Bad Loan Advise from LloydsTSB

somethingcorporate

I cannot see any grounds for complaint here either (aside from the PPI). If your mother suggested she felt financially exposed without any savings then taking a loan out for this is not actually too terrible an idea. If she was under the illusion that the savings rate would be better than the loan rate everyone would be maxing out on loans to bung into savings, this would obviously never be the case for the mainstream.

Your mother was offered a loan and agreed to take it on the grounds she signed on. I fail to see any issue here aside from emotion and remorse over spending the money.

CLAPTON

it would seem to me that 20% (+) on 3500 is more than 700 in interest a year
and 10.5% on 6,000 is about 630 in interest per year but she was earning 2.5% on 2,500 i.e. £62 so net interest was only 567

so it would look like the bank's 'advice' would actually have reduced her interest

Bravehearted_2

Why didn't your mum pay the debt off, instead dwindled it away?

The bank's done nothing wrong - after all she accepted and spent this money.

PPI is the only leg you have to stand on. The rest is down to her.

chesky369

You did say in the first post that "She had also expressed the desire to start saving some money for a rainy day " so proposing an ISA wasn't all that peculiar - some people psychologically need to feel they have a separate fund to fall back on, even if they have debt too. The point of an ISA is that it just sits there - you forget about it until it's really needed, having gained interest. Your mum seemed to have spent it all before it could do so.

Bank staff are definitely NOT advisers, they are only sales people.

Firefox1975

Banks advice was sound

she is paying less of per annum than she would be with the contigency of £2,000 in an ISA.

The bank has merely used the 20% per annum on existing debt as a starting point and worked around reducing that existing debt as well as giving your mum what she requested in an ISA.

Are there still credit card debts these days?

I agree , the bank coudl have just arranged a loan for the Credit card debt, but that would not have exactly satisfied the customers requirement

taylor_s

OK, just to sum up as I think either I haven't explain myself very well or some have got the wrong end of the stick.

- My mum ran up credit card and overdraft debt through poor management of her finances.

- Unrelated to this the bank invited her in for a yearly review.

- She mistook this as an operantly for financial advise not an opportunity for the bank to sell her products. Her fault for not being clued up.

- She took details of her debts to the appointment. She did not enter the bank with the intent of taking out a loan.

- The bank manager advised that she consolidate the credit card debts and clear her overdraft to minimise charges, and leave her with a working capital by way of a loan to keep her in the black. An amount of £4000.

- She expressed the desire to budget start living within her means and to save money that was left over above her working capital at the end of the month in a savings account.

- Bank manager advised that she take a bigger loan and place the extra amount in a savings account as quote: 'a good way to get started saving'. She did not ask for extra, but was sold it as being a good idea and she did not know any better.

- She accepted this advise not aware that this would be costing not earning her interest. (Yes she should be more clued in but was not).

- Loan was agreed based on the advice given and £6000 was transferred into my mothers account there and then.

- Bank manager then setup ISA account in the same meeting and transferred £2000 to the account.

- My mother then paid off her credit card debts leaving her approximately £500 in credit as working capital. Effectively an emergency budget.

- Without the pressure of the debts and with a readily available source of funds in the ISA my mother was not strict enough to keep within budget and so the extra money in the ISA account was eroded over 18 months. Her fault, but may not have happened if she had not had the funds available.


Taking Clapton's point (which I hadn't considered) yes she was paying less than she would have been, but at best case if she hadn't touched the money in the ISA she would still be paying £210+ in extra interest over the £4000 that was required to set her on the right track.

I have no issue with the selling of the £4000 loan to set her straight, but the advise to take an extra £2000 and place it in an account as a suggestion that she would be saving is where I have a problem. When I told my mum that this borrowing this money and putting it in savings was costing her she was genuinely shocked.

I know it seems obvious, but she was not aware this was the case, and it seems to me that the bank took advantage of this to earn them an extra £210+ a year.

I make no bones about it, she was stupid to take the extra £2000 as she didn't need to and wouldn't have thought about taking it if it hadn't been sold to her as a good idea.

She was also stupid not to stick to her budget as there is no reason that she shouldn't have been able to, but she failed to adjust to her change in circumstance after her separation. Again her fault.

But she was persuaded to take an extra £2000 that she did not need and place it in savings as a good investment. The ISA was a good idea, taking extra loan money that she did not need as an investment in savings was a bad idea and not her idea.

I know banks are there to make a profit, but my mum thought they were there to help and advise her.

somethingcorporate

If your mum didn't want the extra money she should not have applied and signed for it. Simple as.

In what world do you think it would be where they would have savings rates higher than loan rates? It simply does not happen or make financial, business, sense on a wholesale base.

I think everyone here understands the situation, you are trying to deflect blame in the wrong direction unfortunately. It lies only with your mother.

_Andy_

Aside from the issue of who's to blame, the complaint is never going to go anywhere as it's her word against the bank's and nothing about it will have been recorded. Accept it and move on.

CLAPTON

Obviously i don't know the details, but often larger loans have lower interest rates than small ones; there are plenty of cases on these boards of people taking out a larger than needed loan to get the lower APR and then repaying the 'excess' back.

When all said and done you can only encourage her to make a formal complaint and see how she gets on.

LovelyLeeds

taylor_s wrote: »

• My mum ran up credit card and overdraft debt through poor management of her finances.
• She mistook
• Her fault for not being clued up
• and she did not know any better
• my mother was not strict enough to keep within budget
• Her fault,
• I make no bones about it, she was stupid
• She was also stupid not to stick to her budget
• but she failed to adjust to her change in circumstance
• Again her fault.

Just by bullet pointing some of your post clearly shows that the banks cannot be held responsible - it is your mum who is wholly responsible - I truly cannot see a case exists, but you may aswell have a go - you never know your luck!

I know banks are there to make a profit, but my mum thought they were there to help and advise her.

...and so it's the bank's fault for your mum's thought process?