Attitude shift on personal loans
Not all banks agree on severity of the problem
by Nancy Gardiner
NNSL (Oct 03/97) - The manager of one Yellowknife bank says he's seen a drastic change in attitude in the past year from people who have personal loans with his bank.
Kent Moffitt, manager of the Scotia Bank, said the reasons for people encountering financial difficulties aren't the same as they used to be. People are now more prone to walk away from their debts.
There are three categories he's seen rise in the past year: people going through marital problems (separations or divorces); employment ceasing for one of the partners in a twosome; and people running into difficulty with consolidated loans.
Their attitude is: "Take what you can get, and stand in line. I just can't do it," said Moffitt.
In the case of consolidated loans, often the people have one or more consolidated loans, and they're coming back seeking another consolidated loan.
"It's really happened a lot in the last year," said Moffitt. And the consolidation category was the largest in the last year.
"They run up credit cards, and all we're doing is financing their credit cards."
"With consolidation, where someone has lost their job, and it's creating a major strain on the marriage -- then it's a Catch 22.
"People at home are fighting over finances, they're used to being able to go on big vacations, a family member gets sick or dies (in the South), and they don't have the cash (to visit).
"It becomes very serious. There's an attitude that people don't have to save for emergencies -- they can always borrow."
Moffitt recommends people seek financial counselling and talk to their bankers before there's a problem.
"Up here, people need to understand banks want to work with them. What happens is when people try to hide or move from their obligations, in today's society and with electronic means, it's very hard to hide," he said.
As for homeowners, there aren't many who just walk away from their homes in Yellowknife since many can still rent or lease their homes out.
Another bank manager who asked not to be identified says there hasn't been a huge increase in loan defaults or bad attitudes, but it could get scary -- more along the lines of foreclosures.
There's double if not triple the number of homes on the market and people can't sell, so they'll want to lease, so there's higher vacancy rates, said Moffitt.
"If someone put five per cent down on a home and is losing five per cent, I can see them just tossing a key at the bank," he said. "There could potentially be some risk out there."
Moffitt said the number of consolidation loans are the same as ever for his bank. Another trend is $5,000 to $10,000 credit limits on people's credit cards but the bank has it's own in-house collecting, which allows it to focus more on sales, he added.
Gord Van Tighem, manager of the Bank of Montreal, said his bank is doing three groups of loans: consolidation, vehicles and mortgages.
However, since rates dropped, there's conflicting message of changes in the economy and small amounts of improved optimism (on personal loans), he said.