Business
The bank stopped giving you credit.
What can you do?
Recently, there has been an increase in complaints filed against banks regarding credit, with those who refuse to choose to try to solve the problem in legal ways.
The chances of success are not high.
What can be done?
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credit
Dror Timur
Tuesday, 08 September 2020, 00:53
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During the Corona crisis, in which there was a significant decrease in the volume of income of businesses and many people, the need for credit only increased.
However, it often happens that the bank refuses a customer's request for credit.
Recently, there has been a significant increase in complaints filed against banks in this regard - both complaints addressed to the banks' public inquiries bureaus and complaints directed at the Bank of Israel's Supervisor of Banks.
Credit refusers choose to try and solve the problem in legal ways, but experience shows that there are rare cases in which such inquiries will lead to a positive result for the applicant.
Banks have very broad discretion when it comes to providing credit to customers, and the considerations that underlie this discretion are many and varied.
Although the bank is obliged to consider each credit application in a matter-of-fact and good faith manner, the bank is generally not required to disclose to the customers the considerations underlying its decision, and in any case a customer's ability to attack these considerations in a specific case is extremely limited.
Also, even if the Bank agrees to disclose in general some of the considerations considered by it, it is highly doubtful whether the Bank of Israel will intervene and oblige the Bank to provide credit.
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no money?
This is not a problem for the bank
Adv. Dror Timor (Photo: Studio Shoham)
It will be clarified in this context that, as a rule, a bank is not obligated to provide the customer with credit even when its financial situation is relatively good and also when the customer offers the bank collateral.
The bank has broad discretion to examine all of the customer's characteristics, including the quality of the security offered, and the bank's right to decide that it is not interested in specific security for reasons reserved with it.
Naturally, in the period of the corona crisis the banks' risk of providing credit is increasing.
The financial statements recently published by the various banks show a significant increase in the rate of provisions for doubtful debts, which causes banks to exercise caution and reduce their willingness to provide credit to customers with a relatively high level of risk.
A more complex question is the bank's ability to cancel credit. The credit (such as a credit line allocated until a future date or alternatively the provision of existing loans for immediate repayment). Of course, the customer can more easily try to attack the bank's decision to terminate credit. However, it should be known that taking legal action against a bank in such a case involves a lengthy and complex procedure, Will solve the customer's need to get credit in the near future.
Sued and went out with their hand on the top.
Bank Hapoalim (Photo: Reuven Castro)
An analysis of the rulings of recent years shows that it is rare for the courts to rule on the obligation of banks on such issues, and even more rare for cases where the court requires a bank to provide credit.
Thus, for example, in a ruling given last December in Bank Hapoalim's lawsuit against Yehuda and Orit Bahur, the customers' defense claim regarding a unilateral reduction of the credit line in the account was rejected, and it was determined that the legislature recognized the bank's right to refrain from granting credit to customers. It has a line of credit, for legitimate reasons designed to allow the bank to guarantee its repayment.
Similarly, in a judgment given in May 2019 in Bank Hapoalim's lawsuit against Moshe and Rivka Benedict, the customers' defense claim regarding the provision of immediate repayment loans without notice was rejected, emphasizing that a bank is not obligated to provide a service that provides credit to the customer and that it may refrain from granting Credit or from continuing to provide credit in order to ensure the repayment of his money.
In practice, a customer's chance of requiring a bank to provide credit against his will is not great.
Accordingly, if a customer's need for credit does not receive a satisfactory answer from his bank, the best recommendation is to try and find alternative avenues for obtaining credit.
Although the interest rates charged by non-banking entities are higher than the interest rates used by banks, if a customer can prove compliance with previous credit repayments, he is likely to be able to obtain reasonable interest rates in these entities as well.
In conclusion, the preferred solution in case of refusal to grant credit is not legal but commercial.
The chances of requiring a bank to provide credit through legal arguments are low, and as a rule it is worth trying and finding a solution by finding another bank or a suitable non-bank financing body.
Adv. Dror Timor is a partner in the Banking and Finance Department at the law firm of Salomon Lifshitz
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