In most standard lending relationships, a lender does not owe a fiduciary duty to a borrower. The relationship is typically considered an arm’s-length commercial transaction. However, under specific and often unique circumstances, a special relationship of trust and confidence can arise, elevating the lender’s obligations to that of a fiduciary. If a lender in such a position breaches this duty, causing harm to the borrower, Lender Liability Law Center can help businesses explore their legal options in these non-standard scenarios.
When Might a Lender Owe a Fiduciary Duty?
A fiduciary duty, requiring a lender to act solely in the borrower’s best interest, is rare but can arise if the lender exerts excessive control over the borrower’s business, acts as a trusted advisor whose advice is reasonably relied upon, or if a long-standing relationship of trust and confidence exists. Such a duty might also be established in situations of unequal bargaining power where the lender exploits borrower vulnerability, or if the lender unfairly profits at the borrower’s expense using confidential information beyond agreed terms. It’s important to note that simply providing general advice or having a friendly relationship is usually not enough to create a fiduciary duty; the circumstances must be compelling.
Consequences of a Breach of Fiduciary Duty
If a fiduciary duty exists and the lender breaches it by, for example, self-dealing, failing to disclose conflicts of interest, or acting against the borrower’s best interests, the lender can be held liable for the resulting damages. These damages can include direct financial losses, lost profits, and potentially punitive damages in egregious cases.
Our Role in Fiduciary Duty Claims:
Our role involves an in-depth analysis of the lender-borrower relationship and lender conduct to determine if a fiduciary duty arose. We then gather detailed evidence regarding interactions, advice, control, and reliance, and if a strong claim exists, we develop a strategy for accountability through negotiation or litigation.
Claims for breach of fiduciary duty against lenders are complex and fact-intensive. If you believe your business has been harmed because a lender violated a special relationship of trust in a commercial context, contact Lender Liability Law Center for a detailed case evaluation.