Lender liability refers to claims brought against a lender based on the lender’s conduct in connection with a loan or its relationship with a borrower or guarantor. These claims can arise from allegations such as breach of contract, failure to honor loan terms, breach of the duty of good faith and fair dealing, improper servicing or collection practices, or overstepping the lender’s role. In commercial lending, lender liability issues often surface when a lender takes action to collect, foreclose, enforce a guaranty, or otherwise address a troubled loan.
Lender liability creates meaningful exposure because the lender generally bears the full cost of defending and resolving a claim, without the benefit of any guaranty or third-party cost-sharing. A single claim can generate significant defense costs, delay or offset the lender’s own recovery through counterclaims and setoffs, and result in damages. At the same time, the conduct underlying a claim can create separate concerns regarding the lender’s policies, regulatory compliance, and reputation, compounding the risk well beyond the individual loan.
The best lender liability defense begins before a claim is ever made. Our firm provides commercial lenders with practical training and ongoing legal guidance designed to help lending teams recognize and avoid practices that could give rise to lender liability claims. We help lenders establish sound practices for documenting decisions, servicing and liquidating loans, communicating with borrowers and guarantors, and navigating challenging loan situations. When a claim does arise, we work with lenders to evaluate the allegations, develop a defense strategy, and protect the lender’s interests while advancing the lender’s broader recovery and risk-management objectives.
