Gail Rant: I’m So Sick of this BS!
Posted by Gail | Filed under Debt Traps
CASTING CALL: Ever wished you could get help from me in person? Now’s your chance. We’re casting for my new show. If you live within 200 km of Toronto and you want a face-to-face with me (and you’re willing to be on TV), click HERE to apply.
Last Tuesday the newspapers were full of stories about PwC Canada’s latest consumer lending survey. (In case you don’t know what PwC stands for, it’s the acronym for Pricewaterhouse Cooper, which is a consulting company.) PwC had a research company talk to over 600 Canadian homeowners with incomes over $100,000. To put this in perspective, according to the Tax Man, the median after-tax income for Canadian families of two or more persons was $63,800 in 2009, virtually unchanged from 2008 and 2007.
The thing that set my Rant Meter off was this line, as reported in the Financial Post: “Canadians look to their banks in a very paternalistic way in terms of providing good advice and diligence over what’s responsible and prudent for Canadians to borrow.”
Lord love a duck! Why is the expectation of good advice and diligence in terms of responsible lending being cast in the light of childlike expectations? Paternalistic? Really?
Maybe I’m wrong, but isn’t it in the banks’ shareholders’ best interest for them to lend prudently? And how did we get into such a mess that banks are actually turning to legislators and begging for help because the pressure from non-Canadian lenders and lenders of last resort are screwing with common sense and good lending practices.
The PwC guy being quoted terms the lending market a “battlefield.” Are consumers the soldiers that lay fallen because lenders are willing to sacrifice us in their war to gain and retain their little piece of the competitive real estate?
Lest you think that PwC is interested in helping the average Canadian by creating a more reasonable lending arena, let me quote from their Executive Summary: “According to the survey respondents, the majority find consolidated lending products appealing, and most are looking for education about how this product can best work to fit their unique needs. To successfully market consolidated lending products, bankers need to understand their clients’ needs and tune the many detailed product features to each customer’s unique circumstances.”
That blah blah blah means that while we’d like to believe Canadians are finally smartening up about getting out of debt, it’s a lot of talk. The action they want to take is to consolidate their debt (oh, yeah, make this easy for me, puh-lease) and PwC wants to “help” banks create just the right hook to reel in these wide-mouth consumers.
There are some other telling statements in the PwC report, like this gem: “According to the survey, debt isn’t a particularly scary word to the majority of Canadians. Nearly 80% agree that borrowing money is necessary to maintain their household.”
There’s also the revelation that 64% of respondents intend to decrease their borrowing over the next 12 months. Do you believe that intention will win out over a new slew of borrowing products aimed directly at consumers Achilles heels?
Let’s juxtapose that idea against this beauty from the survey: “78% of respondents still believe they have the capacity to borrow more.”
Shoot me now!
April 16, 2012 at 7:20 am
A couple of years ago just after my husband got laid off. We went into our financial institution to talk about our mortgage. When he looked at our equity in our house he mentioned more than once that he could set us up with enough money to get a second place!. My husband and I looked at each other and wondered what was going on. He was out of work and based on our equity (I’m guessing the institution wanted us on the hook for more) he was willing to give us another $200,000.00 to spend.
Needless to say we got out of Dodge with our equity intact. And have been really leary every since.
April 16, 2012 at 7:27 am
We have the capacity to borrow more but no desire to!
We’ve been seriously considering moving lately, due to some issues in our neighborhood. But, we’re a year away from DFF, and to take on a mortgage again is not desirable at all. Our property values may go down due to an impending issue, which, really, doesn’t matter a whole heck of a lot if we’re staying, but if the issue will affect our health, it’s a whole different matter! And I’m constantly getting messages that we CAN afford to make the change, but to be so close to tasting debt free, there will be a psychological cost as well. That peace of mind financially will be gone, and who knows what challenges a new property would bring? Argh!
It would be easier if we didn’t mind racking up debt.
April 16, 2012 at 7:59 am
Can’t wait to watch the new show!
Ultimately, we have to recognize that the banks are a business and their business breaks down to getting some of our money through interest and fees and holding on to our funds so they can make interest off of our investments.
Now that so many more lenders are on the market (and what’s with the jewelry pawn guys now offering mortgages?) it’s that much easier for consumers to get loans and, if the number of loan businesses is any indication, more and more people are willing to pay interest through the nose to get what they want NOW even if they can’t afford it.
So, if banks aren’t getting pieces of the original borrowing pie, it makes sense for them to go after collecting the leftovers for consolidation — in this case sloppy seconds is better than nothing.
This means that instead of being the bad guy they are now the ones we go to when we want someone to swoop in and save us. That is a paternal role.
While I’d love to see legislation enacted that would limit the amount of interest and capital the private company lenders are allowed to offer, I expect the best we’re going to get more along the lines of a lottery type warning: “know your limit, borrow within in,” because let’s face it, getting mixed up in that kind of loan system is a huge gamble on your future and the house holds all the cards. But again, there is something intrinsically paternalistic about this kind of law as well — the only difference is that it’s asking the government rather than the banks to protect us. And some would argue, that’s just what they’re supposed to be doing.
April 16, 2012 at 8:21 am
It is very difficult to consolidate debt from other lenders into a loan at your current bank…unless you are rolling it into your mortgage so that it is real estate secure (and of course you have to have the equity to do so and qualify to support the new debt amount)…most banks don’t want to take on the other guys debt as unsecured…especially since alot of that other debt will add up to more than 30k…(I have seen as much as 100k in credit card debt alone for one person…not including the mortgage…and none of those credit cards came from their primary bank that held their savings and mortgage…)..for this article to send the message that consolidating is easy is rather misleading…it is getting more and more difficult to consolidate unsecured OFI debt…there may be ways your bank can still help and so you should always go and talk to someone if you need help
April 16, 2012 at 8:57 am
Seems we have a very romantic notion of banks and their role in our financial lives. But the reality is they’re less George Bailey and more Mr. Potter. They are a business and based on a capitalistic model. My spouse is at the bank right now looking to change his investor profile so he can manage his own TFSA holding. I cautioned that they will try to sell you their products because that’s what they’re advised to do right now. But he’s a smart man and can choose what works for him.
A don’t understand why so many feel comfortable abdicating their adult responsibilities to someone else. And why the media teases us with these statement, suggesting we should do so. I personally don’t like being told what to do. But that’s for another time
April 16, 2012 at 9:03 am
Ok….I’m giggling still over “Lord, love a duck!”.
That should be a new show/book Gail. You have such a way with words!
April 16, 2012 at 9:05 am
It never surprises me when the banks come up with new ways to make money but it doesn’t concern me either. I don’t borrow money, haven’t paid interest since paying off the mortgage twenty years ago, don’t use credit, and don’t pay bank fees.
Don’t be conned into using their money-making products. You won’t come out ahead.
April 16, 2012 at 9:25 am
We haven’t had any consumer debt in at least six years now..none..no mortgage no car paymetns and I shiver to think of ever having to borrow at this stage in my life. One thing I would really like to see Gail is a show for retirees about budgeting and saving and investing and housing etc…… You are so busy now I don’t know how you could ever fit it in but if you do I’ll watch it (I watch everythng else you have on TV).
April 16, 2012 at 9:49 am
Brace yourselves, folks; I bear earth-shattering news: a bank is a business set up to make money. Take a moment to let that sink in. Many of you seem to have anthropomorphized the financial industry, but a bank is not your friend, not your parent, not your caregiver. It is a business. But neither is it evil nor out to “con” you. It is a business.
If you walk into a retail store with a sob story about how you have no more money but really need that great new shirt, do you expect them to give it you for free? Unlikely. A store is a business out to turn a profit. So, too, is a bank.
My husband is a banker (gasp! no!). He is not evil, he is not out to con you. He will not push products you do not need nor will he dispense credit you cannot handle. When you walk through those doors with your great big financial mess on your shoulders, when you’re on your second bankruptcy and just got turned down for that $40,000 loan to buy a new truck that you just have to have, save your outrage and take a good long look at yourself. Believe it or not, my husband is trying to help you get out of your mess. He is recommending the savings account to get you back on your feet. He is suggesting you check out Gail’s site (yes, he does) so that you can figure out where you went wrong and how to make it right.
Stop yelling at him because he won’t bend over for you. Stop biting his head off when he does bend over backwards to help you and it still doesn’t work out because of your own financial screw-ups. Grow up, take financial responsibility, and stop shifting the blame and expecting someone else to fix your mistakes.
April 16, 2012 at 10:10 am
My take on banks as a customer is a little different because I worked with one for 8 years. It’s a bit funny now that I am a customer. I paid off my mortgage in December and I remember when I would go into the bank to make additional payments every few months. At first the lender didn’t believe I would pay it off, her words were “you’re too young not to have a mortgage.” I am 32 and I never once thought that was too young. That doesn’t even make sense to me. How are you too young to get rid of debt. When I finally paid it off, I got a letter in the mail asking if I wanted a line of credit on my home.
Uhh, no thanks, it took me 11 years to get rid of that thing!
April 16, 2012 at 10:27 am
OMG! I had to read this sentence again…”There’s also the revelation that 64% of respondents intend to DECREASE their borrowing over the next 12 months.” So, consumers think they are doing good by simply decreasing their borrowing?!?! They are still getting deeper into debt!
April 16, 2012 at 10:38 am
Sparky & Teresa – Here! Here! Well said. Thank you. I’m so tired of reading articles bashing bankers as “evil out to get you & your money demons”. I take great pride in my job and work hard to provide solid advice to my clients. If they choose to do otherwise, that’s not my problem.
April 16, 2012 at 11:23 am
Gail,
I know your a busy woman, but here I am asking you for a favour in hopes you will be as excited about my program as I am. I work for the TDSB. Each summer we hire over 400 secondary students between the ages of 16 – 19 to work in summer camps in priority neighbourhoods. For the majority of our students this is their first job. They have to get a bank account, understand deductions, income, …. but what I think is missing is teaching them some kind of savings program or wisdom about money.
We host student training on June 27, 28, 29 is their any change you could be a guest speaker for 30 minutes or less?
I am a huge fan of yours and I think your personality and messages would work well with our youth.
Debora 416 394-7455
April 16, 2012 at 12:43 pm
@Teresa
Hello, I’m sure your husband is very good but read this.
I’m looking to renew my mortage.
Over the phone (not in person) the dude told me we could have a 60k line of credit.
I already have a 10k elsewhere (we do not use it). They are simply insane. Sorry to tell you that.
We went to this bank in person and this was the same thing. There was also an another thing a 122k secure with the mortage.
Gail you are rigth “Lord love a duck!”. If I did not know better I would be in alot of trouble.
Everyone at the bank should pass the Gail test.
Have a good day everyone!
April 16, 2012 at 2:13 pm
Teresa, I found your post patronizing. I beg to differ about banks not being out to “con” you. I have been told more than once by my bank that I can borrow way beyond my comfort level. I go in with a set mortage amount in mind and I walk away with information I did not need or want about how I can borrow against my existing equity. It is not “business” to try and talk customers into borrowing more, it is irresponsible on the part of the banks. Yes, I have the courage to say no but others don’t.
April 16, 2012 at 2:37 pm
We recently went to CIBC to see what the penalty would be to pay out our mortgage 10 months early (so that we could take advantage of a lower interest rate). We were told that the penalty would be about 2K, and they would allow us an extra 10K with the new mortgage to cover the extra for the penalty… What ??? We didn’t go in looking for extra money, but they just can’t resist throwing a little extra debt into the equation.
April 16, 2012 at 2:42 pm
@Jane – I think you need to re-adjust your definition of a ‘con’. When you were offered too much debt, did they tell you that you wouldn’t have to pay the money back? As cynical as I am about banks, I doubt that. I assume they offered, and you refused.
When you go to the movies, and the popcorn seller tried to get you to buy the medium instead of the small (“it’s only 50 cents more!”), they aren’t trying to ‘con’ you, they are trying to get you to spend more money. They don’t know (and don’t care) whether you’re on a diet, and really shouldn’t eat the extra 1000 calories. They’re just doing their job by offering to sell you more than you intended to buy.
Similarly, the bank doesn’t know what your comfort level is, and to say they are trying to con you by offering to loan you more than you’re comfortable with is to have unrealistic expectations. If you told them that you’re uncomfortable with X, and they tried to pressure you into buying, that’s bad and it shouldn’t happen, but its still not a ‘con’.
That said, I take your point that not everybody is smart/informed enough (I wouldn’t say it had to do with courage) to say no. Some people think that if the bank is willing to lend it, it must be ok to borrow it. That’s clearly a problem, and its one banks take advantage of, to their profit. Education is the only way to end that.
But I don’t think its a solution to say that banks should only try to sell their products to people smart/informed enough to make a good choice for themselves (like you did). That’s far more patronizing than Teresa’s post, and impossible for the bank to know anyway.
April 16, 2012 at 2:54 pm
It is not my intention to bash the banks as I know they are in business to make money and as in any business, some are better at customer service than others. But we had an experience a couple of months ago with one of the major banks that left me angry and frustrated. For the last 27 years we have dealt with two major banks at the same time with some accounts and a line of credit and a VISA at one and our mortgage and another line of credit and a VISA at the other one. I noticed that one bank was charging .75 percent higher interest on our line of credit than the other one was (both are unsecured). I went in and talked to a rep who advised me that the bank (either head office or regional office) was in the process of reviewing the LOC’s as it came to their attention that some customers were paying more than they should in interest and she asked me to wait a couple of weeks and see what happens. Then we got a letter advising us that our LOC interest rate would be INCREASING by 1.5%. Now that is 2.25% higher than the other bank. We have a 2 very secure long term jobs, great credit rating, have never been late on a payment to anyone, and are well within a healthy debt to income ratio and we have been a customer for 27 years having a large amount of business (read debt – mortgage) with this bank. I was LIVID. I called my rep and explained that I knew she did not make this decision but if they didn’t do something we would pull our business and go exclusively to the other bank. It took her 4 days of arguing with the regional office to have our rate left the same (still .75% higher than the other bank). I am very confused how this is good business by this bank. Instead of working with their good customers they treat us like that. We are now diligently paying down the LOC and will cancel it when it’s paid and when the mortgage comes up for renewal we will shop it around. I feel this bank does not deserve our business (and I’m not sure they’ll even care). As a side note, several of the employees of this bank said they were having a hard time doing their jobs as we weren’t the only ones treated this way and they have had a lot of people pull their business. So if the local employees are trying hard to service their customers, it appears their regional offices are not that concerned.
April 16, 2012 at 3:40 pm
I found the 80% who think borrowing money is necessary to run the household reasonable if they asked with the intentions that mortgage is included. But otherwise, wow! I am sure I am one who could have lots more credit, but it would be unmanagable to take on more. Just stupid. But if I had a “professional” sitting across the table offerring a line of credit to me, “You don’t have to use it, it’s just nice to have” or a mortgage lender telling me I qualified for more, more, more, and wasn’t on top of “the Gail way” I get how people find themselves in big trouble.
April 16, 2012 at 5:45 pm
That is a key point most people do not consider when dealing with banks – that they are a business out to make money. People need to understand that so when the bank offers them more credit they should know their own confort zone, what they can pay back without issue because the bank is offering the credit to them to make money! Though I must admit that I do find banks annoying, I have switched to a credit union and still every time I go in to open a savings account or something they keep trying to push their line of credit/credit card/mortage (ours is held by a family member)/RRSPs etc. If I am interested in hearing about the options they have I will ASK! And even if I decline they start asking questions. I hate all the prying questions! I have the “don’t put your eggs all in one basket” mentality so I have no desire to have everything all in one place.
April 16, 2012 at 7:30 pm
Gail I think. It is wonderful if you truly do a new show. Thank for all your advice and knowledge.
April 16, 2012 at 8:42 pm
Here here Melanised and Teresa…us bankers are not evil, or out to con anyone…I give ALL the information and I don’t offer credit just for the hell of it..I would like all my clients to have a well balanced portfolio that includes savings, both longterm and short term and credit where necessary..i.e. mortgage, car loan, credit card (the limits don’t have to excessive and I will help clients to set payments that will fast track the payout if that’s what they want..and even if they don’t bring it up I will suggest it!)
The banks are indeed a business like millions of other businesses…and we are good people working there…earning a living like many other people and caring about our clients…
April 16, 2012 at 8:44 pm
Gail!
Your truly one amazing woman! I wish i lived closer to apply for casting for your shows. I need a woman like you to whip my hubby into shape with finances! I find it extremely frusterating while I am busting my butt to pay off debt quickly and use effective budgetting, my hubby’s mind is rolling as to what he/we can purchase next! 1 month ago he tried to convince me to buy a New Vehicle – i said NO, the next week he was “just looking” at New Boats and almost signed papers until i threatened that i would not be with him if he proceeded with it, 2 weeks ago he had me looking at New Houses with him and our realtor friend!!! Not sure when the “cant have enough” will ever be enough! I am one tired and frusterated wife and yet my hubby is a wonderful person but he is always blinded by debt and how it really works!
Any Suggestions on how to help a lil lady out!!! : ) Do you have one of those hand clappers with your face on it so i can slap my husbands spending frenzies silly!!! hahahaha
April 16, 2012 at 9:15 pm
My husband and I are in the process of looking to buy our first house. We were shocked stupid when we were told we would qualify for in excess of $400,000 of mortgage on our $95,000 combined annual gross income. Luckily we are NOT crazy and will be sticking with a more realistic $170,000 – $200,000 which should be more than sufficient in our area.
April 16, 2012 at 9:27 pm
Radio today is reporting on the uptake of sub-prime mortgage loans in Canada. The major banks have tightened their requirements so consumers are turning to higher rate mortgages to get the home they “need.” Perhaps the banks are doing consumers a favour by telling them they can’t afford their wants. Or perhaps the banks are hand-in-glove with the sub-prime lenders. If their brothers on Wall Street were bailed out, perhaps the bankers and sub-prime dealers on Bay Street will get their turn, too?
April 16, 2012 at 10:21 pm
@Cas – I hear you! We are in the same boat! We have a good chunk of equity in this home and are in a townhome. I’d like to go to a single detached with more space. However, we have whittled away a fair amount of our mortgage and I question whether I want to tackle a larger mortgage. I find housing prices and property taxes ridiculous right now! Hubby has no desire to move but I go back and forth. Everyone owns here except for one unit who rents and unlike the rest of us, this person takes no interest in going out of his way to keep up the property.
@ Aimee – good for you for catching on! I almost spat out my coffee when the morgage broker we spoke to told us the banks would approve us for a 600k mortgage – WHAT?????! When I first bought this house, they pre-approved me on my own for a 200K mortgage. I was excited until I started budgeting everything and discovered I couldn’t afford that and have a life. I think that’s why so many people get in over their heads – they don’t take the time to figure it out for themselves.
April 16, 2012 at 10:24 pm
By the way Gail, I’m so excited about your new show! I keep watching all the repeats of TDDUP.
April 17, 2012 at 7:54 am
While I completely understand that the banks are in the game to make money for their shareholders, it’s pretty bad out there and people really need to keep their wits about them when dealing with lending firms…A couple of months ago, we went into our bank to discuss a consolidation loan for our student loans (learned this trick on one of Gail’s shows…ended up saving us $500 per month plus our loans will be gone faster… plus the student loan institution which was a major Canadian bank wasn’t the most savoury group to deal with)…anyway, all we were looking for was enough to consolidate but they kept trying to push us to borrow more than twice what we needed “just in case of emergency” Explained to them that I save my own money for emergencies and don’t need to use theirs…was hard to say no when they were so pushy though!!
Thanks Gail for another great post!
April 17, 2012 at 10:14 am
I agree that banks are a business out to make a profit. However, they are businesses that promote themselves (at least on a retail level) of providing sound advice in a “we’re in this to help YOU” mode. If I went to a lawyer for a will, it’s one thing for the lawyer to mention that maybe I should have a power of attorney too, and explain the pros and cons. Yes, there is an upsell but it is an upsell logically tied to the original request and based on a demonstrated need and more importantly, the final decision based on full information (advantages and disadvantages). If I go to a lawyer for a will and the lawyer mentions that the real estate market is at its peak and I should sell my house so she can handle the paperwork, there is no connection other than the lawyer trying to make more money (particularly if I have just spent 10 minutes telling the lawyer how much I love my house!). I get the sense from people that there are at least some banks/bankers who seem to be much more foreceful in their proposed upsell. It may be that individuals are caught in the system and have to push certain types of products in order to meet corporate requirements. That’s fine, but that sounds less like a trusted professional advisor and more like a loan shark. I guess, if we are to say that banks are there to make money, their advertising should be a bit more honest–stop pretending you’re my trusted advisor.
April 17, 2012 at 12:13 pm
“…borrowing money is necessary to maintain their household.” Until you borrow more than you can pay back! It would be great if everyone had the epiphany that you can be your own bank by growing you capital by saving your money and being frugal! Going without something now so you can have something in the future is a hard concept to get around in the current mindset of gimme want I want when I want it now.
April 17, 2012 at 11:27 pm
“Lord Love a Duck!”…these kind of quotes are why I love you Gail so much!!!
can’t wait for new episodes of something to come on 
made me laugh so hard
April 18, 2012 at 9:31 am
Oh Gail,
I wish you had a show for people who are doing alright, but could be doing BETTER. But I guess that isnt good TV. sigh
April 18, 2012 at 1:00 pm
Banks are a business, and they should be treated as such. Not your friend, not your enemy, a business. So if you aren’t happy with their level of service – terminate the arrangement and move on. It’s not personal. It’s just business.
And gail – the bank’s primary job for their shareholders is to maximize profit, not necessarily ensure responsible lending. With CHMC guaranteeing the debts, the banks can both loan too much to people while taking on no risk. If you have a real complaint, it’s that the government underwries the bank’s risk. And people who bash banks for making a profit should invest in them instead; it puts you on the otherside of the equation.
April 18, 2012 at 5:20 pm
CMHC is tightening their guidelines and the bank will still decline a CMHC deal…CMHC is not a guarantee a mortgage will be granted…and of course banks are not the only lenders out there…most people in credit trouble will have credit outside of their financial institution…retail credit cards…cash stores..buy now pay later…car dealerships…finance companies…just to name a few are all out there with the next best deal etc…and there are ALOT of credit SEEKERS out there…as a lender I am responsible and accountable for the products I offer my clients…but at the end of the day the client also needs to be responible and accountable for the amount of credit they seek, apply for and accept…from ALL sources
April 24, 2012 at 4:46 pm
Someone above said that sketchy bank tactics don’t concern them since they don’t personally borrow money, but doesn’t the fact that lots of our fellow citizens get disadvantaged affect all of us, even if we are debt-free, savings-rich and financially responsible? I think when these practices affect enough individual households, they wind up affecting the economy as a whole.