America’s Credit Unions, Ohio League file brief in Ohio guarantor lawsuit

A recent decision from the First Appellate District of Ohio rolled back longstanding industry precedent and practice in its decision, which should be overturned, America’s Credit Unions and other organizations wrote in a brief filed Monday with the Ohio Supreme Court.

In Huntington National Bank v. Schneider, the groups expressed concerns with the First District’s decision to grant summary judgement to the guarantor of a $77 million commercial loan based on the argument that Schneider was a surety instead of a guarantor and, as such, the lender failed to disclose the “riskiness” of the guaranty of payment. “

The organizations note this decision “created a sea change in the lending industry” by rolling back longstanding precedent and industry practice to hold that guarantors who personally guarantee payments when due and payable are sureties instead. 

They add that such a decision “eviscerates” an important tool of economic development, as guaranty agreements make it possible for financial institutions to lend money to underserved areas, small businesses, startup expansions, and other high risk/reward endeavors.

“If this decision stands, it will impose greater compliance costs for lenders, significantly increase lending costs for borrowers and financial institutions, reduce the availability of credit, and undermine the value of existing loan portfolios,” the brief reads. The groups are asking the Ohio Supreme Court to reverse the First District’s decision and hold that the agreement was a guaranty and the defendant is responsible for payment on the loan.

America’s Credit Unions filed the brief with the Ohio Credit Union League, American Bankers Association, and Ohio Bankers League. 

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