December 6, 2022

Volume XII, Number 340


December 05, 2022

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Wisconsin Enacts Written Credit Agreements Law

Wisconsin has enacted legislation that should create more certainty in credit transactions and reduce lender liability claims against financial institutions. 2015 Wisconsin Act 120; Wis. Stat. §241.02(3).

Wisconsin now joins the majority of states (including Illinois, Minnesota, Iowa, Missouri, Nebraska, Kansas, Colorado, Washington, Florida, California, Texas and more) that have enacted some requirement that credit agreements must be in writing to be enforceable. 

Who is covered by the law?

The new law applies to financial institutions and their affiliates. Financial institutions include banks, savings banks, savings and loan associations, credit unions and farm credit institutions. Affiliates of those financial institutions include business entities that control, are controlled by or are under common control with the financial institution.

What actions does the law restrict?

The statute precludes actions on or in connection with the following offers, promises, agreements or commitments unless certain criteria are met:  (1) to lend money, grant or extend credit, or make any other financial accommodation, or (2) to renew, extend, modify or permit a delay in repayment or performance of a loan, extension of credit or other financial accommodation.   

Actions on these types of offers, promises, agreements or commitments are allowed if the following criteria are met:  (a) the offer, promise, agreement or commitment is in writing, (b) it sets forth relevant terms and conditions, (c) it is signed with an authorized signature by the financial institution or its affiliate and (d) it is delivered to the party seeking to enforce the offer, promise, agreement or commitment.

The law specifically prohibits enforcement of these types of offers, promises, agreements or commitments using the doctrine of promissory estoppel. Promissory estoppel allows a claimant to enforce a promise that has not been reduced to a written, signed contract. It requires proof of three elements:  (1) a promise is made that the promisor reasonably should expect to induce action or forbearance of a definite and substantial character by the promise; (2) the promise induced such action or forbearance; and (3) injustice can be avoided only by enforcing the promise. Hoffman v. Red Owl Stores, Inc., 26 Wis. 2d 683, 698, 133 N.W.2d 267 (1965). 

However, the law is also self-limiting.  By its own terms: 

  • It does not apply to credit transactions subject to the Wisconsin Consumer Act.  (Wis. Stat. §§421-427).

  • Nor does it apply to any offer, promise, agreement or commitment in connection with the issuance or use of a credit card (as defined in Wis. Stat. §421.301(15)), whether or not subject to the Wisconsin Consumer Act. 

  • The law does not prohibit any action or claim under Wis. Stat. §100.18 (which broadly prohibits advertising and sales claims that are “untrue, deceptive or misleading,” as well as certain specific misrepresentations).

  • The law does not prohibit any action or claim for fraudulent misrepresentation under common law.

When did the law take effect?

The law applies to actions commenced after December 17, 2015.

©2022 MICHAEL BEST & FRIEDRICH LLPNational Law Review, Volume VI, Number 11

About this Author

Ann Ustad Smith, Michael Best Law Firm, Finance and Banking Attorney
Partner, Practice Chair

Ann works with business owners, investors, and lenders, establishing and navigating their financial relationships and resolving matters relating to financial distress. Her practice is focused on commercial transactions, commercial litigation, bankruptcy, and other insolvency situations, and she is known for:

  • Structuring and closing complex financial transactions

  • Practical, effective solutions to distressed financial situations

  • Resolving (including through...