We examine the effect of corporate violations on bank loan contracting and document that borrowers with higher corporate violation penalties have higher loan costs. Higher corporate violations are also associated with more restrictive covenants and a higher likelihood of a collateral requirement. The increasing effect of corporate violations on loan costs is concentrated in opaque firms or those subject to more competitive markets or ineffective monitoring. Firms with higher violation penalties have lower future performance and a higher number of future violations. Overall, our results demonstrate that banks factor corporate violations into their lending decisions, thus shedding new light on the economic consequences of corporate violations through the creditors’ lens.