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Mel

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