Frances Hsieh/Natalie Wu
|
On 9 November 2011 the Legislative Yuan amended Article 12-1 of the Banking Act stipulating that when extending self-use residence loans or consumer loans, a bank shall not require provision of joint and several guarantor(s), and that when extending self-use residence loans or consumer loans, if a bank has obtained sufficient collateral, such bank shall not require provision of guarantor(s); Article 12-2 of said Act was newly added to stipulate that in terms of guaranty for a self-use residence loan or consumer loan, the guarantee period shall not exceed fifteen years unless otherwise agreed by the guarantors in writing. The Financial Supervisory Commission (FSC) also issued a letter on 11 January 2012 stipulating the same. To ensure thorough implementation of the above, the Bankers Association of the ROC (BAROC) issued Amendment to the Rules of ROC Bankers Association for Implementation of Articles 12-1 and 12-2 of the Banking Act this year. Key amendments are as follows:
|
|
|
|
1.
|
A bank shall not require provision of joint and several guarantor(s) when extending self-use residence loans or consumer loans, but this requirement does not apply to general guarantor(s) based on the new amendment.
|
|
|
|
2.
|
When extending self-use residence loans or consumer loans, if a bank has obtained sufficient collateral, the bank shall not require provision of guarantor(s). However, this does not apply to situations where there is evidence showing that the borrower does not have adequate ability to repay (e.g., borrowers with insufficient income; borrowers who are at an advanced age so the remaining employable period would likely be shorter than the term of the loan; borrowers with bad credit history; borrowers who have offered third-party collateral, etc.) and the borrower voluntarily initiate to provide guarantors to the bank to enhance his/her credit support. However, the banks shall not by any means induce the borrower to provide guarantors. In particular, to avoid being suspected of inducing borrowers to provide guarantors, the guidelines amended by the BAROC expressly specify that:
|
|
|
| |
(i) |
Banks shall not formulate standardized application forms to induce borrowers to provide guarantors to the bank.
|
|
|
| |
(ii) |
In relation to the documents to be filled out by the borrowers, the title of such documents cannot be called "letter of consent" and wordings such as "agree to provide guarantor(s)" cannot be included in such documents.
|
|
|
| |
(iii) |
If a borrower voluntarily initiates to provide a guarantor to enhance his/her credit support, he/she must submit to the bank an application written or typed by himself/herself with full text headed "Application" specifying year, month, date thereon and signed by himself/herself.
|
|
|
|
3.
|
Other rules governing guarantors' rights and obligations:
|
|
|
| |
(i) |
In case of insufficient collateral when extending self-use residence loans or consumer loans, banks can demand a guarantor but cannot request guarantors to waive the right to plea for preference claims (i.e., beneficium ordinis).
|
|
|
| |
(ii) |
When extending self-use residence loans or consumer loans, if the bank finds that there is insufficient collateral and demands a guarantor or if the borrowers voluntarily initiate to provide a guarantor, the bank shall declare to the guarantor, in the form of a declaration letter, for the guarantor to fully understand its legal risks and obligations.
|
|
|
| |
(iii) |
The guarantee period for self-use residence loans or consumer loans cannot exceed fifteen years unless otherwise agreed by the guarantors in writing. Although it is not a statutory requirement, banks are nonetheless recommended to provide the guarantors with an individualized agreement for the guarantors to fill out certain areas including specifying the guarantee period by themselves and put their handwritten signatures thereon.
|
|
|
| |
(iv) |
If there is any default by the borrower during the guarantee period and the bank has initiated legal proceedings against the guarantor, the time period during which the bank may claim against the guarantor for performance of its guaranty obligations is subject to statute of limitations under the Civil Code. If there are any disputes arising therefrom, the bank may take judicial approach to seek a final resolution.
|
|
|
