Bank entrapment of borrowers
Bank borrowers can be fooled into a false sense of security.
In Chapter 17 of the Code of banking practice the banks undertake to:
“If we are considering providing you with a new loan, or an increase in a loan limit, we will exercise the care and skill of a diligent and prudent banker.”
“If you are a small business, when assessing whether you can repay the loan we sill do so by considering the appropriate circumstances reasonably known to us.”
These clauses are widely believed to mean that the bank will use that care and skill to avoid lending the customers into unaffordable debt.
The banker and the farmer
That however is not said or suggested in the code. The most profitable loan for a banker is one that the borrower cannot afford repay or service but is secured by real property of far greater value than the loan it secures. Farmers, affected by weather, commodity prices and government policy are ideal targets, whose skill is related to livestock, crops and the land, not financial statements, loan projections and budgets.
Selling up security
When the customer cannot make a repayment instalment the interest rate often increases and the debt builds up the customer pays what they can which is first allocated to interest. The bank earns an increasing share of the business income each year. After many years the debt may have risen by millions and is approaching the value of the security the bank will sell the property up. The borrower will lose all the money they have poured into the loan over the years, perhaps a decade of more and lose the property with which the loan was secured.
Taken for a ride
The bank did use its care and skill as a prudent banker. It protected itself all the time, making sure it had good mortgage security and could recover the debt in full by selling up the borrower. For the bank and its shareholders it was very prudent. It just made the bank part of a small fortune. The loan was probably approved by AI.
But it took the borrower for a very expensive ride.
The Big Bad Billionaire Banks
It is to protect bank customers that GBAC has worked hard over the last 40 years. It helps the borrowers to see the traps in the bank offers and to exercise their own care and prudent behaviour to protect themselves from predatory moneylenders, particularly the big billionaire banks.
HI – Human Intelligence wins the day
It is possible for borrowers to obtain good, suitable and reasonably safe loans, but it requires a good bit of work and recognition by the borrower that the bank will exercise the care and skills of a diligent banker to earn itself the maximum amount it can from the loan and it expects the borrower to understand that what the bank earns the borrower loses.
GBAC offers a HI (Human Intelligence) service from negotiating the best loan in the first place, managing that loan through and clearing the debt and recovering the title deeds at the end. The is the way for borrowers to make money out of borrowing.