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Two SCs, One Bank (is this meme overplayed yet?)

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  • Two SCs, One Bank (is this meme overplayed yet?)

    Here at my bank, we have two SCs who are (hopefully) about to be former customers.

    SC1 and his wife have a mortgage with us. I've only dealt with him, though I suspect some of the SCness carries over to her. Several years ago, SC1 lost his job and the bank moved the loan to non-accrual (meaning the accrued interest goes into a separate bucket and all the payments are applied to principal - this way, the bank attempts to collect the principal balance first and only collects the interest if there's money left over). SC1 has since found new employment, but the loan remains on non-accrual because they have intermittent lates.

    About two months ago, SC1 informs us that they have made a claim to their insurance because a drain pipe "exploded," spraying sewage around several rooms in their house. I can only imagine how much that stinks (literally). They weren't satisfied with the settlement the insurance company offered them, so they hired an independent adjuster for a second opinion. It seems that went nowhere, since SC1 eventually brought in a check from the insurance company. Per standard practice, the check was made out to SC1, his wife, the independent adjuster, and my bank. SC1 brings the check in and expects us to sign it over to him so that he can complete repairs. Um, no. He's telling me that the house isn't livable, so basically the collateral is worthless, yet he wants me to give him the insurance money without paying off the loan. I politely told him no. He asked if there was any other option, since in his estimation, the loan would be paid off, but he'd be left with a shitty house (literally) and only about $200 of the insurance money. I said I would talk to my boss, Goodhair. He left with the check.

    I talked to Goodhair when he returned the next day, and he agreed with me. SC1 needed to pay off the loan with the insurance money. I called SC1 to tell him, and he started to argue with me about the balance. Though I tried to explain it several times, he just couldn't understand why he had to pay so much accrued interest. He also didn't understand why he had to pay off the loan, trying to play the sob story angle by repeating that the house wasn't livable and he and his wife and children needed someplace to live. But I stuck by what I said. I told him he could apply for a new loan either to repair the house or to buy a new house, but he had to pay off the current loan.

    Then he asked me to talk to his attorney. He said that several companies were trying to screw him over, and he wanted to make sure we weren't, too. The attorney asked for a copy of the original note, so I faxed it to him. We went over the right of set-off on the back of the note, which says that any items payable to the customer that he presents to us can be used to pay any amounts due and owing on the loan. So we can use the insurance check to pay off the loan. The lawyer seemed ok with that. Then he asked about the accrued interest. Apparently, SC1 had told him that we were trying to collect interest through the maturity date of the loan. When I explained that, no, we're only trying to collect interest through the day the loan is paid off, and the reason it's so high is because we put it on non-accrual status about 3 years ago, he seemed to deflate.

    He must have explained the situation to SC1 because SC1 just came in to pay off the loan. I gave him a receipt for his paid loan, a check for the independent adjuster, a check for the remaining amount, and an application for a new loan. Chances are we'll turn him down for the new loan, but we can't legally discourage him from applying.



    SC2 we've had issues with before, ending about 10 years ago when he served jail time for writing checks on a closed account with us. Before that, he had 3 loans with us. Each one was done because of an overdraft or a cashed check that he couldn't pay back. We eventually got paid back all money owed to us. But now, less than a month ago, CW opened a business checking account for him. Why he came to us, I'll never understand. His business is in a town 20 miles away. He must remember that he tried to screw us out of a lot of money. All I can figure is that every other bank in the area has already turned him down. CW must have bought his line of BS that his debt is all his wife's fault and that he's turned over a new leaf. It's my guess that he told CW that he found Jesus, because that seems to be the kind of thing that would convince her that he's changed.

    SC2 opened the account about 3 weeks ago, and it's already overdrawn. He claims that he's supposed to be receiving a $2800 deposit from his merchant credit card account, but that hasn't arrived. He should know better than to write checks on an account before verifying that the deposit has arrived. Additionally, a $1700 check he deposited when he opened the account has been returned by the bank it was drawn on. From his account at that bank. When I called to ask about it, he said that after he deposited the check with us, his shop was broken into. They stole checks off his account at the other bank as well as some cash and even a car. He said he informed the bank the checks were stolen, but they wouldn't allow him to return them as unauthorized. The whole story reeks like last month's seafood.

    When I relayed this to Goodhair, he said that we WILL be closing the account tomorrow. If the $2800 deposit comes in, we'll send SC2 a check for the funds remaining in the account. If it doesn't arrive, we'll turn it over for collection. Time to close the account before we take a loss.
    "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

  • #2
    Congratulations, Ghel, on getting Goodhair to do his job. *salutes*
    Labor boards have info on local laws for free
    HR believes the first person in the door
    Learn how to go over whackamole bosses' heads safely
    Document everything
    CS proves Dunning-Kruger effect

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    • #3
      Quoth Ghel View Post
      If it doesn't arrive, we'll turn it over for collection. Time to close the account before we take a loss.
      Please pardon what may be an obvious question, because I don't work in the industry. Why do banks allow accounts (with no overdraft protection) to go negative? Is it not as simple as holding deposited cheques for xyz days until the client has built up some history, and bouncing cheques drawn on the account if funds are not available?

      Thanks for the stories.

      Comment


      • #4
        Each bank handles overdrafts differently. For a customer with no account history (or a bad history, like SC2), we return overdrawn checks as soon as they hit the account, which means the next business day. We also charge an overdraft fee, which often means the account still shows a negative balance. SC2's first overdraft was Monday. We returned the checks today (Tuesday), charged him a fee, and the returned check from his other bank also came back to us today.

        If a customer has a good history with us, we might forgive a small overdraft by not returning the check or charging them a fee. But we don't do that often.
        "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


        • #5
          For the first example, isn't having all of your payment going to principal a GOOD thing? I mean, I'd accrue a whole lot less interest if I could pay down the principal on my home first. Right now I have a ways to go before the amount applied to principal is more than the interest. Or taxes.
          A lion however, will only devour your corpse, whereas an SC is not sated until they have destroyed your soul. (Quote per infinitemonkies)

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          • #6
            Yes, that's right. We accrue interest based on the principal balance, so if you pay down the principal balance first, you pay less interest. Which is why it's a good idea to pay extra on any loan, if you're able to (assuming your loan doesn't have a prepayment penalty, which none of ours do). But the reason the bank switched SC1's loan to non-accrual was because we didn't expect to get all of our money back anyway.

            ETA: I didn't quite get Goodhair to do his job, or not all of it, anyway. When SC2's deposit arrived this morning, Goodhair changed his mind and decided to let SC2 keep his account open, for now. If he overdraws his account again, then we'll close it. Way to stick to your guns, Goodhair.
            Last edited by Ghel; 08-13-2014, 05:50 PM.
            "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


            • #7
              I hope I'm missing something on the first story.

              It seems to me like a person has a mortgage on a home and also carries insurance against property damage. A good thing to do and probably required by the bank since the property is the banks collateral on the loan.

              A serious accident causes damage to the property and the insurance company assess the damage and cuts a check to have the damage fixed. Instead of allowing the funds to be used to pay for the damage to the property, the intended purpose of the money, the bank seizes the funds, uses them to pay off the loan and all accrued interest early and tells the guy to go fuck himself and good luck getting a loan to fix the damaged property that you can't live in but you now own outright.

              I don't consider myself naive, I expect the bank to protect its interests. I would expect them to require the owner to hire a licensed contractor and to issue payment directly to the contractor so the owner can't pocket the money and never fix the property (banks collateral on the loan). I could even see a bank, if there was any money left over, applying the left over to the loan.

              Am I reading this correctly? Is this a standard bank practice that I just never read about in the news? It sounds like the kind of thing that is legal but would only be practiced by institutions that people only deal with if there credit is so trashed that any decent company wouldn't touch them with a ten foot pole.
              You'll find a slight squeeze on the hooter an excellent safety precaution, Miss Scrumptious.

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              • #8
                Quoth Caractacus_Potts View Post
                I hope I'm missing something on the first story.
                .
                Well, you missed the part where the customer is the one that tried to "f" the bank. The bank wasn't "seizing" anything, it was just collecting what it was owed.

                "He's telling me that the house isn't livable, so basically the collateral is worthless, yet he wants me to give him the insurance money without paying off the loan."

                and the part where extending the current loan or providing a new loan would be asinine; since most Banks are businesses and not charitable institutions.

                "SC1 lost his job and the bank moved the loan to non-accrual (meaning the accrued interest goes into a separate bucket and all the payments are applied to principal - this way, the bank attempts to collect the principal balance first and only collects the interest if there's money left over). SC1 has since found new employment, but the loan remains on non-accrual because they have intermittent lates. .. we put it on non-accrual status about 3 years ago."
                Last edited by Josh; 08-14-2014, 05:23 PM.
                “The whole problem with the world is that fools and fanatics are always so certain of themselves, but wiser men so full of doubts.”
                ― Bertrand Russell

                Comment


                • #9
                  Yes, SC1 has been a problem customer for years. We weren't about to sign over the check to him and have him split with the money. Even if we allowed him to use the money for repairs, we would have held on to it and paid the contractors ourselves.

                  There's a reason why the bank gets listed as mortgagee on the customer's insurance. The usual situation is the house burning down. Yeah, it sucks that the majority of the money goes to the bank to pay off your loan, but you'd have to pay back the loan anyway. Having to pay a mortgage loan on a destroyed house while trying to find some other place to live would suck even worse.
                  "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
                    So sort of like buying a car on a 5 year loan and then having an accident 2 years later. The car's totaled and in that two years you've proven that you are a bad loan risk. The bank is going to expect you to pay off the car loan with your insurance check rather than put it towards repairs that won't come near to returning the car to it's pre-accident condition. And due to your issues with the orginal loan, the bank won't let you get another loan through them.

                    Does that sound right?

                    Comment


                    • #11
                      Quoth wheeitsmee View Post
                      Does that sound right?
                      Essentially, yes.

                      And due to your issues with the orginal loan, the bank won't let you get another loan through them.
                      Probably, but we can't discourage them from applying, by regulation. We can turn them down for the loan based on their history with us, but we have to let them apply, if they wish to. So when SC1 finally brought the check in, I also gave him an application, so he can apply for either a loan for repairs or a loan for a new house. Since he probably thinks he did nothing wrong, I expect he'll bring the partially-completed application back in a few weeks.
                      "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


                      • #12
                        The house has effectively been destroyed. It is unlivable, and therefore worth next to nothing, the same as if it had been through a fire and all was left was the charred shell.

                        We might have been willing to work with the customer if (a) he hadn't been intermittently late on his payments for years (it's not simply that he was out of work once - it's a pattern of late payments), (b) he hadn't delayed for about 3 weeks between when he received the check from his insurance and when he brought it in, and (c) he hadn't insisted that I talk with his attorney before finally relenting and paying off the loan. I didn't really mention it, but when the customer had had difficulties paying in the past, he hadn't kept in communication with us to keep us updated on his situation. That would have gone a long way toward getting us to work with him when he wanted something from us.

                        All I'm going to say about the way some banks have handled overdrafts is that I don't agree with that practice, either, and it's not something my bank has ever done.

                        ETA: We finally closed SC2's checking account today, after it was overdrawn again.
                        "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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