The Parasites of Western Economy, Part 2: Shifty Lenders.

by tonytran2015 (Melbourne, Australia)

#shifty lender, #parasite, #shark lender, #captive borrower, #inexperienced borrower, #private equity, 

The Parasites of Western Economy, Part 2: Shifty Lenders


Because of the requirements in life we do have take loans during some phases of our lives: A worker has to buy a car to go working far from home and later he has to buy his house using long term loans. We certainly have to borrow to buy houses if we neither use gold to store our saving  nor want to lose much of the saving in hand to the vicious inflation ([2]).

1. The shark lenders in car finance preying on new borrowers.

The lendings by banks to the starting up car buyers have to be appreciated. 


However, there are often more numerous greedy “shark lenders”, who are usually located next door to the car show rooms, and are associated with the car dealers to prey on the hot headed emotion of unseasoned young buyers to mislead them into disadvantageous loan contracts. Those contracts places very high interests on the young buyers and rob them of their savings or may even bankrupt them (see also [3,4]). 

2. The manipulators of captive borrowers on long term loans.

They are the  loan makers who initiated loans only to have their conditions changed during the life of the loans. Even housing loans may become financial traps to unwary borrowers.


There are many types of traps (see also [5,6].:


2a. Shifty lenders have a condition that any borrower who wants an earlier end the loan have to pay an outrageous exit fee (about nearly one year of interest) which is many times the actual cost to the lenders for organizing the early termination of that loan. This stops their borrowers from switching to obviously cheaper loans.

Fortunately for Australians, exit fees have been banned in Australia for contract signed after 01 July 2011. I am not aware of any similar laws protecting Americans.


2b. Shifty lenders may impose a condition that lender can recall the loan at any time before the expiration of the loan contract. This is an outrageous condition and is used by shark lenders to send unwary borrowers into higher interest loans.


2d. In a typical loan contract offered by a shark lender, the initial interest rate is very low, but if there is any single late payment (which may even be caused by the failure of the computer of the lender!), the low interest rate will forever disappear and a high interest rate replaces it for the remaining life of the loan.


2e. If there is any second late payment, the shark lender will take possession of the mortgaged house and sell it at a low price to their associates.


2f. Shifty lenders may also impose conditions in the loan contract that the initial lender may resell the loan to a new lender who can set new loan conditions.

This trap can lead to unreasonable high interest rates to unwary borrowers.

3. The lenders who discloses only the advantages but not the disavantages of the loans.

The lender may offer his client low interest loans from Switzland [7] but failed to say that the declining exchange rate of US dollars versus Swiss franc may require more than the low interest to repay the loan (see [8]).

Many business owners have lost their businesses due to those lenders.

4. The lenders who want exclusive rights to all banking of the borrowers.

The lenders who want exclusive banking rights are really ready to take over the business of the borrowing companies. The lenders are usually owned by some private equities. Any such lender actually wants to take over some target company without paying the price of a normal take over! Such a lender will do it by causing financial distress in a target company and to trigger its default. A typical example is reported by BBC (ref. [9]):

Judge Martin Beddoe said Scourfield “sold his soul” to Mills in exchange for “sex”, “bling” and “for swag”.….

Scourfield, 54, a former HBOS manager, told customers to use a turnaround firm called Quayside Corporate Services… Mills, 60, who ran Quayside…, bribed Scourfield … “…What Scourfield gave Mills in addition to fees was the opportunity to take control of the various businesses and, in some cases, to acquire ownership of them,” prosecutor Brian O’Neill QC told the court. “

Any such targeted or collapsed company will be acquired for cheap price and restructured by some private equity associated with the lender and on sold to new buyers at huge profit as a healthy restructured company (see [10,11]).


The shifty lender provides all finance and  banking services at very low costs to the  “healthy restructured”  company. But as soon as the sale has been completed. those services will be withdrawn, leaving the company to seek the services at much higher costs from other provider companies in the market.


The  “healthy restructured”  company is bound to collapse. The following comment ([12]) from the original founder of a company illustrates the problem:

“It was bought by a type of merchant bank who paid a hundred million [dollars] for it and 18 months later floated it for $500 million,” Dick Smith said.

“Now you don’t have to be very bright to know that’s absolute greed, it’s impossible and unfortunately that’s caused this terrible problem at the moment.”


Even multimillion dollars pension funds have been tricked into buying those “healthy restructured” companies loaded with heavy debts.


5. Outright loan scam makers.

Carried out by faked lenders. They asked people to pay huge application fees for a cheap loans but they only took the fees and disappeared (see [13]).

6. Conclusions

All lenders are not the same and all loans are not the same. Borrowers need to be financial competent as the traps become more and more elaborate. Even multimillion dollars have been trapped.


References:

[1]. The Parasites of Western Economy, Part 1: Motorvehicle Insurance Scams., posted April 17, 2017.

[2]. gold-for-storing-wealth, posted April 28, 2017.

http://www.bankrate.com/financing/cars/warning-on-unfair-car-loans/

[3]. warning-on-unfair-car-loans, date

[4]. www.moneysmart.gov.au: car-loans, date

[5]. www.moneysmart.gov.au: home-loans fees, date

[6]. prepaymentpenalty, access date 05MAY2017

[7]. countries with the lowest interest rates for loans mortgageshttp://www.womensarticle.com/20-countries-with-the-lowest-interest-rates-for-loans-mortgages/?utm_source=taboolainterestwo&utm_medium=referral&utm_term=allnewspipeline

[8]. Luigi Zingales, Guy Rolnik, Amit Seru, Putting the Client Last: former-investment-banker-explains-clients-sucker-punched, posted

[9]. Ex-HBOS banker ‘sold his soul for swag’, bbc new, http://www.bbc.com/news/business-38842723, 2 February 2017.

[10]. the-private-equity-giants-the-greek-target-and-a-trojan-horseOctober 28, 2015

[11]. report-says-big-buyouts-are-likelier-to-default, date 05Nov2009

[12]. dick smith blames-private-equity-owners-greed-for-collapse, http://mobile.abc.net.au/news/2016-01-06/dick-smith-blames-private-equity-owners-greed-for-collapse/7069604

[13]. www.moneysmart.gov.au: loan-scams, date


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15 thoughts on “The Parasites of Western Economy, Part 2: Shifty Lenders.

  1. Two great posts Tony crooks never change they were the same in late 80’s when l was a broker .. Same plan scam and run for the hills .. I put a few out of business and many more took their place added both posts to share on tweet news as it’s connected to social media and will get info out to people .. Regards Ian

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      • It’s always a pleasure .. Tony Have been busy setting up with Brittius on the shared site for daily news it’s running 24 hours a day and posts from various feeds hoping to add in some bloggers RSS feeds soon and will let you know as yours are brilliant .. Did you work in finance or related or were you like me self taught ?

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        • Thank you for your comment on my postings.
          I have Univ. Degree in Accounting, but that gave me not much knowledge on tricks and traps. I have to learn them from my many friends working in finance. Like you, I am a self taught property investor, share holder, I had also been a derivatives trader. So I had first hand experience !
          If I fell for any of the traps I would be badly damaged. That is why I have to be always on guard and up to date with all those traps.

          Liked by 1 person

          • Thanks for that Tony .. It’s true that becoming streetwise is the best but I was in finance and insurance from 21 – until around 50 and finding honesty was really difficult from selling door to door to offshore funding which is where l gave up even after having my own domain .. I set up companies, lent money and helped people out of debt without borrowing money and never became a millionaire .. Became a half millionaire until my fellow directors robbed me and left me for dead .. Ended up in care services and found as many crooks and left .. Not employable as l now know too much .. They don’t like people like me or Brittius as we know answers before it happens .. The clue of course is to listen to what they don’t say .. then you know whether they are lying .. Worked out from that 9 out of 10 people lie and so your so called friends circle reduces a handful of real genuine friends ..

            Liked by 1 person

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