House seeks greater protection for loan guarantors

THE House Legal Affairs Committee has tabled a bill to protect loan guarantors and hopes to get it passed by the Plenum in the next fortnight.

All political parties are understood to back the bill that would protect guarantors against borrowers who trick them into signing contracts, then are unable to pay their loan, leaving the guarantors having to fork up large amounts of money to settle someone else’s debts.

According to the new bill, the guarantor will have the right to enquire about the borrower’s financial status. At the same time, the guarantor will also be able to demand that the borrower be barred from signing over their property to someone else or abandoning their responsibility of paying off their loan.

If the borrower does attempt to transfer the rights of his property to another party, the guarantor will reserve the right to counteract the action. These rights also apply to all pre-existing signed contracts.

One of the matters that remains to be settled is how far the legislation will stretch to protect guarantors who countersigned loans before the bill was tabled. The opinion of all parties is that the law will apply only to guarantors who have not yet been subpoenaed by the court to pay off the borrower’s debt.

The bill stipulates that the guarantor will automatically be informed of the borrower’s financial situation.

The new law will only protect guarantors who have signed recognised bank loans. Under no circumstance will it apply to oral loan contracts.

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