Questionable Decisions as Interest Rates Rise.

NO [Declined], we will not loan you more money.

Every day starts anew and mid week was no exception; a loan application had been declined.

Sure it happens from time to time but usually only when one pushes the envelope. Not this time, what I thought was going to be a tick box deal resulted in a [questionable decision]; things really have changed. It was like common sense had suddenly been ruled obsolete.

A question, if you sold somebody something, then found out they were having trouble using it would you

a) Stop and help them or,
b) Leave them to their own devises?

Clients topped their mortgage up some time ago to purchase another race car with the intention of repaying the loan when the first race car sold. Well things did not go as planned. No a real problem as they had a revolving credit facility.

So long as they paid, the interest all would be fine. So they thought...

Each month they would be late making payment by a few days and short by a few hundred dollars which they would make up well before the next payment was due.

This went on month after month without any contact from the bank, so there was no reason for them to  think the bank were overly concerned as not only did the bank not contact them, no fees had ever been charged for late payment.

It wasn’t until the clients applied to top their mortgage up by another $30,000 to purchase another house they were told, “due to accountant conduct we will not lend you any more money”.

What would have been your response? Naturally, as soon as I heard about this I appealed the decision however it fell on deaf eyes. Twice I appealed and twice I was turned down.

Maybe the bank is technically correct, as I am sure the rules were explained to the borrower at the time they first took out the loan but I still have an issue with the decision for the following reason.

The bank has a monitoring system for everything. When a banking consultant is alerted by the system that an account is not being managed as well as it could be, and they do get notified, why isn’t a good old fashioned phone call made? A courtesy call; I think it was once called.

Sure, in this case the bank wasn’t charging penalty fees. Maybe it was simply poor customer service yet ironically, the customer is the one that goes without.

Bank bashing? No not at all. Drawing attention to this application was simply intended to be a reminder, not to take things for granted.

With interest rates now on the move, there will be more decisions over the coming months that will leave some wanting. The easiest way to avoid disappointment is to get a financial check up each year, work within defined limits and to read and question your bank statements.

Brian Dalley is a leading Property Consultant | former NZMBA Mortgage Broker, and Real Estate Agent.

Comments

[Alan]

Brian, if a client doesn't keep to arrangements, why should their bank be favourably impressed? You would do your clients more good by encouraging careful money habits, rather than critiquing their lenders for being quite justifiably leery of sloppy behaviour. Hell, if it was my bank lending out my deposit money, I would expect my bank to be bloody careful not to lend to unreliable borrowers. All a borrower really has is their reputation, & if they can't take care of that it's no use blaming the lender.

[Brian]

Hi Alan, thank you for taking the time to comment, yes that advice was given to the customer however there are two sides to the coin, do you not think the lender had some responsibility to offer the same advice?
Cheers
Brian

[Alan]

Hi Brian, I guess I think it's self evident that if you keep walking up to a cliff edge often enough, eventually you'll go too far! People have to nail it themselves to establish a good reputation. I know sometimes the bankers get a bit carried away, but not that often. From my long past experience as a banker, I know what a psychological effect it has when a customer lets you down. Each time they do it, it has to be looked at, & a decision made, time wasted sometimes if the transaction is not quite serious enough to warrant a dishonour. So when time comes round for the customer to ask for the banker's partnership for more business, the banker is just not interested, he has better clients that demand less maintenance.
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