Opening a bank account and receiving various banking services, leads the customer to sign many different documents at the bank's request. Not many people read every word in these documents, and even fewer understand everything written in them. The prevailing feeling among most customers is that banks act only in their own interests without seeing the customer and his needs before their eyes.
The relationship between banks and customers is more complex, beyond the purely contractual level, as various legal provisions impose different obligations on the bank in relation to and for the benefit of their customers, and the ruling provisions have created duties of trust between the bank and its customers, with banks being required to act, in all matters related to managing the customer's funds, in the best way for the customer and without consideration of the bank's profits.
For example, in A.A. 122/84 Mansour v. State of Israel, it was ruled:
"The bank and its officials are supposed to act in all matters related to the money of its customers in its hands, guided by consideration of the best interests of the customer. The relationship between banks and customers is one of dependency of the customer on the bank. Furthermore, the 'dual loyalty', which may arise in balancing the interests of the customer's best interests on the one hand and the bank's profitability on the other, requires a great deal of purity, honesty and fairness. Because of the accumulation of information held by bank officials, and because of the customer's dependence on the advice of bank officials and the services they provide, there can be opportunities for acts of corruption.
There is a relationship of trust between banks and their customers, and customers are guided in all their financial affairs by bank employees, whose behavior requires a high level of integrity and avoidance of being subject to undue influence while fulfilling their duties towards each individual, who constitutes the customer public and towards the public as a whole.".
However, as the court ruled, there are limits and reservations to this duty of the bank. The bank operates for profit, and therefore it is understandable that the bank will not be able to place the customer's interest before its own interest in any situation and at any price. There are areas in which the duty of trust cannot be applied to banks in its entirety, as this could paralyze their activities, in the absence of the ability to collect a profit from the customer. This is the case, for example, with regard to commission or interest rates. If these are too low, the bank will refrain from offering its services. Commission and interest rates are supposed to be regulated by a competitive banking market, supply and demand, and where this fails, by supervision and regulation - and not by imposing an excessive duty of trust, which would paralyze the banks' activities. Therefore, the customer's interest in paying less does not outweigh the bank's interest in maximizing profit.
The law did not impose an obligation on banks to grant credit to their customers. The granting of credit is subject to the discretion of the bank, which considers and examines, among other things, the purpose for which the credit was taken, the amount of credit requested, the collateral offered, and the financial ability of the credit applicant to repay the bank together with the bank's profits. The bank has a legitimate business discretion as to whether or not to grant credit. A developed credit market allows customers to examine the offers of different credit providers, when sometimes the business considerations of one credit provider may be different from those of another.
However, along with business considerations, banks also have certain obligations towards their customers when granting credit. For example, according to the Bank of Israel's directives to the banking system, before granting credit, the bank must conduct a documented analysis of the customer's credit needs and determine an agreed credit limit, with deviations from it only occurring in unique circumstances specified in the directive.
There is also the beginning of a trend in case law of expanding the bank's fiduciary duties to the customer, even when granting credit. This is a welcome trend, which brings to light the understanding that there are gaps in information and power between banks and customers, in this complex area of credit and loans. In many cases, credit is required precisely at a time of financial or cash flow distress for the customer, especially vis-à-vis the bank granting the credit. It would be appropriate to expand the banks' fiduciary duties when granting credit, so that they do not exploit the customer's distress solely for their own needs.
The writer is an attorney. Erez Ben-David From the office Wolfson Weinstein & Co.', Specializes in the field Real estate law, TAMA 38 and related transactions theCommercial-civil.
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