Any transaction in which the debtor’s personal property serves as a guarantee or security for the debt payment or where the debtor has a legal interest. Secured personal property transactions are governed by Article 9 of the Uniform Commercial Code (UCC). Consequently, in the situation mentioned, it is necessary to enter a contract between the debtor and a secured party that establishes or guarantees a security interest.
The interests of the bank will be legitimate if there is an agreement between the creditor and the debtor. In case of delay or non-payment of the principal amount of the debt by the latter, the bank has the right to dispose of property or immovable (movable) property to cover this amount (Finnegan, 2020; Lanzinger, 2020). Although religion requires the “forgiveness” of the debt in the event of its default, one should not forget that these biblical teachings were written when such issues were not resolved by legal settlement described by the norms of the Uniform Commercial Code.
Christian notions about the procedures for giving and collecting debts and provisions impose additional requirements on lenders and borrowers. The commandments suggest that the amount of money borrowed should not be subject to interest, while at the same time, the person in debt must pay back the money within a specific time frame. Christian lenders are under less financial freedom, and the provisions of the UCC give them greater power, implying the levying of interest or the confiscation of property (Clarkson et al., 2017). The religious and legal points of view can be balanced in that interest and collateral can only be taken as insurance for the lender against the bad faith behavior of the borrower. If the latter pays the debt, the deposit and the interest must be returned. At the same time, the borrower can be protected from further violations by blacklisting certain clients.
Thus, the Uniform Commercial Code will not help the debtor in any way if he defaults, given that any credit obligations are secured at the legislative level by a pledge or agreement that allows the creditor to at least block accounts and use the available money and pledge to cover the principal debt legally. Nevertheless, it should be borne in mind that all actions on the lender’s part must follow the rules and laws that do not violate the integrity of the original contract and the ethical standards of the banking (loans) business.
Clarkson, K. W., Miller, R. L., & Cross, F. B. (2017). Business law: Text and cases (15th ed.). Cengage Learning.
Finnegan, D. L. (2020). Private ordering, dynamic merchant tradition, and the Uniform Commercial Code. Research Handbook on International Commercial Contracts, 181–195.
Lanzinger, M. (2020). Movable Goods and immovable property. Gender, Law and Material Culture, 265–284.