Unscrupulous Banking Practices!

Willing2Learn

camelot1971 said:

sourcrates said:

Ask some people that question on these forums, and they will tell you banks are the pillars of our community, who can do no wrong, and the very thought of a mis-sold loan, or credit card, would be entirely the debtors fault for borrowing irresponsibly, as they are grown adults and should all be making sound financial decisions.
However my experience tells me otherwise, some banks are more liberal with their lending policies, than others, remember, a bank is not there to help you, to hold your hand, or to be your friend, a bank exists solely to make profit for its shareholders .

Cases such as the one you cite, are far from uncommon, but alas the only recourse people have is via the ombudsman, and it can be quite difficult to prove hardship sometimes.
I agree with the line you quote from Martin Wolf : Excess borrowing by fools would have been impossible without excess lending by fools.
Hits the nail right on the head.

Ask some other people that question on these forums, and they will tell you banks are the work of the devil, who can do no right, and the very thought of a mis-borrowed loan, or credit card, would be entirely the banks fault for lending irresponsibly, as they are an evil business and shouldn't be able to exploit the lazy and feckless.
However my experience tells me otherwise, some customers are more sensible with their borrowing plans than others and take adult decisions, not blaming others for how they decide to run their lives.

I think the reality is that the majority of people would say that the banks role in society is somewhere in the middle of the positions described by both sourcrates and Camelot71

Takmon

sourcrates said:

Ask some people that question on these forums, and they will tell you banks are the pillars of our community, who can do no wrong, and the very thought of a mis-sold loan, or credit card, would be entirely the debtors fault for borrowing irresponsibly, as they are grown adults and should all be making sound financial decisions.
However my experience tells me otherwise, some banks are more liberal with their lending policies, than others, remember, a bank is not there to help you, to hold your hand, or to be your friend, a bank exists solely to make profit for its shareholders .

Cases such as the one you cite, are far from uncommon, but alas the only recourse people have is via the ombudsman, and it can be quite difficult to prove hardship sometimes.
I agree with the line you quote from Martin Wolf : Excess borrowing by fools would have been impossible without excess lending by fools.
Hits the nail right on the head.

So if a bank is happy to lend that money and take the risk and the borrower is an adult that is happy to accept the money and spend it then where exactly is the problem?

You have never really given a good reason why you want to have such a tight restriction on what adults can and can't do?

adindas

It is the role of the bank to lend people / business the money to keep the economy moving. Unless it is a loan shark, the reputable lender / banking will always do affordability check. 
The Problem with the affordability check is that it is a self-assessment exercise and cross checking is difficult and time consuming which in turn will add the cost of borrowing.
Some people are not telling the truth when completing that exercise as all they want is to get the money. Getting that money they will consider it as a free money from god to be splashed for the luxury items / holidays, gambling, betting which they could not otherwise effort .  They just start realising it when the debt collectors start chasing them and start blaming other parties but themselves. Some people have never ever learnt the lessons. They declare bankruptcy and they keep falling into the same trap.
You could easily see it form this forum on almost daily basis where the people are complaining for not getting the loan, credit cards , sometimes with a nice wording  "debt consolidation" (instead of  saying getting more money to be splashed). They will start blaming the lender for not lend them the money for consolidation.
But this is not to deny that a few people out there are genuinely in trouble because of bad luck / personal circumstance such as illness but reading from this forum, this people are probably a tiny minority. 

DCFC79

As the person knew they were in arrears why would they then think its ok to spend upto the limit. In my opinion both the bank and the customer are at fault here.

born_again

There is nothing wrong with consolidation of debt.
What should happen in these situations is that ALL debt is paid by the bank lending the money, ALL these accounts are closed and markers placed to ensure that no further lending is allowed until the lender is happy that the customer is in a situation to start afresh.
So either loan paid back, or they feel that the customer is now in a better position.

Ergates

Takmon said:

You have never really given a good reason why you want to have such a tight restriction on what adults can and can't do?

Because the vast majority of the population* of the world are human beings, not robots.  As such, they are flawed.  It is very well known (because it is self-evident) that people in desperate financial situations do not always  (or often) act in their own best long-term interests.  It is unethical to exploit people you *know* are not acting rationally.  It's similar to the reason pharmacies don't sell paracetamol in bottles of 100 any more.

Also, aside from the purely ethical arguments of protecting people from themselves, it is us as a society that have to pick up the pieces when someone's financial situation implodes.  This costs time and money - it is better for society and for the individual if things are caught earlier and are prevented from the worst excesses.

*probably all of it, but you never know...

Takmon

Ergates said:

Takmon said:

You have never really given a good reason why you want to have such a tight restriction on what adults can and can't do?

Because the vast majority of the population* of the world are human beings, not robots.  As such, they are flawed.  It is very well known (because it is self-evident) that people in desperate financial situations do not always  (or often) act in their own best long-term interests.  It is unethical to exploit people you *know* are not acting rationally.  It's similar to the reason pharmacies don't sell paracetamol in bottles of 100 any more.

Also, aside from the purely ethical arguments of protecting people from themselves, it is us as a society that have to pick up the pieces when someone's financial situation implodes.  This costs time and money - it is better for society and for the individual if things are caught earlier and are prevented from the worst excesses.

*probably all of it, but you never know...

But i'm saying that the controls are already tight enough and if a lender decides the person is worth the risk then they must think there is a good chance they will make a profit overall so customers must be paying them back. The fact that a lot of customers who can genuinely afford the credit are being turned down shows that controls are going too far the wrong way. 

I think one of the big things that causes people in debt to act irrationally is that they don't have enough knowledge about budgeting and how to run their finances that they make a bad choice. If people were provided with good financial education and money was discussed more freely then having this knowledge would make them far less likely to panic. 

So i'm saying target the root cause and educate the people and not put more and more restrictions in place which will never be fully effective at stopping people getting into debt and also ends up hindering people who can manage it. 

phillw

Takmon said:

But i'm saying that the controls are already tight enough and if a lender decides the person is worth the risk then they must think there is a good chance they will make a profit overall so customers must be paying them back. The fact that a lot of customers who can genuinely afford the credit are being turned down shows that controls are going too far the wrong way.  

What does someone who can genuinely pay it back look like, compared to someone that genuinely can't?
Consider that interest rates are currently at an all time low and it would be irresponsible to lend to someone that can only afford it now & not when the payments double, which everyone is expecting it to over time (depending on whether brexit just kills our economy or completely decimates it)

Takmon

phillw said:

Takmon said:

But i'm saying that the controls are already tight enough and if a lender decides the person is worth the risk then they must think there is a good chance they will make a profit overall so customers must be paying them back. The fact that a lot of customers who can genuinely afford the credit are being turned down shows that controls are going too far the wrong way.  

What does someone who can genuinely pay it back look like, compared to someone that genuinely can't?
Consider that interest rates are currently at an all time low and it would be irresponsible to lend to someone that can only afford it now & not when the payments double, which everyone is expecting it to over time (depending on whether brexit just kills our economy or completely decimates it)

That's part of the point I'm making it's difficult to tell who can genuinely pay it back and someone who can't and only the person borrowing it really knows if they can. So that's why putting tighter and tighter controls in place only ends up blocking out more and more of the people who have a solid plan on how it will be paid back. 

I'm talking about all credit products so with loans the interest rate will stay the same until the end, credit cards and store cards the interest rate will stay the same until the deal ends and if they increase the standard rate of interest the borrower has the option to close the account and avoid the increase. So interest rate increases don't effect all products yet these tight controls on acceptance are universal.

I do agree Mortgages are different due to interest rate changes but they do look deeper into peoples finances so they should be able to better determine affordability. But again this has tightened up recently and doesn't need more controls.

born_again

phillw said:

Takmon said:

But i'm saying that the controls are already tight enough and if a lender decides the person is worth the risk then they must think there is a good chance they will make a profit overall so customers must be paying them back. The fact that a lot of customers who can genuinely afford the credit are being turned down shows that controls are going too far the wrong way.  

What does someone who can genuinely pay it back look like, compared to someone that genuinely can't?
Consider that interest rates are currently at an all time low and it would be irresponsible to lend to someone that can only afford it now & not when the payments double, which everyone is expecting it to over time (depending on whether brexit just kills our economy or completely decimates it)

That is all part of the affordability checks that are in place certainly for a mortgage.
Gone are the days when people got interest only mortgages on the basis that they said they were getting a inheritance to pay it off...
No one knows where interest rates will go. If they double then there will be very few people who will not be hit and struggle.

Banks can't win. FCA set stringent checks for mortgages which has left a lot of people paying far more than they should, as the checks means they can't switch to a lower interest rate. Yet they are managing to pay far more... Go figure that one. Its the regulator that is the problem at times.
Now they are looking to relax the rules again.