SI KC01120.220 Oral Loans in the KC Region (RTN 10 07/2009)
To be considered a bona fide loan, an oral agreement must meet the requirements in SI 01120.220C. One requirement is that the loan be enforceable under State law.
B. State law for Iowa, Kansas, Missouri and Nebraska
Oral loan agreements are enforceable in all four states in the Kansas City Region if the agreement has been "wholly performed" on one side. As long as the loan agreement is made between the lender and the recipient, it does not matter whether the proceeds are given to the recipient or a third party.
Mike and Bob orally agree for Mike to loan Bob $1,000. The agreement includes an obligation to repay and a feasible repayment plan. Once Mike gives Bob the $1,000 then one side of the agreement has been wholly performed and the agreement is bona fide.