Bank of America v. Miller, 599 U.S. 449 (2023)
In the landmark decision of Bank of America v. Miller, the Supreme Court faced the crucial question of bank liability in cases of loan defaults, a topic of significant relevance in the wake of post-recession regulatory reforms.
Does a bank have a duty of care to prevent borrowers from defaulting on loans by ensuring borrowers’ capacity to repay prior to loan approval?
A bank is not liable for a borrower’s default on a loan if it reasonably assessed the borrower's ability to repay at the time of loan approval, adhering to industry standards and regulations.
The Supreme Court reversed the lower court's decision, holding that Bank of America was not liable for Miller's default. The court ruled that while banks must adhere to industry standards in evaluating loan applications, they are not insurers of borrower success post-loan approval.
This case is pivotal for law students as it clarifies the extent of a bank’s duty of care in the context of loan approvals and establishes a precedent for evaluating the liability of financial institutions. The decision delineates the boundaries of liability, emphasizing borrower responsibility and the realistic limits of due diligence in financial transactions. Additionally, it highlights the balancing act courts must perform between facilitating credit accessibility and ensuring responsible lending practices.