Potential 'rip off' by Bank?

pqrdef

opinions4u wrote: »

They can only do this from the product range that they have and, in this case, have found alternative ways of doing things.

The trouble with this analysis is that they didn't try to offer him a personal loan at a high rate of interest, they just said he was absolutely too bad a risk to have a personal loan at all.

But that's clearly not the case, because if he'd taken the car insurance deal, they'd have been making him a 12-month unsecured personal loan at 23% to pay the premium.

anna42hmr

pqrdef wrote: »

But that's clearly not the case, because if he'd taken the car insurance deal, they'd have been making him a 12-month unsecured personal loan at 23% to pay the premium.

to be fair, insurance is not really a loan, they would have been offering insurance with the option to pay on direct debit, (and most insurance companies charge more between 10-25% for paying insurance via direct debit monthly, vs a one off lump sum. it would just be in this instance the direct debit charge is 23% ) they also do not credit score you when providing car insurance quotes etc

opinions4u

pqrdef wrote: »

The trouble with this analysis is that they didn't try to offer him a personal loan at a high rate of interest, they just said he was absolutely too bad a risk to have a personal loan at all.

But that's clearly not the case, because if he'd taken the car insurance deal, they'd have been making him a 12-month unsecured personal loan at 23% to pay the premium.

It's a fair call.

But remember personal loans where there's risk based pricing need to offer the advertised rate to 67% of successful applicants. This forces a cut-off where only a limited number of loans for that specific product can be offered at a higher rate - meaning the chances of being declined rise.

We don't know who is offering the car insurance, or the credit to pay for the car insurance monthly. While it could be underwritten by the bank it's just as likely that the insurer is an independent company that has simply "white labelled" its policies with the bank's branding. The credit for the premium would almost certainly be provided by a different operator where the different risks of an insurance client base are priced in.

An example would be Lloyds TSB. Their car insurance is provided by Churchill who were, last time I looked, owned by Royal Bank of Scotland (although I believe there was/is a plan to sell them). I would guess the credit for monthly premiums is provided by somebody completely different!

pqrdef

anna42hmr wrote: »

to be fair, insurance is not really a loan

Yes it is. A 12-month Certificate of Motor Insurance for legal purposes couldn't be issued if its validity was going to depend on the holder keeping up to date with the instalments. Somebody has to pay the money up front.

olly300

As the others have made clear you can't complain.

Your alternatives are:
1. For the car owner to agree for him to pay her the extra money in instalments over the year. The agreement should be in writing and signed by both parties.

2. For you to get the extra money (by any means that you can legally) and then in turn lend the money to him. Again you will need an agreement in writing for him to pay back the money.

If he defaults on the loan then you can easily go to court to enforce the agreement however this will cause a major family dispute, so it really depends on his character.

olly300

pqrdef wrote: »

Yes it is. A 12-month Certificate of Motor Insurance for legal purposes couldn't be issued if its validity was going to depend on the holder keeping up to date with the instalments. Somebody has to pay the money up front.

Agreed.

There are actually finance companies who specialise in lending money to insurers to provide loans for people to pay car insurance in instalments. (The actual company I know myself is part of a bank.)

Plus this also explains that when you cancel insurance mid-way through when paying in instalments you still owe money. There as paying a year in advance you tend to get given money back.

vaporate

Shame savers can't dictate their rates to banks

ses6jwg

I hate to tell you this but turning up smartly dressed etc is very admirable but completely pointless in this day and age.

In most banks you don't actually see "the manager" any more, and even if you did, they have very very little, or even no bearing at all over the outcome of an application for credit. It really is a case of "computer says no".

The only bearing we have as bank staff is the income details that we put in, and if we get a "refer" decision, then we can attach supporting documentation or other information to support your application.

But it is the underwriters who decide. Not the manager - most bank managers these days are simply sales managers with a bit of risk and control chucked in for good measure.

P4ula

Thank you for all the responses.

I suppose I was a bit annoyed as the 'solutions' the bank offered all worked out more expensive for him than a straightforward personal loan (we spent a lot of time yesterday yesterday working out the relative cost of the options he was offered).

My son was upset and annoyed at the decision and to paraphrase him, he has been a tax payer since he left school and the bank in question has borrowed off the tax payer when it needed it, it seems to him it is a very one way street. That coupled with the miserly rate of interest he has been recevinig on his regular savings has certainly dented his view on banks. His current account is also a 'premium' account which he pays for monthly and has since he opened it at 16 when he started work again generating profit for the bank.

I know that is not related to a banks lending policy, but it does seem very 'Little Britain' as some have said above in 'Computer says no' and that is it. It is also nice to find out your 'friendly bank mamger' is nothing but a salesperson and not a 'decision maker' as they were in my day. Perhaps if the banks had managers who could make both strategic and tactical decisions then they would not have dropped themselves into such a mess a few years ago.

He does have a credit card from the same bank which he was directly mailed an application for. He accepted the offer of the card. Very wisely he has used it only once to pay for a trip to France which he cleared the same month thus avoiding paying interest. So he 'scored' highly enuogh for a credit card last year and again earlier this year when they increased his credit limit without asking.

Anyhow, as he is on leave this week (he is working over Christmas) he is going to try a couple of other high street banks to see if they want his business at an affordable rate. As he said yesterday, although the car is ideal for him, he would rather let it go than pay a high interest rate to get it.

Paula

opinions4u

Perhaps if the banks had managers who could make both strategic and tactical decisions then they would not have dropped themselves into such a mess a few years ago.

I remember the change from "manual" to "computer" when it came to the lending decisions. I challenged it in the way you are doing now, resistant to a change I didn't welcome.

But, unfortunately, I was wrong. While not perfect, the statistics clearly show that computers make better lending decisions than human beings.

The demise of HBOS and the sinking of RBS back this up. Big decisions made by people near or at the top of these organisations destroyed them. The decisions guided predominantly by computers (retail lending to individuals) have come through the recession fairly well by comparison.

One other suggestion, your son should ring the credit card helpline and ask if there are any low interest / zero interest deals available to him.