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Resolving Risks for Banks Referring Customers to Texas Consilium

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Resolving Risks for Banks Referring Customers to Texas Consilium

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byJim Ratchford
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Why Refer Bank Customers to Texas Consilium?

We all understand the significant benefits that can be achieved when businesses receive a qualified and objective outside perspective. By referring customers to Texas Consilium, banks provide their business clients with access to expert business diagnostics, improvement programs, and leadership development—helping them identify opportunities for growth and sustainability.

A stronger, more efficient business is a more financially stable borrower, ultimately benefiting the bank by reducing risk, improving loan performance, and strengthening customer relationships. Texas Consilium serves as an independent, trusted advisory resource dedicated to business success, ensuring that referrals are made in the best interest of both the customer and the bank. By partnering with Texas Consilium, banks demonstrate their commitment to proactive, solutions-driven customer support while enhancing the long-term financial health of the businesses they serve.

Understanding Lender Liability

“Lender liability” refers to legal claims that borrowers may bring against banks, alleging that the bank acted improperly in ways that harmed the borrower’s business. These claims can arise from various situations, including allegations of:

  • Breach of Contract – If the borrower claims the bank failed to honor loan terms or made misrepresentations.
  • Breach of Fiduciary Duty – If the borrower argues that the bank overstepped its role as a lender and took on fiduciary responsibilities (e.g., controlling business decisions).
  • Negligent Misrepresentation or Fraud – If the borrower claims the bank misled them regarding loan terms, assistance, or expectations of financial improvement.
  • Economic Duress or Undue Influence – If the borrower feels pressured by the bank to take actions that ultimately harmed their business.
  • Control Over Borrower’s Business – Courts have ruled that if a lender excessively involves itself in the business’s decision-making, it could be held liable for the borrower’s financial difficulties.

Risks in Referring Borrowers to Texas Consilium

If a bank refers a business to Texas Consilium (TXC) to assist with improvement, the borrower might later claim that the referral:

  • Was coercive, meaning the bank forced them to use TXC’s services.
  • Was based on assurances from the bank that TXC’s involvement would lead to improvement, and if it didn’t, the borrower may claim they were misled.
  • Resulted in business changes (such as restructuring, leadership shifts, or operational adjustments) that contributed to financial losses or failure.

Strategies to Mitigate Lender Liability Risks

We all recognize that great value can be provided to the bank’s customers by referral to Texas Consilium.  To reduce the risk of lender liability while referring customers to TXC, banks should consider the following:

  1. Make Referrals Voluntary – Clearly communicate that using TXC is optional, and ensure that there is no implication that loan terms, extensions, or renewals depend on engaging TXC.
  2. Avoid Making Promises – Banks should not make assurances that TXC’s involvement will guarantee business improvement, financial recovery, or loan repayment success.
  3. Maintain Independence – The bank should avoid appearing to control the borrower’s decision to engage with TXC. Referrals should be positioned as a resource, not a directive.
  4. Use a Disclaimer – When referring businesses to TXC, banks should provide a written disclaimer stating that:
    • The bank has no financial interest in TXC’s services.
    • The borrower is under no obligation to work with TXC.
    • The bank makes no guarantees about TXC’s results.
  5. Avoid Direct Involvement in Consulting Services – If TXC engages with a borrower, the bank should remain separate from the engagement and not participate in advisory meetings, business strategy discussions, or implementation plans.
  6. Ensure TXC’s Role is Clearly Defined – TXC should provide written agreements that define the scope of their services and state that the borrower assumes responsibility for business decisions.
  7. Encourage Borrowers to Seek Independent Advice – Banks should recommend that borrowers consult with legal or financial advisors before engaging with TXC to reinforce that the decision is theirs alone.

By taking these precautions, banks can encourage business customers to explore TXC’s services while minimizing the risk of lender liability claims.

Support by Texas Consilium

To further support banks in their good-faith efforts to assist their valued business customers, Texas Consilium (TXC) can provide documentation that reinforces the voluntary nature of referrals and the independence of TXC’s advisory services. This documentation can help banks demonstrate that their recommendations are purely for the benefit of the business and not a condition of lending, thereby mitigating lender liability risks. By working together with banks in a responsible and transparent manner, TXC aims to support businesses in achieving long-term success while protecting the interests of all parties involved.

Contact our Executive Relations Team to discuss the possibilities for your bank HERE.

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