Legal Question in Banking Law in Pennsylvania

Re: Credit Denial

You asked about a denied student loan.

Funny you should ask because I am working on a matter in this area right now. Banks in the student loan area are very cautious now because of a problem they created. Private lenders lobbied Congress to include private student loans in those loans that were presumptively nondischargeable in bankruptcy. In a classic case of be careful of what you wish for, now that private loans are presumptively nondischargeable it means that the standard for overcoming the presumption of nondischargeability must be much lower than it was when only government backed student loans were in that class. Guaranteed lenders biggest argument was that such "publicly financed" loans are subject to a higher standard because of the public involvement. For this and because of some other changes that also have turned out to be unfavorable in the Bankruptcy Act amendments of 2005 the lenders must be very cautious about lending.

How does this affect you? Well, you got turned down for a loan because of potential risk. You should appeal to the company and discuss the specific reasons for denial. They may change their mind.

But as to a denial simply based on their improper application of policy that probably wouldn't fly too far. While most transactions take place when an agreement is reached between the parties, a loan is often a contract only when the the commitment becomes fixed. You could have a claim based on promissory estoppel, or maybe even breach of contract.

The problem is that in order to enforce either you would actually have to pay for the suit and the potential of getting the cost of the suit back is low. I can't speak as to the odds of prevailing as I don't know enough. I would be happy to look at the matter but this isn't something that most, if any, attorney will bring on contingency.

Regards,

Roger