Help! I have a problem with my guarantee...
In a previous post we explained what a personal guarantee is and what you need to know before signing it. However, things are not always rosy once you enter into a guarantee agreement. We know that problems may sometimes crop up.
We list below the most frequent ones, so that you know what to do if this happens:
Unclear wording. Your bank is responsible for ensuring that the guarantee is worded clearly and comprehensibly. It should also give you any explanations you may need in order to understand your rights and obligations. However, if you have already signed the guarantee and a conflict arises, bear in mind that the courts have the final say.
My bank refuses to enforce the guarantee until I submit certain documentation. In this case, the wording of the guarantee is what counts. For example, demanding that the main contract guaranteed be terminated contractually or by the courts, where this is not envisaged in the guarantee, is contrary to good banking practice.
I am still being charged fees and commissions even though the guarantee term has ended. In these cases, you should first check the guarantee wording to see what type of term was agreed. It could be an expiration term (which means that the guarantee ends at a specific time, after which it is not enforceable) or a guarantee term (after which the guarantee continues to be enforceable with respect to the obligations arising while it was in force).
Charging fees and commissions would be inadmissible in the first case, but not in the second. However, if the risk ceases to exist, for example, because the original document is returned, an equivalent guarantee is provided, the obligations guaranteed are met or the collateral taker expressly waives the guarantee, charging fees and commissions would be contrary to good banking practice.
My bank refuses to release a joint and several co-guarantor. This is based on the bank’s commercial and risk assumption policy and is therefore in its hands.
I have been asked to return the original guarantee document to cancel it. Is this correct? If this was so expressly agreed, yes. This is logical in the case of guarantees with indefinite or unspecified terms, or whose enforcement or expiration period has not lapsed. Some banks waive this requirement if is proven by other means that the risk has been extinguished. In any event, your bank should inform you, before signing, of the cancellation requirements in the case of loss or destruction of the original.
Find out more in our 2020 Complaints Report (in Spanish)