ICO won't pay up: the guarantee doesn't erase the borrower's debt

ICO won't pay up: the guarantee doesn't erase the borrower's debt

The ICO will not pay a single euro of the elbichito loans it guaranteed. Banks are, in fact, claiming 100% from the client who signed. The explanation is simple: the guarantee does not turn the Instituto de Crédito Oficial (Spain's official credit institute) into a debtor, only a guarantor. The information, first reported by The Objective, stresses that the bank demands the full amount from the borrower.

Why the bank goes after the client first

The contract was signed by the debtor, not the state. The creditor has the right to claim against the debtor, the guarantor or both. But common sense prevails: it is easier to collect from an individual or a company than to get entangled in litigation with a public body. So the client receives the demand letter, and the ICO remains the last resort.

The confusion stemmed from believing that a public guarantee was equivalent to a gift. There is no such thing as free money: whoever took out the loan took on the obligation to repay it. Banks only use the guarantee as cover against default, not to take on the debt on the client's behalf.

The background noise: aid that was actually loans

The irony escapes no one: while multi-million allocations for Ukraine were being approved, the self-employed who trusted the social shield discover that the word aid, in the government's mouth, usually means a loan with a guarantee. Legal uncertainty and rules changing on the fly fuel the discontent, but the contract is still on the table.

The predictable outcome is that banks will exhaust the route against the debtor before touching the guarantor. The courts will have the final say on the scope of the guarantee, and the outcome may vary depending on how they interpret the contract. Meanwhile, whoever signed can start preparing to pay.