Say What? Tips On Oral Communication (Part 2 of a two part series)
In a prior posting, I articulated several suggestions or tips on oral communication with the borrower or principal about a troubled loan. The most basic goals of a workout (restructure or recovery) require some oral communication. Another goal is to avoid "bad" communication.
Here are several more tips:
Power of Two: All conversations should involve at least two (2) lender personnel. There is strength in numbers – and it can help if (or when) at a later date, the borrower has a “different” version of the conversation.
Disclaimers: At the start of the conversation, clearly state that you have no authority to bind the lender, that the call is merely meant to collect information, etc. It is a good idea to repeat the statement at the end of the call.
No Threats: Never ever threaten a criminal or civil law suit. Never.
No Oral Agreements: Agreements should be in writing. Do not invite or create oral agreements. In other words, simply agree to put terms into writing as a follow-up to the conversation so the borrower (and its counsel) can review them. And, as noted above, make it clear that other lender personnel will need to approve the written terms before become a binding agreement.
Stick to Your Business: Only make statements that are well within the scope of your business. Never suggest ways for the borrower to run its business or improve business. Use “I need to see” statements. Avoid statements like “you’d make more money if. . . . “ You should exercise control over your business as the lender, and NOT the operations of the borrower’s business.
One-sided Deals: Avoid suggesting structures that solely benefit you. A decision that solely benefits the lender (without benefit to borrower) probably will come back to haunt the lender. Once again, avoid proposing the “too good to be true” idea.
No Recordings: Don't. (Sorry that I even mention this, but it is always best to state the obvious.)
As stated in my earlier posting, in future postings, we’ll cover related topics such as (i) theories of lender liability and recommendations on avoiding it, (ii) attorney client communication, and (iii) the “drivers” behind the borrower’s perspective.
Any thoughts, suggestions or other comments on this important topic?
