Transfer of Credit Claims and the Bank’s Duty of Care

Earlier this month the Supreme Court provided answers to two legal questions of great importance to the financial (banking) practice. The first question was to what extent claims of a bank on a borrower are by their nature non-transferable to a non-bank. Additionally, the Supreme Court provided an answer to the question to what extent the bank’s duty of care is relevant in the event a claim on a borrower is transferred by a bank to a non-bank. It has been argued, by debtors, that claims arising out of credit agreements cannot be transferred by a bank to a non-bank. The main argument for this was that assignments to a non-bank would allegedly impair the legal position of the debtors, since a non-bank assignee allegedly is not bound to the same regulatory obligations and the duty of care that is applicable to a bank.

With respect to the first legal question, the Supreme Court confirmed that banks can validly assign credit claims to non-banks, also if the underlying loans are non-performing or have been terminated and regardless of whether the debtor is a consumer or not. It also confirmed, with respect to the second legal question, that if the assignee is not a bank, it can be required to observe the same duty of care towards debtors as would apply to a bank under the given circumstances. Strictly speaking, the duties that a bank must observe towards its debtors are not transferred pursuant to the assignment. However, the legal relationship between the assignee and the debtor is governed by the same principle of reasonableness and fairness, as laid down in the Civil Code, which means that the non-bank assignee is required to take into account the legitimate interests of the debtors. This can also include the non-bank assignee being bound to a duty of care which, in certain circumstances, can entail that it must act towards the debtor in the same way as can be expected of a reasonably acting bank.