Lender Liability Law and Legal Definition

Lender liability refers to a lender's exposure to financial compensation claims relating directly or indirectly to actions taken by the lender. Lender liability arises mainly in cases where there is an allegation that a lender has violated a duty of good faith, whether implied or contractual owed to the borrower. Lender liability arises mostly from the claim that a lender drove a person or firm into bankruptcy. Briefly, lender liability law says lenders must treat their borrowers fairly, and when they don't, they can be subject to borrower litigation under a variety of legal claims.