Fiduciary Duties for Creditors

Fiduciary duties are ethical or legal duties one party has to another. Broadly, these duties include duties of loyalty and duties of care. Fiduciary duties often apply to trustees in the arena of finance, but creditors have fiduciary duties as well. If you must take out a loan of any kind, you should be aware of these duties so that you can monitor whether your lender is treating you fairly. If you are a creditor, failure to heed these duties may result in legal difficulties.

Timely Communication

A creditor must communicate in a timely fashion with the person to whom he has lent funds. This helps the beneficiary because he is able to respond to a creditor's actions quickly and doesn't have his time wasted. Timely communication is to the creditor's benefit as well, as she may have only a specified period in which she legally may send notices or file suits according to statutes of limitations. A creditor has the responsibility to respond to a beneficiary's requests for information within a reasonable time frame.

Property and Sales

In the event that a creditor seizes property and the beneficiary files for bankruptcy, the creditor is responsible for returning that property. A creditor must adhere to this duty, because bankruptcy places a temporary stay on collections, meaning that a creditor cannot seize the beneficiary's funds or property. This duty also means that the creditor must stop any scheduled sales of property and contact the sheriff or marshal to cancel scheduled property seizures.

Actions

A creditor has a duty to act--she cannot simply sit back and watch the beneficiary fall into greater financial difficulty or legal hardship. A creditor thus must attempt to notify the beneficiary of delinquencies. She also must handle cessation of collection efforts.

Creditor Interests

A creditor may not take actions on a beneficiary's account that are for her own interests. For example, a creditor should not charge superfluous fees solely for the purpose of acquiring additional revenue or put some of the beneficiary's funds into personal accounts.

Records

Because a beneficiary has the legal right to request information from a creditor, and because a creditor may need to take legal action against the beneficiary, a creditor has the duty to keep all records and documentation related to the beneficiary's account up-to-date. The creditor also must ensure that the data held within the records and documentation is accurate. If the beneficiary finds that data in the records and documentation is not correct, it is the responsibility of the creditor to modify the records to accurately reflect the beneficiary's payments, debits, requests, inquiries and proceedings.