Potential 'rip off' by Bank?

Tally-Ho_2

opinions4u wrote: »

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.

Hi,

But whilst in general the computer based decisions may work, what they cannot cope with (and the old time bank manager could) is situations out of the normal.

As an exaggerated example, let's say I have just won £100 million pounds on the euromillions lottery (I haven't but i wish lol), I have proof of it and am about to toodle off to wherever to be presented with the cheque. Its the end of the month and money is tight. So dear XXXXXXXXX Bank, can I have a £300 pounds overdraft until I can pay a cheque in - computer says no!.

I am sure if it was a human decison by an old time manager the result would be somewhat different (and his branch would be the recipient of the rather large cheque from Camelot)!.

zppp

Tally-Ho wrote: »

Hi,

But whilst in general the computer based decisions may work, what they cannot cope with (and the old time bank manager could) is situations out of the normal.

Hence why some have an override feature.

If you won that much, I believe Camelot come to your home anyway with a certain amount in cash when they collect your ticket.

Tally-Ho_2

zppp wrote: »

Hence why some have an override feature.

Only some?. I would hope in situations like that the Mk1 human brain could Always overide xxx version of whatever software.

zppp wrote: »

If you won that much, I believe Camelot come to your home anyway with a certain amount in cash when they collect your ticket.

Never having been in that position I wouldn't know, but it was only given as a example.

Nukumai

opinions4u wrote: »

the statistics clearly show that computers make better lending decisions than human beings.

True - but "more consistent lending decisions" might be preferable to "better lending decisions", because context is all important.

Along with the globalization of banking, we have also seen an almost unimaginable expansion in levels of consumer credit over the past 25 years or so. These factors, along with (in fact, driven by) the evolution of available technologies, advanced the growth of standardized scoring tools and the like. The personal loans industry would not exist as we know it without computerized scoring/recording tools. With the banking/financial services industries evolving into mere commodity products over the years, financial institutions have sought to standardize as much of their business as they are able; understandable from this perspective, I guess.

Also, very few banks operate on the spread between their deposit and lending books in these modern times. As banks also typically take on proprietary risk (eg. market speculation) there is internal competition for available capital...which leads to a bank's risk appetite, from time to time, being reflected in the scoring model they use; eg. when there is a drive to boost retail lending exposure, more funds are allocated for this (by way of the specified lending criteria being relaxed, for example).

There has also been a growth in the mobility of the general labour force. In bygone days a local bank manager would possibly have first-hand knowledge of the customer and his/her family and their finances due to building a relationship with them over a period of time...and would have a reasonable and rational feel for the prudence (or otherwise) of advancing a loan to a given customer.

Personally, I think that, all things being equal, the young man - as described in this thread by his parent - would have had very little trouble securing a loan from his local bank manager under the old regime.

Ok, I'll stop here, because I am starting to sound like my father...

ERICS_MUM

Nukumai wrote: »

True - but "more consistent lending decisions" might be preferable to "better lending decisions", because context is all important.

Along with the globalization of banking, we have also seen an almost unimaginable expansion in levels of consumer credit over the past 25 years or so. These factors, along with (in fact, driven by) the evolution of available technologies, advanced the growth of standardized scoring tools and the like. The personal loans industry would not exist as we know it without computerized scoring/recording tools. With the banking/financial services industries evolving into mere commodity products over the years, financial institutions have sought to standardize as much of their business as they are able; understandable from this perspective, I guess.

Also, very few banks operate on the spread between their deposit and lending books in these modern times. As banks also typically take on proprietary risk (eg. market speculation) there is internal competition for available capital...which leads to a bank's risk appetite, from time to time, being reflected in the scoring model they use; eg. when there is a drive to boost retail lending exposure, more funds are allocated for this (by way of the specified lending criteria being relaxed, for example).

There has also been a growth in the mobility of the general labour force. In bygone days a local bank manager would possibly have first-hand knowledge of the customer and his/her family and their finances due to building a relationship with them over a period of time...and would have a reasonable and rational feel for the prudence (or otherwise) of advancing a loan to a given customer.

Personally, I think that, all things being equal, the young man - as described in this thread by his parent - would have had very little trouble securing a loan from his local bank manager under the old regime.

Ok, I'll stop here, because I am starting to sound like my father...

Very interesting and "understandable", thanks. Sounds like a model answer to an exam question posed by the Institute of Bankers


Linda

NouveauRiche

Poor lad, I feel like lending it to him myself! The only reason he would be considered a "bad risk" is partly due to his age, and probably because he doesn't have a lot of credit already. I know that sound stupid, but it can be the case.

If he goes on any of the price comparison websites for his car insurance, he may find that one of the companies are able to offer him a monthly payment. (This shows up on the quote.)

As for the old days of the Bank Manager "knowing" their customers - it does still happen. I have been with the same bank since 1972 (yeh - I'm THAT old). for the last 20 years or so I have had the same account manager. Rare, but there are still little pockets of true customer care out there!

CLAPTON

all a very bad idea

better that he learns now to buy only things he can afford (i.e. has the money for); madness to buy something he can't afford just because a relative is selling it.

at his age a car costing 1,500 or 2,000 can give reliable cheapish motoring

remember he needs to budget for car tax, MOTs, repairs, petrol

he may very well come to regret getting a car atall with all the expense let alone get a loan as well


and by the way, he would be advised to use the CC regularly for things he anyways would buy and pay in full each month... that will help build up a good credit rating so if he wants a mortgage in the future he will have a proven record of dealing with credit sensibly

maybe not want you want to hear but there you go.

jambosans

P4ula wrote: »

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.

Before trying elsewhere it may be worth your son contacting the credit card customer services, stating he wishes to close the account. Normally, these calls are handed off to a retention team who can provide incentives to stay. For example, they may place an interest free on purchases for x months - similar to new business offers. You can obviously work through the figures, but if they can provide a long enough period of interest free (and credit limit permitting), he may be able to pay for the insurance using the credit card. It's worth a shot before taking another hit on his credit report with a new application.

That said, has your son made sure this relative's car is value you for money? Like CLAPTON has said, you can get a decent car (for a 19 year old) for around £2000, even up to £2500 would still leave £1500 left for insurance.

Running_On_Empty

Perhaps it's likely he was refused the loan because he has not been registered on the electoral roll for very long.

Just because he couldn't get a loan at this time, doesn't mean that the whole banking system is wrong. He needs to get this in perspective.
With his careful saving he will eventually qualify for a mortgage. Far better than borrowing for car insurance or a car.

xyz123

honestly speaking, spending £5k on first car for a 19 year old is OTT if not simply mad...(especially for someone who is not a millionaire!).. There is a reason his insurance will be very high (and that's because he will be a high risk driver)...dont waste money...get a banger for £1-£2k and build up no claims bonus......