Defenses to Financing Violations

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 What Is Financing?

Financing is the process of taking out a loan to pay for a costly item, like a car or a home. While financing for a home is known as a home loan, financing for an automobile is more usually referred to as a car loan.

Most of the time, a contract will bind the borrower to specific conditions and repayment plans. In most cases, the lender will charge interest and sometimes a fee for the financing services.

What Kinds of Financing Offenses Exist?

Although financing agreements are beneficial, some forms of infractions may also be present.

These consist of the following:

  • Lending fraud
  • Contract misrepresentation
  • Violation of federal or state regulations (for instance, regarding collection methods, interest rate changes, etc.)
  • Forcing someone to sign a loan contract
  • Lying about a contract with a government official or representative

These infractions can occur in a single person’s arrangement, or they can frequently happen in a company organization. As a result, numerous financial infractions necessitate thorough investigations by the relevant authorities.

Loan Fraud Occurs When?

In any case involving a loan, fraud is possible. Mortgages, auto loans, boat or other recreational vehicle purchases, home renovation contracts, credit card or bank applications, and basic personal loans are a few common situations where loan fraud can happen.

Mortgage transactions are generally the first thing that springs to mind when you think of loan fraud. Mortgage loan fraud can start from either the borrower or the bank.

The real estate agencies or other intermediary parties engaged in the transaction, like brokers, may also commit fraud. As a result, there are several opportunities for fraud throughout the home-buying process. It can happen even when a person owns the property and asks for a loan modification.

What Else Do I Need to Understand About Mortgage Fraud?

It’s wise for homebuyers to be aware of the various ways they could be exploited during the process. Predatory lending is when a financial institution provides a borrower with a high-interest loan in return for priceless collateral, such as a deed to a property.

The lender can seize the property and sell it at a much higher price to make money if the buyer cannot repay the loan in full, which frequently occurs because of the high-interest rate. If the bank withholds or misrepresents the loan length, this could be regarded as fraudulent action on the lender’s part.

On the other hand, lenders ought to be aware of the tricks borrowers use to give them a better loan. People may do this to increase their chances of receiving financial approval or to secure loans with reduced interest rates.

Exaggerating income, claiming employment when you do not have one, and saying you will occupy the house while planning to purchase it as an investment property are a few instances of prevalent mortgage fraud practices.

The aforementioned are only a few typical instances of fraud in mortgage transactions on both ends. It is a good idea to seek legal advice from a criminal defense attorney or a real estate attorney if you believe you have been defrauded in any of these ways or another mortgage transaction.

What Are a Few Possible Repercussions of Loan Fraud?

Loan fraud may qualify as a white-collar crime with criminal repercussions, particularly if a sizable sum of money is at stake. It may also have effects on your career and personal life. Penalties, loss of citizenship, job chances, reputational harm to businesses, and lost business opportunities are a few examples of potential outcomes.

Therefore, victims of loan fraud may file a criminal complaint. Additionally, they can have a civil action to get a monetary damages award. Contractual violation or false representation are possible causes of action. The fraud will have to be supported by a paper trail. The loan agreement, emails, receipts, and other transactional papers may fall under this category.

What Are Some Counterarguments to Financing Offenses?

There may be several defenses against violations of the rules governing finance, depending on the laws in each state and the specifics of each case. A few of these are:

  • Unclean hands: If the plaintiff is guilty of the same violation they are suing for, in some situations, they may not be eligible to get certain remedies.
  • Lack of knowledge: For many offenses, the defendant must have acted deliberately and with the awareness that they were misleading a party. Therefore, ignorance may occasionally be used as a defense.
  • Coercion: If the defendant was coerced into committing the infraction by another party, that fact could be used as a defense.

Numerous other defenses, such as intoxication, particularly involuntary intoxication, or lack of purpose, may also be relevant. These might depend on how each particular jurisdiction interprets the financial laws.

Definitions of Unclean Hands

According to the “clean hands” doctrine, a party seeking an equitable remedy from a court through a lawsuit or motion must be free from any wrongdoing or unfair behavior associated with the situation at hand.

As an affirmative defense, a defendant may claim that the plaintiff has “unclean hands.” However, the plaintiff’s actions relating to the plaintiff’s claim may not be objected to using this argument.

The plaintiff’s unrelated corrupt behavior and general immoral character would therefore be unimportant. The plaintiff must demonstrate that the defendant was deceived or engaged in improper behavior concerning the issue at hand for the defendant to prevail. Legal or moral wrongdoing is acceptable as long as it is related to the current situation.

A legal doctrine states that a party seeking a judgment cannot receive assistance from the court if they have engaged in unethical behavior related to the dispute.

If the defense can demonstrate that the plaintiff, in this case, had unclean hands, the lawsuit will be dismissed, or the verdict will be overturned. It is a typical affirmative defense raised by defendants, and the defendant is required to prove it.

The doctrine of unclean hands, also referred to as the clean hands doctrine or dirty hands doctrine, is an equitable defense in which the defendant contends that the plaintiff is not entitled to an equitable remedy because he is acting unethically or in bad faith concerning the subject of the complaint, i.e., with unclean hands, and that this conduct bars the plaintiff from receiving an equitable remedy.

The burden of proof rests with the defendant to show the plaintiff is not acting in good faith. The notion is frequently expressed as “equity must come with clean hands” or “those wanting equity must do equity.”

What Is Necessary to Establish Unclean Hands?

Unclean hands are not defined in any particular way. It will be assumed that the person has dirty hands if they are not just an innocent party hurt by a guilty party and hence do not merit a remedy. Whether this is adequate depends on the particular court and jurisdiction, and a contract law expert can help you decide.

Do I Need Legal Assistance to Defend Against a Financing Violation?

Financing offenses can occasionally result in very severe civil and criminal punishments. You might need to employ a credit lawyer if you need assistance with finance issues. A competent attorney in your region can offer you legal counsel and assistance with your claim.

Additionally, your attorney can offer you legal advice if you have any specific inquiries about the defense’s points.


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