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Secured Creditor Exemption / Lender Liability Amendments

The Secured Creditor Exemption is an exemption to CERCLA liability for those holding indicia of ownership primarily to protect his or her security interest, so long as the person does not participate in the management of the facility. Essentially the secured creditor exemption allows a lender that forecloses on a property to avoid be considered an "owner" that would be subject to CERCLA liability for any contamination already existing at the site, provided they don't participate in management activities as an owner would.  The secured creditor exemption was put in place by amendments to the original CERCLA law – the Asset Conservation, Lender Liability and Deposit Insurance Protection Act in 1996 (commonly called the lender liability amendments).

Despite this exemption, however, lenders frequently still choose to conduct thorough environmental due diligence to evaluate the potential environmental liability of a property  for many reasons, including determining the possible reduced value of a contaminated site and whether it would be worth foreclosing on.

Environmental Due Diligence Terminology