Sacramento, CA asked in Banking for California

Q: Is it Legal for companies to buy a loan from another company and then change the terms and charge you more money?

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1 Lawyer Answer
David H. Relkin
David H. Relkin
  • Business Law Lawyer
  • Manhasset, NY

A: The first rule when it comes to lending is that the terms of your loan cannot be modified unless the original agreement allows for it. (In many cases, lenders' agreements allow for the assignment of a loan.) Thus, unless you were to ratify the "new terms" (by having executed some type of agreement with the "new" lender), the original terms will apply. One area in which it is common that the terms may (seem to) change is in the "rate of interest" after the assignment, but that is only legal if the original bank's loan had a "floating" interest rate, and the new bank recalculated the new rate -- but only on the terms allowable under the original loan agreement.

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