that the co-owner is aware of the risk they are exposing themselves to.

Also, if the bank offered new facilities whilst relying on such a personal guarantee and charge that had been put in place sometime before, then again they have a duty of care to imform that co-owner of the circumstances and obtain their consent.

The bank cannot necessarily rely on the involved partner giving all the facts to that co-owner.

For more information, take a look at our website personal-guarantee.co.uk, or give us a call on 0845 055 8457 0845 055

 

Company cross guarantees

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Unless companies are in the same group of companies, it proves difficult for banks to enforce inter-company cross guarantees. The question is, what sort of consideration would a third party gain from making such a guarantee?

Each case always has to be considered on its own merit but it is an important issue, so get good advice so you can be sure of your ground.

For more information, take a look at our website personal-guarantee.co.uk, or give us a call on 0845 055 8457 0845 055

 

Mainstream bank centres for dealing with Personal Guarantees

In each of these blogs, I will try and provide some insights into how the institutions such as banks approach their calling in of personal guarantees.

Most of the mainstream banks have centres that deal with the chasing of personal guarantees- so although the local manager might send the initial demand letter and try to negotiate a repayment plan, they have little authority to do a deal and will often suggest taking an interest bearing loan.

An agreement at this stage would be a result for the bank, but certainly not for the person who signed the personal guarantee!

However, the longer the matter is being dealt with at this level, the more time the personal guarantee holder buys themselves, so don't be in too much of a hurry to move it on to the banks' centre! And remember, many personal guarantees are at best dubiously enforceable and many are not enforceable at all.

For more information, take a look at our website personal-guarantee.co.uk, or give us a call on 0845 055 8457 0845 055

HSBC- how they operate.

In the last 15 months or so, we have seen a department allegedly based in Canary Wharf but actually based in India manage collections regarding PGs- the long Indian names and .in email addresses tend to give them away. However, they are difficult to contact and relatively slow to respond, which is great under normal circumstances if you are fighting a war of attrition but dreadfully frustrating if you actually want to do a deal. We have seen a recent move by HSBC to use their internal Birmingham based resource, Metropolitan Debt Collection Services and DG Solicitors, but again find they can be just as ineffective in pursuing on behalf of the bank. For more information, have a look at our website at www.personal-guarantee.co.uk