Guarantor protection

​The Danish Consumer Council and the Danish Bankers Association have adopted a common position on rules for private guarantees that afford you better protection as a personal guarantor. Their agreement has since formed the basis for the statutory provisions of section 48 of the Danish Financial Business Act (lov om finansiel virksomhed). A ‘personal guarantee’ is taken to refer to guarantees where no commercial relationship exists between guarantor and borrower.

If you are asked to stand guarantor, there are a few things of which you should be particularly aware:

  • You should not stand guarantor if you cannot afford to lose the amount you are asked to guarantee. Therefore, always ask yourself whether you are prepared to ‘give away’ the money to the borrower, as guarantors often find it very hard to get their money back from a borrower.
  • It is your personal responsibility to assess the risk of having to pay if you stand guarantor. The bank will supply information to help you assess the risk, but you should consider asking the borrower for details before agreeing to stand guarantor. 

 

How to protect yourself better as a private guarantor:

  • If you are thinking about being a guarantor, you should read the leaflet 'Information about guarantees: Personal guarantees', compiled by the Danish Consumer Council and the Danish Bankers Association. Go through the leaflet with your bank before signing a contract of guarantee.
  • The bank must give you specific information about the borrower's finances so you have a full understanding of the contract content and an overview of the consequences of the guarantee commitment.
  • Your contract of guarantee must be in writing.
  • You should not stand guarantor for old debts.
  • The size of the guarantee commitment must be limited to the amount of loan principal or, in the case of credits, the credit maximum.
  • The maximum time ceiling for guarantees is ten years and, for overdraft facilities or loans with no fixed repayment date, five years, conditional on the guarantee lapsing if the bank makes no demands on you within the timeframe mentioned.
  • As a guarantor you must be sent an annual notice regarding the size of the guarantee commitment.

​Statutory provisions

The agreement between the Danish Consumer Council and the Danish Bankers Association has since formed the basis for the statutory provisions of section 48 of the Danish Financial Business Act (lov om finansiel virksomhed). Read more on the website of the Danish Financial Supervisory Authority.

​Information about guarantees

This leaflet deals only with ‘personal guarantees’, that is, guarantees where no commercial relationship exists between guarantor and borrower.

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