A few years back, the government created guidelines to stop lenders loading debt onto people who were ill equipped to handle it. The Responsible Lending Code now informs the way banks lend new money. Unfortunately, it hasn’t fully permeated down to the way they manage existing debt.
So an elderly gentleman with minimal income and next to no assets can have his overdraft extended indefinitely by the bank. When asked if the overdraft should be gradually repaid, the answer comes back: “We’ll just take it out of his estate.” News flash – there won’t be enough in the estate for the bank to get its money back.
In our opinion, a really responsible lender wouldn’t just follow the letter of the Code and ignore existing debt. It would come up with a plan to clear the debt. Whether it’s a few thousands of overdraft or a large mortgage across a property portfolio, responsible lending means looking at the long-term interests of the client.
Perhaps banks aren’t always best equipped to do this. In which case, the question shouldn’t be, “Which bank do I go with?” but “What financial arrangements will best serve my purposes?”
And that’s a conversation we’re always ready to have.