15K Overdraft and having to sign a PLG

JK1000

I recently applied to BOI for a temporary loan to purchase equipment for resale. Aprox 15K, I was advised that I would no longer be allowed a 28 day loan and would need to apply for a permanent overdraft. Normally I would use my credit card with a limit of 5K for purchasing equipment for resale and clear this off at the end of the month. Due to the size of the Job this was not an option and a OD of 15K was applied for.

BOI agreed to an over draft facility however they required a Personal Letter of Guarantee signed by both directors. even thought only one director had 100% of the shares. PLG's were signed for 15K and a facility was put in place.

It was only when we tried to use the OD that we discovered that it was for 10K and not 15K. When we queried why this was the case and why a PLG was required for 15K we were informed that we had only been approved for 10K OD the PLG was to cover the overdraft and 5K Credit card Limit!.

We are extremely annoyed that BOI never made it clear that we were only approved for 10K and the PLG was also to include the credit card. We feel that we were mislead and duped into signing the PLG to secure the unsecured Credit Card debt.

Has anyone else come across this sort of thing with BOI?

DubTony

Sneaky tricks by BOI going on here. Basically what they've done is turned your credit card from what is effectively an unsecured loan into a secured one by having you and somebody else commit to guaranteeing it. It doesn't change anything from your point of view, as any "loan" in your own name is personally guaranteed by you anyway, but they've dragged somebody else into the equation. As co-signees of a Personal Guarantee you are both liable for any debt incurred. I assume that's what the intention is here. As soon as is possible I'd close that credit card account and NEVER get another one from BOI. Your co-director will be on the hook for your credit card forever.

My old man got a loan to do up a shop back in the mid 90's. There was no issue getting the loan, but he was surprised they didn't ask for a PG. When he mentioned this to the accountant, he was told that if he'd signed a PG before (for anything) they could probably use that as the guarantee. Sure enough, when he bought the shop on a 7 year loan in 1988 he had guaranteed it. That loan had been paid off in time and without any trouble.

So he asked the bank about the PG, and they confirmed that his PG from 1988 covered the new loan (banks don't seem to lose paperwork). It seems it had contained a clause of some sort enabling them to do this.

Moral of the story - Be careful what you sign. My advice is to ensure that they return the letter to you when you've paid the loan (there may be more to this legally, so professional advice might be worth getting; what I mean is that simply returning the letter may not be enough to remove any liability you might have). 15K isn't a lot, but as long as they've got that on file, they've likely got you by the short hairs irrespective of what arrangements you might make about loans in the future. At the very least have a good business solicitor look at it to determine if they can use it later for anything.

BTW, does anyone think that the use of the word LETTER in Personal Letter of Guarantee kind of softens what's actually being signed? Loan shark stuff IMO.

Yeah! I don't like banks - or bankers.

Nuttzz

I had the same to with BOI around 2003-4. Is your credit card paid off at the end of the month completely? Our business card is (by dd) so wasnt covered by the PLG

sandin

Its standard practice by all banks especially in UK. In fact in the UK they can even take money out of another account you have to pay off an account you owe them on!

At least the good news is you got an overdraft - keep it in good standing and go for a stocking loan next time - these are a lot cheaper (less than 6% at present) and can be used/paid off on and off for the period stated (usually a year)