straight to the point – from different points of view

Credit Union or Money Lenders?

Credit Union or Money Lenders?

When most of us hear the term money lender we think of a shady character who lends to persons in distress at predatory rates of interest. These guys were not shy about using intimidation and occasional violence to collect on their advances. You may be surprised to learn that in T&T we now have licensed money lenders who are required to comply with relevant laws and regulations.

So we have two classes of money lenders. We have the legal, regulated version over which there is some degree of supervision and sanctions, if necessary. And we still have the unregulated variety who you would be advised to stay well away from regardless of your circumstances. Then of course we have what we might describe as the traditional financial institutions with whom we have been doing business for decades. Those would include banks, credit unions, friendly societies, mortgage brokers and trust companies. We can borrow money from any of these.

I am going to relate a real situation to you and I want you to see if you can guess which category the lender belongs to. We can then discuss the implications of the behaviour and suggest how we can bring some order to a clearly disorderly and unregulated sector of the market for the provision of loans and advances. So here we go.

A sum is borrowed from the lender. The lender holds 10,000 on deposit from the borrower. Over the lifetime of the loan, a further 6,000 or so is placed with the lender by the borrower by way of shares and deposit account. The borrower makes all his payments as per the agreement save for the final one which leaves him about 4,000 dollars in arrears. This is when it gets bizarre.

The borrower has liquid assets (cash) with the institution far beyond the amount he is in arrears and he asks the institution to use those assets to pay off the arrears and to repay to him the amount left in his accounts. The institution refuses, claiming that the borrower’s assets are not his to claim until his loan is first paid in full. The agreement between the parties actually says the opposite.

To summarise, the institution has seized the 16,000 of assets that belong to the borrower while demanding that the borrower repay about 4,000 dollars that he is in arrears on his loan. They have at this time held his money for two years with no sensible reason given for their position, even when queried by the regulator or an attorney retained for the purpose.

That is unfortunately not the end of the story. Brazenly, the institution has also charged a monthly late payment fee of 1,210 dollars. That bears repeating – a monthly charge of 1,210 dollars is levied in respect of the arrears of 4,000. That is on top of the interest charge of 1.875% per month. The equivalent annual rate represented by those charges is about 400%. The facts bear repeating –

  • Borrower in arrears of less than 4,000 dollars on loan at institution
  • Borrower has more than 15,000 dollars in shares and deposit with same institution
  • Institution refuses to return funds even to clear outstanding balance
  • Institution charges 1,210 dollars per month in late payment fees on top of 1.875 % monthly interest

The coast is clear. Old style money lending practices have now arrived in the mainstream. The situation I described above has occurred at a Credit Union, Diego Martin Credit Union (DMCU). Their management team of Hamlyn Pantin and Brian Moore not only believe that such treatment of their clients is acceptable, they have had the audacity to state everything I described in an official letter to the Regulator in response to a complaint submitted in the face of their intransigence.

Asked to justify their ridiculous late payment fees, they wrote to say that their committee decided upon that fee at a meeting and that they are therefore legally able to levy it. They say that their refusal to allow deposits and shares to be used to clear the debt or be withdrawn is also based on committee decisions. The most important fact here is that none of this is in the agreement between the institution and the borrower. They insist that they have the right to engage in these actions simply because their committee decided as much.

My friends, this predicament is not at the hands of a money lender, either regulated or unregulated. These are in fact the actions of Diego Martin Credit Union (DMCU). The client is yours truly. This is the treatment I have received and continue to receive at the hands of a mainstream Credit Union.

Who would have thought that a “respectable” financial institution would engage in the despicable kind of predatory lending that was confined to the outer edges of the profession? Reflect on the reality that this behaviour comes from a fully regulated financial institution. Ask yourself where is the regulator while this is taking place. Can we accept this as the New Normal?

I have a lot more to say about this treatment from DMCU and will do so in the coming weeks. For today though I want to finish with a few words about the Regulator who happens to be the Commissioner of Cooperatives. Be aware that my complaint with them is now almost two years old and in that time they have failed to communicate with me about progress or lack of it. They have wasted at least eighteen months as they are totally powerless to regulate DMCU, or any other Credit Union in all probability.

Given the facts stated above, which are borne out by documents submitted by DMCU themselves I would expect the following actions at a minimum.

  • Demand explanation from DMCU as to how they justify imposing charges and withholding client assets in ways that are not part of any agreement
  • Demand answers as to whether other borrowers have been treated in a similar manner
  • Demand a schedule showing the interest rates charged to all clients over past five years
  • Demand a written commitment to cease all such unlawful charges forthwith
  • Institute an audit of a sample of loans on their books
  • Ensure that my situation is resolved in compliance with my agreement and my legitimate request

If these things are done, the public could possibly regain some confidence in DMCU. Should they not be done, the regulator ought to seriously consider whether DMCU is fit to carry on the business of lending money, as they are clearly incapable of acting other than as the backstreet money lenders of yesteryear.

I have written today about the unlawful treatment meted out to me by DMCU. I plan in the near future to elaborate on several related issues at DMCU including failure to protect shareholder funds and abuse of other clients. I will also delve somewhat more deeply into the role of the regulator and their abysmal failure to discharge their responsibility.

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