Are Banks Super-Sizing Personal Loans? |

With the economic crisis happening across the world and banks offering more personal loans, credit cards, mortgage loans, and other loans, the finger of blame is being pointed squarely at the banks. Questions are being asked and unions are looking for answers. Are banks at least partially responsible for customers getting in way over their head in debt? Is the pressure put on bank staff to sell, sell, sell causing the unsavory and unnecessary loans to be made? Are banks trying to sell you a larger personal loan than you need? The Sunday Star-Times (from New Zealand) is seeking answers.

Unnecessary Loans or Helpful Advice?
The most telling aspect is the case of a 77-year-old man who wanted to purchase an item in the price range of $14,000 to $15,000. Now this man went into his bank to get the money he needed. He had plenty of money in term deposits and could have broken them to gain the money he needed without paying any interest and without going into debt. However, the bank did not suggest this option to him. Instead, they convinced him to get a credit card. The idea was to get a credit card and put the $14,000 to $15,000 on that. The main problem with this method comes in paying for the credit card, because the 77-year-old lives on a fixed budget. Now, the man has thousands of dollars in debt when there was no need to have any debt.

Is the Pressure to Sell Too Much?
We do not like to think of banks as businesses, but they are. And like any business, they have to sell to make a profit. Banks sell credit cards, personal loans, mortgages, secure loans, and checking and savings accounts. Like many other businesses, the banks in question have quotas and targets. The staff has quotas they must meet in order to prove themselves with the company. When someone does not meet the quota, they are made to feel inferior and sometimes not valuable to the bank. The big difference is that unlike other quotas, these sales feed on the desperation of people. Then when the people cannot pay, the rest of us have to suffer as well.

The unions are saying it is all too much. The banks need to cut back on the quotas to properly reflect the economic times we are currently in. The banks are saying they are working to “decouple” salary increase and sales targets. However, is it too little too late? Only time will tell, but one thing is for certain. Watch out the next time you attempt to get a personal loan. The bank may try to convince you to super-size it.