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LegalGems
LegalGems, Lawyer
Category: Consumer Protection Law
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Experience:  Research Attorney; Private Practice; Attorney Mentor; Mediator
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I signed a business application in 2007 for line of credit.

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I signed a business application in 2007 for line of credit. The application had language in the bottom that said something to the effect whatever money we give you, you will personally guarantee. I hadnt read it because it looked like the same standard signature page I had used with my bank (I brokered business customers to them). Buried in the fine print, along with all the language about checking references etc was the above sentence. I never received or signed business documents after we received the line. Being a pretty big company, I never saw the paperwork. Later I learned we never received it since it was sent to the wrong address. The documents were never signed. The 30 page contract was apparently enforceable via the signed application for business credit. They asked for me to pay personally after my company closed and I was shocked. Plus they put it on my personal credit. It is the only negative I have and I need to get rid of it. I appealed to the credit bureaus that there was no guarantee and that there must be fraud involved or a mistake. They do the digital info exchange and always come back "verified". I have demanded that they do an investigation as required by the FCRA and they say they have. I assert that is not an investigation which requires critical data analysis. How do I get the credit bureau agencies to remove this trade line? I understand I can sue the bank but that is long and costly. I need these removed.
Submitted: 1 year ago.
Category: Consumer Protection Law
Expert:  LegalGems replied 1 year ago.

LegalGems :

Hi! LegalGems here. My goal: To Do My Best To Assist You. Please remember, I can only provide general information,as this is a public forum.

LegalGems :

I have looked into this on your behalf, and generally, when one signs a statement personally guaranteeing a line of credit or a loan, that person assumes individual responsibility for the payment if the principal fails to pay it. Are you saying that you did not sign the statement, or that you weren't aware of singing it at the time?

Customer:

I signed an application for business credit. I never knew, even having funded a thousand plus financial transactions and being a top 5 company in equipment finance for businesses, that what you sign on an application was enforceable. I never read it anyway because it was boiler plate and the banker was pushing me so he could win a contest. I didnt even know we were approved for many many months. We never received documents and after signing the application I just went about my day figuring when I get the documents then I can decide what I want to do. How can one agree to terms they have never seen? So if the bank decided that they get my first child in the terms then I have to turn him over? Obviously that is against the law but just making a point. How can one agree in advance to something they have never seen?

LegalGems :

If the application was worded correctly, (i.e. if it states that should the line of credit be approved, then the applicant personally guarantees....) then it could be binding. However, in order to enforce a debt, the creditor needs to validate it. The law is vague on validation - but generally there needs to be adequate proof that there is outstanding monies owed. As long as it is not against public policy, it would be enforceable. I'm checking to see if there is a statute that governs font size, as that may help. Once you received notice of the approval, did you cancel it?

LegalGems :

I cannot locate any statute that regulates font size unfortunately.

Customer:

I never received anything, I figured we were approved for a corporation only transaction since I was told that we were applying for that and we used it for 4 years. My company was large enough to qualify for corporation only. I would never had know otherwise since I never received a contract not had I signed one. How could the application be a contract? That is ridiculous. Its deceptive. The top of the application said "Business Application". Its just an application. How can that become a contract? There was no consideration. So basically, I sign an app, I receive no notice of terms, no notice of approval, my employees use it and thus I am bound by whatever terms were in there? Thats insane.

LegalGems :

Often a contract will incorporate prior documents - so if the line of credit was issued, and accepted, and it incorporated the application, then that is one way to incorporate. And for applications, often times it states that IF approved, the following T&C's are included, so it can become included into the contract. It's similar to an email contract -where many emails, when taken together, can be considered a contract. There are prohibitions against Unfair and Deceptive Business Practices Act, but this would require a review of the application and all other documents resulting from the transaction.

LegalGems :

I'm checking to see if I can find any further information.

LegalGems :

If, on the application, the Personal Guarantee clause was not conspicuously stated, that could provide an opportunity to contest it - as misleading, deceptive, and possibly fraudulent. However, you would need to bring an action for declaratory relief in order to obtain a judgment to this effect.

Customer:

I would agree with you IF I had received documents, signed them acknowledging that the application was incorporated. Im not an Attorney but I have legally taken on the best of them. It is absolutely crazy to think a person can agree to terms they never see or sign for later. Just crazy. I wish I could do that in my business. Ironically the bank that I funded most of my business with, and the one on my bureau, was absolutely intense about getting proper personal guarantees on a separate page and sometimes notarized. I wish I could get away with what they are saying. It would make my business so much easier. I could make incredible amounts of money without disclosure of anything based upon a basic application. So please tell me that I am wrong. That yes a bank can hold you to whatever they want, known or not, based upon something in advance like this. It says personal guarantee but I in this case the banker was holding the paper and said sign here. Again why would I even bother because I was waiting for the actual contract before I agreed to anything.

LegalGems :

But you signed the application, correct? I want to be clear on this so I provide the correct information.

Customer:

Yes I signed the Application. I even signed as President because I never saw the personal guarantee working. And I re state, I would have no reason to question anyway as I was waiting for terms to decide what I wanted to do. The word application itself is critical. Its an application for terms. So if I dont see the terms, and I dont sign terms then how can I be incorporating the application? I didnt mind making the payments but I would never had agreed to a Personal Guarantee. Its deception period.

LegalGems :

The problem is that many applications, particularly lines of credit, applications for loans, state language as follows: In consideration of credit being extended... I personally guarantee..." - and this is the language contained on many applications. However, it would be worthwhile to have an attorney review it, because if it is not conspicuous then it would be deemed deceptive (unfair and deceptive business practices).

Customer:

I cant prove that he came into my busy office, said this is for the business, had his hand over that part and had me sign it. But even if I did, then how can I be held for terms that I have NEVER seen or signed? Please explain.

LegalGems :

Other similar language would be "This application is submitted to XYZ...The applicant agrees that if any credit is extended it shall be according to the terms set forth below...".

LegalGems :

If they don't have your signature on the personal guarantee, then they would not be able to hold you personally liable, as your signature would be required - and they would need to produce this in order to collect on the debt.

Customer:

that is ok. that did not happen. there were 4 pages, I only signed and saw one of them. And I can show I didn't fill them out because much of the information is wrong. My business partners cell phone # XXXXX in my line for example. He typed them in, he came up with one page and I signed it. The fourth page, that I received 4 years later when in dispute, showed more detail about what I was agreeing too BUT the main term documents that I received after requesting them in our dispute, was over 30 pages long. That set of documents (or the 4th page) I never saw and since the address and business name on the application were wrong, I doubt it even came to my office. So again, how can I agree to incorporate an application, thereby having an enforceable PG, if I had never received or signed the main term documents?

LegalGems :

Typically you need to initial the bottom of each page on most applications to show that you had knowledge of them. So that is helpful. If there was no signed personal guarantee by you then there would not be a basis for holding you personally liable. If your business partner signed this guarantee, the partner would have personal liability. If the business partner filled them out and brought only the last page to you, in order to deceive you regarding the personal guarantee clause, then you would have a possible action against him for fraud in the inducement.

LegalGems :

But if the application did not have language similar to the language I referenced above, the application itself would not be binding.

Customer:

I will try this one last time. I signed an application that included wording of a personal guarantee for any granted credit. I didnt know I was signing that. Not sure it would have mattered to me at the time. Because I did not receive documents to sign. I DID NOT RECEIVE DOCUMENTS. I accept the application is enforceable if I sign the documents stating such. Maybe a case could be made that if they certified mailed documentation to me ONLY and I confirmed receipt, and then I used the line, that I would be agreeing to the terms. Even then that is weird considering how intense lenders are about perfect documents and how the consumer community has forced even the bolding of certain wording to make sure the lenders are not being sneaky. BUT I DID NOT RECEIVE DOCUMENTS. So how can the application be enforceable?

LegalGems :

I am sorry I am confused. If you signed an application that included wording of a PG, I don't understand how you weren't aware of signing it? Are you saying you completed an application, but never received notice of the granting of credit, and never used the credit? I am not trying to be difficult as I am trying to provide you with the information you need; but I am not clear on this.

Customer:

1) I received and signed an app with personal guarantee language

Customer:

2) I didnt know that this was the wording because I couldnt see it nor would I even think it mattered given my experience

Customer:

3) There was a page 4 of the application (and 1 and 2) that I never saw. Only page 3 but it did have PG language. The 4th page had more. Page 1 and 2 were the data pages

Customer:

4) I never received notice of approval

Customer:

5) I never received documents showing the terms of the approval such as rate, months, collateral, various important legal language in contracts specifically regarding PG and/or application.

Customer:

6) my company started using the line.

Customer:

7) I never used the line as it was a cash flow tool for accounting.

Customer:

8) my partner signed all the same docs I did and he managed the checks. The payments on the line were automatic so I wouldnt see them

Customer:

9) I would never have authorized use of the line if I would have received the full contract. In fact, I am pretty sure I can prove that the line was granted before we were even sent documents. Not sure if we used the line at that time however. The documents came from across the country and our line was granted immediately.

Customer:

10) the documents were sent to the name and address on the application (page 1 and 2). It was the wrong name on our business door and the wrong address. Close but wrong and since we just moved in no way the Postal person would know. These were typed and sent according to the banker downstairs. We never received them.

Customer:

done

LegalGems :

Thank you for that. I will respond to each line for clarity. 1) This type of application can be binding if credit is later extended. 2) If you could not see it due to your partner's concealment, that could constitute an action (i.e. fraud, breach of fiduciary duty) against your partner; 3) If page 3 had the PG and you saw this, that would not be in your favor, unfortunately. 4) If you nor your company nor your agents never received notice of approval then that would arguably negate the application. 5) this would be a violation of the truth in lending act so that is helpful; 6) if the company started using the line the creditor can argue acquiescence; also lack of due diligence in verifying the terms; 7) if it was allowed to remain open then the same concepts as #6 would apply. However, given the complexity of this document (i.e. 4 pages, plus 30 pages), plus the possibility that your partner and/or the banker engaged in unscrupulous activity, I would urge you to have an attorney review the document in detail so that all avenues are examined.

Customer:

had nothing to do with my partner. i am just saying he used the line, I would have authorized him probably. I signed and dealt with over 10 contracts a day. I know what I would agree to and what I would not. If we were using the line, in my mind it would be because I saw the contract and agreed in writing. But that didnt happen and I didnt know we were going to be held to a PG. Again its such a simple question. How can a bank hold a person liable for terms they have never seen? Really it that simple. I dont know why we are analyzing all the other details. HOW CAN A LENDER HOLD A BUSINESS/PERSON ACCOUNTABLE FOR TERMS THEY HAVE NEVER SEEN?

Customer:

By making the payments from my business I am obviously agreeing to that part of the contract. Even then, since I hadnt seen the contract, for all I know is these were principal only payments. But monthly invoices show the details. So in this case the business is agreeing to make payments at the rate of X. If I used it personally and paid personally I suppose I would be also showing I agree to that part of the possible contract as well. There is no way on Gods green earth that a person should be held liable for ALL terms just because they signed and application. That is nuts.

LegalGems :

I'm very sorry. Based on the information you provided, particularly the delineated items, it appears that there was knowledge of the PG, and that the credit line was issued/accepted. The burden would be on you to prove that you did not see the terms, since according to what you stated, you knowingly signed the PG. If the application contained incorrect information (ie mailing information) yet had either you or your partner's signature, it would be very difficult to hold the bank responsible for this. I am trying to be clear, and most importantly, honest, based on the circumstances as I understand them to be. The courts will look to the parties' experience/expertise, and if one is familiar with financial/business transactions, they will be held to a higher standard, so I am afraid a court would query as to why the credit line was used if the terms and conditions were never received.

LegalGems :

For your last post, again, I agree with you - but if the application is worded correctly, if accepted, the T&C's in the app can be binding.

Customer:

The burden is on them to prove I received the contract. I am cancelling this conversation. My partner did not receive the documents. Its my experience that say I should expect documents. You did NOT read what I said. I funded thousands of deals with this bank and every single one REQUIRED a signed personal gurantee page WITH the main documents. NEVER EVER EVER EVER were wwe allowede to use the application for a contract. Same Bank. US Bank. Over 10,000 funded deals and NEVER with them or any other bank were we allowed to use an application. THAT IS MY POINT. The industry NEVER allowed an application for a contract which is A BIG REASON I never considered the page I was signing to be relevent. You are not following all of this and I need to move on. Thank you for your tim

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