Wisconsin Governor Scott Walker signed legislation last week that gave a big boost to banks hoping to skate on lender liability lawsuits brought by borrowers. Act 120 was signed into law on December 16th. The bill protects banks, savings banks, credit unions and certain other lenders from claims by borrowers who sought to sue based on oral promises or commitments.
The new legislation prohibits lender liability claims against banks based on promises made by the bank unless the promise or agreement is in a signed writing, is complete, and is “delivered to the party seeking to enforce the offer, promise, agreement, or commitment.”
The legislation pitted Legal Action Wisconsin against the powerful Wisconsin Bankers Association and other business groups.
Under the new law, Wisconsin borrowers and bank customers will no longer be able to rely on promises made by bankers unless those promises are in writing and signed. Because the bill uses language calling for “delivery to the party seeking to enforce,” there is an additional fear that third parties will also no longer be able to sue banks even if a promise was made in writing.
A last minute amendment on the Senate floor added language that clarified that the new legislation does not apply to claims brought under deceptive trade practices or common law misrepresentation. The amendment offers some hope for customers who relied on false statements and misrepresentations by their bank.
Records obtained from the Wisconsin Government Accountability Board reveal that the banking and business lobby was able to outspend Legal Action Wisconsin by more than 20 to 1. Legal Action Wisconsin was the sole voice speaking out against the bill on behalf of borrowers and bank customers.
One large law firm that defends banks told the National Law Review that the new law “encourages discussions between financial institutions and borrowers by reducing the chilling effect that, in the past, could have resulted in lender liability lawsuits.”
We disagree. The new law suggests the opposite. Now bank customers have less recourse against banks and bankers for misstatements and ignored promises.
Banks have recently scored several state legislative victories. When banks can’t get their way with Congress or regulators, some are seeking help from state legislatures. Unfortunately, there is usually no one speaking on behalf of borrowers at the state level. When a pro consumer group does testify, they are quickly outspent and out-lobbied.
Can borrowers win? Of course. Banks may score a few state house victories but lender liability cases against banks can still be won. Unfortunately, most lender liability lawyers work in big defense firms. Even if they have no direct conflict of interest, most won’t sue banks or they charge such high fees that borrowers can’t afford their services.
Think you might have a case against a bank? Give us a call. We are a boutique, plaintiffs’ practice representing borrowers and bank customers. Contact attorney Chris Katers at (414) 777-0778 or the author of this post, attorney Brian Mahany at brian@mahanylaw or (414) 704-6731 (direct).
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