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I was once offered, and accepted, a line of credit for X. Apparently, I violated the terms (I believe that I made a late payment), and my line of credit was cut in half.

What is the legal doctrine or formula that allows a banker to do this?

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It's governed by your credit agreement or some similar document, which you surely signed as a condition of receiving credit. There was almost certainly a clause that said the bank could reduce or revoke your credit line if you missed payments.

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