SO careful about the financial industry, who works hard to tell us how much they care about their customers — yet at the same time, are happy to literally STEAL money from those unsophisticated about money. The story starts with my friend calling me a few nights ago to explain he’s sitting in HSBC, in front of the loan officer, and he’s about to sign off on a loan. Thankfully, he was about to sign the paperwork when something told him, “I should probably call Greg and get a second opinion”. My friend, who has owned a home for a couple of years, has recently been dealing with some financial difficulties, and was thinking about refinancing his house in order to get some capital to pay down some of his debts. Out of the blue, he started getting calls from the local branch HSBC, who told him they’d be glad to lend him money and they’d save him a lot of interest and headaches. In other words, this company is COLD CALLING people, trying to find people that they can lend money to. They called several times, and finally convinced him to come in and meet with them to see how they could “help” him. So here he was, on the phone with me, wondering if he should go ahead. I asked him a few questions about the loan, and immediately became concerned. He told me that they were going to be lending him money at 14.99% interest per year. I asked him what costs and fees there were on top of that. He said the legal fees were about $400, the title insurance another $400, there was a $500 “loan processing” fee, and then the appraisal which was another $400. I started asking him specifics of the loan and he didn’t know the answers — because these snakes hadn’t really explain the full details of what they were trying to get him to sign. The worst part of all was that this was a 5 year CLOSED loan… and if he wanted to pay off this 15% interest loan any time during the 5 years, it would be a SIX MONTH pre-payment penalty. Frankly, I couldn’t believe this was all true. I couldn’t IMAGINE that a bank would try to screw a customer so badly like this, and thought perhaps he had misunderstood the deal. I asked to speak to the loan officer, which I did. First, I verified all the details I had been told, and sure enough, it was all true. And this loan officer started trying to convince what a GOOD deal this was for my friend, since the interest rate was lower on this loan that it was on some of the other debt he currently had. I’m not sure if this guy was stupid enough to believe that he actually was helping my friend, or if he just has no conscience and has no problem ripping unsophisticated people off. I told him that my friend would not be signing the paperwork unless they reduced the interest rate, and made the loan so it could be paid off any time without penalty. As I expected, he told me he didn’t have the authority to change the terms, and took my phone number, explaining the branch manager would call me back to discuss the obvious ‘misunderstanding’. Of course, they never called me back. I said to him “I can’t believe a bank would rip people off like this!” And his response was, “well we’re HSBC Finance, not the bank. We’re owned by the bank, but we’re a different company”. I said, “so that makes it okay for you to rip people off?” He didn’t have a response for me. I spoke to my friend again, and told him under NO circumstances should he sign anything and to GET OUT of there. I could help find a lot better alternatives that would be in HIS interest, not this scumbag bank. The next day, I spoke to my friend again. He said after I hung up, the branch manager came into the office and for 20 minutes, this loan officer and branch manager tried to convince him this WAS a good deal, and to be careful who he took advice from. Thankfully, because I made him PROMISE not to sign anything, he didn’t. Since then, they’ve called him 3 more times, trying to get him to re-consider. I also found out even more information than makes this whole scenario even MORE disgusting. They were going to require him to take out disability AND life insurance, which would have cost him more than $100 PER MONTH! This is on TOP of the more than $700 per month interest payment for a loan of less than $60,000! This, for a guy who is single, with NO dependents, who has NO REASON to take out insurance on their mortgage. Of course, this company sells their own insurance products, so that would have been almost ALL profit to them. And they led him to believe that this was not only a good idea to protect HIM, but was required for the loan (both complete LIES). In fact, the insurance was only good for the bank because they made money from it. A lot of money! I almost drove over to the branch office of his lender to let the branch manager know what I thought about their tactics. They are LITERALLY preying on consumers who simply DO NOT KNOW how the lending process works. They told him that 15% was a good deal. They told him that insurance was REQUIRED and that their price was very good. They told him a 6 month interest penalty for pre-payment was normal. These kinds of stories make me SO MAD, and truly inspire me to try and get the message out to as many people as possible. It’s even worse that this was a good family friend, and I’m just glad I was able to stop him from making a MAJOR mistake that would have cost him TENS of thousands of dollars over the next 5 years… while filling this unscrupulous lender’s pockets. Of course, their defence is always going to be “we didn’t force them to sign” and “they made the decision”, “it’s not our fault if they buy what we sell”, and “we are just selling what the market wants”. The problem is, the average consumer is not EDUCATED enough to make a reasonable decision with things like this. They dangerously RELY on a bank to give them honest and fair advice… which opens the door for this kind of garbage to take place. As I always teach, KNOWLEDGE and CONTROL are the 2 keys to being successful financially. This means finding someone who you CAN trust to give you fair and honest advice, and NEVER taking your advice exclusively from someone who gets PAID to sell you a financial product. I am just glad I was able to help my friend avoid this catastrophe .. but it also saddens me thinking about the fact that there were probably 4 or 5 other people who didn’t call me that day, before signing off on a loan that will cost them tens of thousands of dollars, and a lot of heartache .. all in a product that’s been dressed up to “help them”. What a bunch of crap. Am I mad? Yes. I’m incensed that people get treated like this by these banks who pretend to “help”, meanwhile they have their hand in your pocket and provide biased, self-interested advice that helps ensure the average consumer remains saddled with debt, and NEVER gets ahead. HSBC, you should be ASHAMED of yourselves for absolutely SCREWING hard-working, honest and unsophisticated consumers in the market place! Unfortunately, they’re not the only lender out there preying on those with lack of knowledge about money. Part of what I feel I contribute to society is helping people understand how money and finance really works, so I stop hearing about these kinds of heart-breaking and angering stories every day.]]>