KEY DOCUMENTS ASSOCIATED WITH LENDING

Documentation Verification: The documentation is a very important part of the retail credit process. It protects the bank interest from adverse selection of unwanted borrowers with pre-set bad intentions. In terms of bad performance defaulters who might turn to be bad debtors, these documents will help the legal department to proceed with cases.

In many cases, proper verification of documentation has saved the banks from entering into adverse selection of borrowers that intended to deceive the bank. Each part of this document is intended for a purpose.

The documents are divided into the following:

One: Customer’s Verification such as ID, source of income, address, utility bills, statements from other bank, proof of property ownership, assets, collateral, guarantees, etc.

Two: The Bank’s Charge documents.

The charge documents are the legal documents that a customer has to sign with the bank. Each charge document has a particular legal value and purpose. One such document is the letter of continuity. This was created after a famous case known as Clayton’s Case, which is now deeply embedded in UK banking law. As a result of that case, banks issue these documents where the borrower agrees that the bank has a right to continue claiming repayments until the outstanding amount is paid off. 

In another case, a bank lost its case against a borrower who had defaulted due to some cutting in the white area of the promissory note. The borrower’s lawyer argued that the area that was cut had contained with a note stating the loan had been paid and canceled. Therefore, we should make sure there are no cuts or missing parts of the document, and even no pins (that could obscure the document), to protect the bank’s rights.

As per the bank’s credit policy, the charge documents may differ depending on the product. They documents must be filled by the borrower and checked by the credit officer to make sure it is properly filled, contains a proper authorised signature, and has no cutting or over-writing. (Most of us have experienced having to re-submit forms long after overlooking just one detail.)

In case the forms are digital, the verification may be easier due to the software flagging incorrect details, but it will still require filling in the same amount of information.

In cases requiring collateral, the credit officer must verify the ownership deed and the deed’s status, for example that the property is mortgaged, or is free from encumbrance (meaning that no one else apart from the customer has a claim on the property).

The Bank’s Charge documents

The charge documents are the legal documents that a customer has to sign with the bank. Each charge document has a particular legal value and purpose. For example, one such document is the letter of continuity. This was created after a famous case known as Clayton’s Case, which is now deeply embedded in UK banking law. As a result of that case, banks issue these documents where the borrower agrees that the bank has a right to continue claiming repayments until the outstanding amount is paid off. 

The charge documents are the legal documents that a customer has to sign with the bank. Each charge document has a particular legal value and purpose. For example, one such document is the letter of continuity. This was created after a famous case known as Clayton’s Case, which is now deeply embedded in UK banking law. As a result of that case, banks issue these documents where the borrower agrees that the bank has a right to continue claiming repayments until the outstanding amount is paid off. 

There was a case where a bank lost its case against a borrower who had defaulted due to some cutting in the white area of the promissory note. The borrower’s lawyer argued that the area that was cut had contained with a note stating the loan had been paid and canceled. Therefore, we should make sure there are no cuts or missing parts of the document, and even no pins (that could obscure the document), to protect the bank’s rights.

As per the bank’s credit policy, the charge documents may differ depending on the product. They documents must be filled by the borrower and checked by the credit officer to make sure it is properly filled, contains a proper authorised signature, and has no cutting or over-writing. (Most of us have experienced having to re-submit forms long after overlooking just one detail.)

In case the forms are digital, the verification may be easier due to the software flagging incorrect details, but it will still require filling in the same amount of information.

In cases requiring collateral, the credit officer must verify the ownership deed and the deed’s status, for example that the property is mortgaged, or is free from encumbrance (meaning that no one else apart from the customer has a claim on the property).