A more that two year investigation into the lending practices of financial institutions around the country has found that some of the terms for consumer loans are “ridiculous,” homeowners require additional protection and there exists a need to examine interest fees that are charged.
The recommendations were contained in a report that was tabled in the House of Assembly last week by Malcolm Adderley Jr., chairman of the House Banking Committee which spearheaded the investigation.
Mr. Adderley, member of parliament for Elizabeth, also called for such a committee to further its probe and become the watchdog for consumers. In tabling the report, he said he felt duty bound to investigate, analyze and produce a report to influence the establishment of polices that would be in the best interest of the people of The Bahamas.
“Many persons felt that the financial institutions have a double standard when it comes to their dealing with Bahamians,” he said.
“There is a strong view that the ratio between the securities demanded and the amount of the loan requested is extremely disproportionalﾅConsumers feel that the terms of loans are very onerous and inconsiderate and generally speaking heartless treatment is meted out to mortgagors, even those long term bona fide customers who default on their mortgages.”
However in response to the complaints leveled, local bank representatives called the representations over-exaggerated and unfounded and claimed that in many instances they had bent over backwards to accommodate defaulters.
The committee found that the fundamental issues raised by concerned citizens related to lending practices for residential mortgages. Public fora were held on the island, in Grand Bahama and Abaco which account for a vast majority of the population.
The sentiment expressed for the most part was that the ratio of interest on consumer loans is “unconscionable,” according to the report. Mr. Adderley explained that most banks pay depositors an average of 3.3% on fixed deposits and savings accounts while they charge as high as 10.2% on consumer and commercial loans and overdrafts.
Additionally, the committee said there was a need for homeowners to be protected from their homes being sold at a discounted rate and acknowledged an additional need to review other bank charges with a view to capping them.
Among the areas identified for scrutiny was the deferral of interest paid on principal amounts borrowed in cases where the borrower has defaulted as a result of circumstances that were beyond the individualﾒs control.
“It was suggested that the direction to go may be the introduction of Indemnity Insurance that would cover all unforeseen events. It was felt that the financial institutions and the government should lend their assistance in this regard,” Mr. Adderley said.
“The view was expressed that the financial institutions should institute a policy of deferring the principal until the borrower is able to get back on his/her feet. In this regard, the financial institutions ﾖ banks and insurance companies ﾖ should form a partnership to minimize the effect of the problem.”
As for policies relating to repossessions, MPs who conducted the investigation determined that there is a dire need for a different process. The point was made that no institution, without appropriate advertising, should repossess any property. There were numerous allegations made concerning inside deals, with the select committee recommending a heavy penalty against any institution found to be committing such acts.
The committee probed a host of other areas ranging from settlement of cash on mortgage properties and delinquencies to United States dollar accounts and rescheduling of amortization periods.
The other members of the House Banking Committee were the MP for Holy Cross Sidney Stubbs; the MP for Marco City Pleasant Bridgewater; the MP for High Rock Kenneth Russell and the MP for South Abaco Robert Sweeting.
By: Tameka Lundy, The Bahama Journal
