Norman D. Farnam
Janell M. Oudenhoven
February 5, 2016
Wisconsin has a new law which prohibits lawsuits against financial institutions to enforce oral promises or commitments. With several important exceptions, the effect of the new law is that all agreements between lenders and borrowers must be in writing. Put another way, lenders no longer can be bound to oral agreements.
2015 Wisconsin Act 120 establishes that no action can be brought against a financial institution (defined as banks, savings banks, credit unions, savings and loan associations, and credit institutions) or its affiliate with respect to an offer, promise, agreement, or commitment unless it:
To be protected, the lender’s oral communications must relate to (1) lending money, granting or extending credit, or making any other financial accommodation or (2) renewing, extending, modifying, or permitting a delay in repayment or performance of a loan, extension of credit, or other financial accommodation.
Act 120 does not protect financial institutions from lawsuits related to consumer credit transactions under Chapters 421 to 427 of the Wisconsin Statutes or oral communications made in connection with issuing or using a credit card or other open-ended credit.
Significantly, there was a last-minute amendment to Act 120 that permits claims under Section 100.18 of the Wisconsin Statutes for fraudulent misrepresentation by a lender. Therefore, while a lender cannot be sued to enforce an oral agreement or on a theory of promissory estoppel, the lender may still be liable if its oral communications result in a fraud upon the borrower.
The intent of Act 120 appears to be to permit lenders to freely discuss potential terms of new loans, renewals and the workout of troubled loans. The new law may help lenders discuss with borrowers the options available without the fear that the borrower will claim he or she had a deal with the lender. On the other hand, the upshot of the new law for the borrower is that there can be no handshake deals with lenders. Whether the law will ease or cool discussions between lenders and borrowers remains to be seen.
If you have any questions about how the information in this article may affect you or your business, please contact Norman Farnam at email@example.com or (608) 257‑2281 or your Stroud attorney.
DISCLAIMER: The information in this article is provided for general informational purposes only, is not necessarily updated to account for changes in the law, and should not be considered tax or legal advice. This article is not intended to create, nor does the receipt of it constitute, an attorney-client relationship. You should consult with your own legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.
Thank you for contacting Stroud, Willink & Howard, LLC, via our website. We have included this notice to inform you that any communication with us through this website does not constitute or create an attorney-client relationship with us. Please note that we cannot act as your attorney or provide you with any legal advice until we know that doing so will not create a conflict of interest. Until we have agreed to represent you, anything you send us will not be confidential or privileged, and you should not send sensitive or confidential information through this website.
By clicking "Submit" below, you agree that our review of any information you send to us will not create a lawyer-client relationship with us, and you recognize that our review of your information, even if it is highly sensitive and even if it is transmitted in a good faith effort to retain us, does not preclude us from representing another party directly adverse to you, even in a matter where that information could and will be used against you. If you would like to discuss the possibility of potential legal representation, you may request a consultation by e-mail or by calling our office.