Obligation to pay back loan

Dan133269

Hello all.

Consider the following hypothetical situation,
If a person, John, took out a loan with a bank, and in the process of getting the loan, never signed any paperwork, and was never given any written loan agreement, would he in theory be legally compelled to pay that back if the bank were to take him to court? Say for arguments sake that there is a record of the money being put into his current account with the same bank, but no written and signed loan agreement.

Thanks.

coylemj

You'll probably find that when he opened the a/c that he signed the terms and conditions document which will cover that loan.

For example, say a bank gives a trusted customer an overdraft extension of 2,000 over the phone to go on holidays. He comes back from holidays and his current a/c is now 2,000 in the red, he has the same brainwave that you had i.e. they gave him the money with no signed documents. The banks do employ lawyers in head office and I'd be pretty sure that that angle is well covered.

steo87

Dan133269 wrote: »

Hello all.

Consider the following hypothetical situation,
If a person, John, took out a loan with a bank, and in the process of getting the loan, never signed any paperwork, and was never given any written loan agreement, would he in theory be legally compelled to pay that back if the bank were to take him to court? Say for arguments sake that there is a record of the money being put into his current account with the same bank, but no written and signed loan agreement.

Thanks.

I've worked for a major Irish bank before and I have actually dealt with this exact situation.

To put a long story short - the customer was disputing the loan and asked to see a copy of the loan agreement. We, the bank, (or more specifically the customer's branch) couldn't located the agreement. The customer then refused to pay the loan (rightly so in my opinion). He actually got away with it - the loan was written off.

I'm certain this type of lazy bureaucracy has contributed to the state of the banks presently. The loan was for over 20 Grand, and was simply just written off.

dotsman

steo87 wrote: »

I've worked for a major Irish bank before and I have actually dealt with this exact situation.

To put a long story short - the customer was disputing the loan and asked to see a copy of the loan agreement. We, the bank, (or more specifically the customer's branch) couldn't located the agreement. The customer then refused to pay the loan (rightly so in my opinion). He actually got away with it - the loan was written off.

I'm certain this type of lazy bureaucracy has contributed to the state of the banks presently. The loan was for over 20 Grand, and was simply just written off.

I'm very surprised that they did this. It's very easy to prove the loan. Account Statements showing the funds being transferred to the customer's account. Regular repayments being made back to the bank over a number of months years. The only situation were statements wouldn't prove much is if the loan was given in cash (unlikely), and there were no repayments ever made (thus the customer could claim they never got the money, nor was aware that repayments were being taken by the bank.

Bank's lose documentation all the time, and many customers try this. The only real benefit you can hope for is clauses in the T&C's etc (ie you could falsely claim that the T&C's offered you more/better repayment holidays, or some other such trivial thing). However, again, the bank can hit back by examining all the various T&C's they have had over the years and state that there is no way this could be.

Basically OP, you're going down a very dangerous road here. Unethical and illegal, you could hope to rob the bank, but if you fail, you could end up FFL.

I wouldn't risk it.

Our man in Havana

All the person has to do is put the bank to proof of the loan. If the bank can't find the proof i.e. the loan agreement, application form etc a court will tell the bank to go swivel.

I would well believe that a bank would write off a loan where they had no paperwork. It would be very embarrassing for all concerned if the case was thrown out of court and the papers got hold of the story.

hardCopy

dotsman wrote: »

I'm very surprised that they did this. It's very easy to prove the loan. Account Statements showing the funds being transferred to the customer's account. Regular repayments being made back to the bank over a number of months years. The only situation were statements wouldn't prove much is if the loan was given in cash (unlikely), and there were no repayments ever made (thus the customer could claim they never got the money, nor was aware that repayments were being taken by the bank.

Bank's lose documentation all the time, and many customers try this. The only real benefit you can hope for is clauses in the T&C's etc (ie you could falsely claim that the T&C's offered you more/better repayment holidays, or some other such trivial thing). However, again, the bank can hit back by examining all the various T&C's they have had over the years and state that there is no way this could be.

Basically OP, you're going down a very dangerous road here. Unethical and illegal, you could hope to rob the bank, but if you fail, you could end up FFL.

I wouldn't risk it.

Surely all you could prove with statements is that money was transferred? This would not show how, when or if the money should be paid back.

I would be very surprised if the bank haven't covered themselves in some way though, if the loan was agreed over the phone they probably recorded the call.

Dan133269

Thanks for the replies people.

Would person's credit rating be affected in this situation?

And let's take the hypothetical situation further, say John is a good lad and doesn't want to be dishonest in not paying back the loan, even if it is to a corporate body i.e. a bank and not to a person, can he simply agree to pay back the principal without interest and if he does try this approach, does he expose himself to being obliged to pay principal plus interest as he is acknowledging there should have been interest in the first place?

I can assure you I'm not up to anything immoral, just curious.