The state of Florida sets few regulations regarding the rights and responsibilities of a co-signer to a loan or contract. A co-signer guarantees a loan, usually for a vehicle or real estate, for another party by using his own credit history and income. In so doing, the co-signer bears the same responsibility for the debt as the borrower, which makes co-signing a risky proposition unless the co-signer can be assured of the trustworthiness of the borrower.
The state of Florida allows the contract between the borrower and the lender to determine the responsibilities of the co-signer. The co-signer will usually have to make payments on behalf of the borrower if the borrower defaults on the loan, according to the Office of the Attorney General of Florida. In addition, the co-signer will have the responsibility of paying late fees, court costs and attorney's fees when the lender collects on the debt.
If a co-signer does not make payments on a property or a vehicle, the lender will report the delinquency to his credit bureau, negatively impacting the co-signer's credit score. Florida lenders do not have to notify the co-signer of the borrower’s delinquency if the loan contract does not contain such a clause, according to the Florida attorney general's office. Co-signers should make sure to obtain all copies of the documentation associated with a loan and should require the lender to notify them if the borrower defaults.
The state of Florida defers to federal regulations regarding the fair disclosure of co-signer responsibilities. Title 16, Section 44.3 of the Code of Federal Regulations requires lenders to notify the co-signer that they will have to pay the full amount of debt if the borrower defaults and the creditor can pursue collection activity against the co-signer in the event of default without first trying to collect from the borrower. Lenders must also divulge in the contract that they can sue or garnish the wages of a co-signer.
Under Florida law, a lender cannot obtain a judgment against a co-signer more than five years after the date that the borrower defaults on a property, according to the state's statute of limitations. The state of Florida sets no limits on the amount of late fees and penalties a lender can charge a co-signer for late payments. In addition, the state allows for garnishment of up to 25 percent of disposable wages to collect a deficiency balance if a lender forecloses upon or seizes property.
- Justia: 16 C.F.R. § 444.3
- Office of the Attorney General of Florida: How to Protect Yourself -- Co-signing a Loan
- Consumer Financial Protection Bureau. "What Is a Debt-to-Income ratio? Why Is the 43% Debt-to-Income Ratio Important?" Accessed Aug. 26, 2020.
- Federal Trade Commission. "Co-Signing a Loan." Accessed Aug. 24, 2020.
- Wells Fargo. "Secured Loans and Lines of Credit." Accessed Aug. 24, 2020.
- SoFi. "Using Collateral on a Personal Loan." Accessed Aug. 24, 2020.
- First Alliance Credit Union. "The Basics for Needing a Cosigner on a Loan." Accessed Aug. 25, 2020.
Chris Hamilton has been a writer since 2005, specializing in business and legal topics. He contributes to various websites and holds a Bachelor of Science in biology from Virginia Tech.