Bank’s Oral Promise as Good as Paper it Was Written On

Note: The DearEsq free 'ask a lawyer' site is offered as a free informational service to the public and is not intended as legal advice. Laws vary from state-to-state, and in addition every situation is unique, and relevant facts may not be known. The answer to the question posed below may not apply to in your state or to your situation. For legal advice in your state and your situation you should consult with an attorney in your state who is familiar with the rules and laws in your state.

“My situation is this. I recently cosigned a loan for my son at a bank in Illinois. The loan was to be an unsecured loan but the bank had a $3000 limit on unsecured loans and the loan was for $3500 so the bank ask me for the title to my motorcycle to hold as collateral. They told me that they would waive the insurance requirement and after he had paid $500 on the loan they would release my title. About four months into the loan I received a letter from the bank’s insurance department saying that they had not received proof of insurance and if I didn’t provide it they would insure it themselves, and add $500 to the loan. I contacted the loan officer at the bank, he told me not to worry about it because he had waived the insurance requirement, and that “he would take care of it”. The insurance department. contacted me again and I explained to them what the loan officer said. They said they had not been contacted by him, so I provided the insurance proof they needed. Now my son has paid more than $500 on the loan but the bank is not releasing my title and has added $300 to the loan for insurance. Is this legal and what can I do about it?”

Unfortunately, you are what is known as “bound by the four corners of the document.” If you don’t have any of those assurances in writing, there is little that you can do about it assuming that the loan documents that you signed are consistent with the actions which the bank took and is taking.

What this means is that you need to review the documents which you signed very carefully. If they don’t mention insurance at all, or the bank holding title to your motorcycle as collateral, than you may have a shot at contesting this, but I’m betting that they do mention it.

And, even if they don’t, the reality is that the cost of challenging the bank’s action legally would cost you tens, if not hundreds, of times more than the charge for the insurance.

You may wish to consider this a $300 lesson to get everything in writing.