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  • #1

    Worst Loan Customer (longish)

    Well, I guess she's not the worst, because if she was just a little bit worse, we would have foreclosed on her loan. But she has been the most expensive, in the terms of postage and employee time.

    I'm not the loan officer, but since I send out past due letters and so forth, I deal with this customer frequently. We'll call her "Betty."

    Betty bought a restaurant about 10 years ago. She took out a loan at our bank to pay for the building and renamed the restaurant after herself. According to my coworkers, Betty's is always busy when they go there to eat. I refuse to eat there, and I'll get to the reason in a bit.

    About 6 years ago, Betty filed a Chapter 11 bankruptcy. That's a reorganization - her debts are not wiped clean, but she gets a much longer time to pay them back. Since one things she owed on was taxes (not only didn't she pay her income taxes, but she failed to send in the money that she withheld from her employees' paychecks for taxes), the IRS stepped in and set up a payment plan for her.

    Betty also has a checking account with us. It used to be several, but seeing how they were all constantly overdrawn and there didn't seem to be any rhyme or reason to which account she used for what, we closed the extra accounts "to simplify things for her." The IRS had informed us that if we paid the employees' paychecks when the account was overdrawn, we could be liable for paying the employees' tax withholding. So now Betty's employees are frequently pissed at US when we say we can't cash their checks.

    Since her loan is still constantly past due, we frequently take a payment out of her checking account when there's money available. That doesn't happen very often, and even then, she's usually still a month behind. Almost all of her payments go to interest because they're so late, so the balance of her loan doesn't drop. She started at $36,000 ten years ago, and her balance is about $32,000 now.

    The loan has been rewritten and extended at least 3 times. The last time it was extended, we also increased the amount of the loan to pay her real estate taxes, since she was close to having the county take her property because of past due real estate taxes. Each time the loan has been extended, the interest rate has been lowered and so have her payments. The bank has done everything possible to help her keep her restaurant.

    Then, a few months ago, we received a notice from her insurance company that her property/liability insurance was being canceled due to non-payment. I had to advance on her loan to pay for force-placed insurance, which only covers the property - it doesn't provide liability insurance. So if a customer were to get sick or fall and break their leg on the restuarant property, she would have no coverage to pay for a lawsuit. (This, BTW, is why I refuse to eat at her restaurant any more.) I sent her a letter explaining all this, but I don't think she even reads mail from the bank any more.

    She thinks she has figured out how to work the system, and after a fashion, she has. But she's pissing everybody off in the process. The truck driver who delivers her food to the restaurant stops at the restaurant, picks up her check, comes to the bank to cash it, and then goes back to the restaurant to unload the food. Half the time there's no funds in the account, so he has to come back the next day and try again. She only has two or three employees that have been working there more than a few months - most of them find a different job after we refuse to cash their paychecks.

    The bank is getting shorter with her. But if we want to foreclose, we have to go to the bankruptcy court and get their permission to foreclose, which means more headaches and legal fees. For now, we take payments from her checking account as we can and continue to send her past due letters.

    The worst part of it is that she also has a loan with us for her house. That loan is never past due, and the real estate taxes are always paid on it. How is she able to pay her house loan, but not her business loan? Some customers are just beyond comprehension.
    "I look at the stars. It's a clear night and the Milky Way seems so near. That's where I'll be going soon. "We are all star stuff." I suddenly remember Delenn's line from Joe's script. Not a bad prospect. I am not afraid. In the meantime, let me close my eyes and sense the beauty around me. And take that breath under the dark sky full of stars. Breathe in. Breathe out. That's all."
    -Mira Furlan
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  • #2
    Quoth Ghel View Post
    The worst part of it is that she also has a loan with us for her house. That loan is never past due, and the real estate taxes are always paid on it. How is she able to pay her house loan, but not her business loan? Some customers are just beyond comprehension.
    Quite obviously a case of pleasure before business.
    Pretend there's something here that sounds insightful, but is really just some pseudo-intellectual bull.

    Comment

    • #3
      Question:Can her home be used as collateral for the business loan?
      For civilized discussion about broadcasting, media and sports along with fun games to play, visit:
      http://atriumforum.com/
      Emphasis on Michigan area broadcasting, but ANYONE is welcome!

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      • #4
        I'm not a lawyer or accountant or loan officer, and I don't play one on TV, however... I think it depends on what the business entity is.

        If it's a LLC(Limited Liability Corporation), then it would be a seperate entity from herself as a person. Same with an S-Corp or many of the other business entities created to protect the owner from the liability of the business.

        If, however, the business is in her name as a person, not as a business entity, then I believe if the same loaning entity is loaning to her business and her home, they can use one as collateral for the other.

        Comment

        • #5
          If I recall correctly, the original loan was in the business name, in the form of Betty's Family Restaurant, Inc. However, that entity is now inactive, and all the subsequent extensions have been in the borrower's name. The home loan can't be cross-collateralized with the business loan because the business loan is a Small Business Administration loan, and they won't allow it. Now that I think about it, that may be the reason the bank hasn't foreclosed before. Not only do we have to deal with the bankruptcy court, we also have to deal with the SBA.
          Last edited by Ghel; 07-01-2008, 01:39 AM. Reason: typos abound
          "I look at the stars. It's a clear night and the Milky Way seems so near. That's where I'll be going soon. "We are all star stuff." I suddenly remember Delenn's line from Joe's script. Not a bad prospect. I am not afraid. In the meantime, let me close my eyes and sense the beauty around me. And take that breath under the dark sky full of stars. Breathe in. Breathe out. That's all."
          -Mira Furlan

          Comment

          • #6
            Honestly, I don't really understand why the bank doesn't sue. Sure it's going to be a headache but by letting her get away with it they encourage her behaviour and get stuck with a bigger headache.
            How was I supposed to know someone was slipping you Birth Control in the food I've been making for you lately?

            Comment

            • #7
              It actually sounds like the bank are making money out of her. Sure she may pay late and sometimes they have to take money from her account, but if they charge her for every bounced cheque and her loan is accumulating interest, she is generating money for the bank.
              "I can tell her you're all tied up in the projection room." Sunset Boulevard.

              Comment

              • #8
                Quoth cinema guy View Post
                It actually sounds like the bank are making money out of her. Sure she may pay late and sometimes they have to take money from her account, but if they charge her for every bounced cheque and her loan is accumulating interest, she is generating money for the bank.
                Perhaps, but it sounds like they're making less money than they should be.
                How was I supposed to know someone was slipping you Birth Control in the food I've been making for you lately?

                Comment

                • #9
                  You're right in that we're making less money than we should be, if we're even making money at all. When you figure in employee time...

                  Her interest rate is very low, even in the current market. Still, nearly all of her payments go toward interest. Her late fees are extremely low, but they accumulate very fast. And we only charge $18 per item for overdrafts, which I'm sure you'll agree is very low. And even then, we frequently don't charge the fee if the overdraft is less than $10.

                  The bank is, I think, trying to be nice. But in my opinion, they're just enabling the customer to continue with the same sort of behavior.
                  Last edited by Ghel; 07-01-2008, 01:37 AM. Reason: typo
                  "I look at the stars. It's a clear night and the Milky Way seems so near. That's where I'll be going soon. "We are all star stuff." I suddenly remember Delenn's line from Joe's script. Not a bad prospect. I am not afraid. In the meantime, let me close my eyes and sense the beauty around me. And take that breath under the dark sky full of stars. Breathe in. Breathe out. That's all."
                  -Mira Furlan

                  Comment

                  • #10
                    nope; too bad they can't take her to court and force her to liquidate assets to pay off her debt.

                    just another case of people not taking responsibility and working the system.
                    look! it's ghengis khan!
                    Sorry, but while I can do many things, extracting heads from anuses isn't one of them. (so sayeth the irv)

                    Comment

                    • #11
                      Quoth Ghel View Post
                      Still, nearly all of her payments go toward interest.
                      If she isn't paying off much of the capital, she will be paying for a long time. She may not be generating much money, but she is generating more than if she paid off the loan on time.

                      Now whether that is worth the time and expenditure of employee time is another matter. $18 may not be a lot, but it easily pays for a standard letter and the time it takes an employee to type, print and post it.

                      Of course that fact that she's bouncing her employees' paychecks while ensuring her home is secure, makes her a very crappy boss.
                      "I can tell her you're all tied up in the projection room." Sunset Boulevard.

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