Here's an interesting one for you!

Dan133269

Right, let me see if any of you could give opinions on this purely hypothetical scenario. Bit of a long one but bear with it.

There was a young man named John who approached a bank for a loan to go back to college. The bank agreed to give John a loan for 10,000 euro. As far as John remembers, he never signed a credit agreement even though the bank gave him the money. The bank manager told him to come into the branch the following year once his Masters degree was finished and they would agree on a loan re-payment schedule. "Grand" says John. Little did he know he would run into financial difficulties just after his graduation from college. John got legal advice from a solicitor and those working in the banking sector and was informed that if there is no signed credit agreement, the bank will pretty much have an unenforceable agreement and will not be able to get it enforced through the courts.

Around the time John verbally agreed with the bank manager to call back into the branch to sort out a loan re-payment schedule (roughly 1 year after he got the loan), he gets a letter from the bank asking him to drop in. John is about to leave Ireland to work abroad so tells the bank he is too busy to call in but asks them what are the terms of his credit agreement. The bank says they cannot locate the credit agreement for the moment but will contact John when they can. John informs the bank he cannot remember signing any credit agreement. The bank says they will look into it.

Over the course of the next year (i.e. up until 2 years after John went back to college) the bank sends him letters on average every 4 months informing him that no repayments have been made on the loan. John rings his branch and the collections centre who are now dealing with the case and asks both of them for a copy of the credit agreement, as he does not have 1, if it exists. He asks them on approximately 4 separate occasions for this information, in total. The bank and collections centre both inform him that they will need to look into it and they will contact him. Neither the bank nor the collections centre contact John regarding the existence of any credit agreement.

Yesterday, John noticed that his current account with the same bank has been blocked and his money frozen, meaning he cannot access his own money. He calls the bank's collection centre who inform him that his current account is now frozen by them because he has not made any loan repayments. John is informed for the very first time by this bank that they do not have a copy of any credit agreement between them and John.

John asks the bank why he was not given any notice of his current account being blocked, the bank replies that a letter detailing his account would be frozen, was sent the day before the current account was frozen. According to the customer service agent on the phone, the letter was sent from the bank’s collection office in Birmingham, England, to Waterford, Ireland on the 1st November, and the current account blocked on the 2nd November.

The bank now states that the current account will remain blocked until John agrees to a loan re-payment structure with them, with the 5th of November being the deadline for reaching an agreement.

John asks the bank are they allowed to block someone’s current account if that person’s loan re-payments are apparently in arrears. The bank replies that it is bank policy to do this. John asks what is the legal basis for such behaviour i.e. what statute/banking Code/term in current account contract allows this to be done. The bank does not answer this question.

Please advise John.
Does the bank have the legal right to interfere in his current account funds on the basis of a non-repayment of a loan without a credit agreement?
If so, does the bank have to give John adequate notice before cutting off access to his money?

Thanks in advance.

homer911

John would be on thin ice IMO. Even though no credit agreement exists, he has not denied receiving the funds, in which case the debt exists. What does not exist however are details of any interest rate to be applied to the loan. If it went to court its likely the judge would find in favour of the bank, but as no agreement can be found, the liability might be limited to the amount advanced.

This is not legal or professional advice - its only a personal opinion

Dan133269

homer911 wrote: »

John would be on thin ice IMO. Even though no credit agreement exists, he has not denied receiving the funds, in which case the debt exists. What does not exist however are details of any interest rate to be applied to the loan. If it went to court its likely the judge would find in favour of the bank, but as no agreement can be found, the liability might be limited to the amount advanced.

This is not legal or professional advice - its only a personal opinion

Thanks for reply. Can you point me towards any precedent for this?

BuffyBot

John should continue to seek professional legal advice, which can't be sought here.