Despicable Banker Tactics

I hear all the time about the offensive tactics used by lending bankers to cajole money out of defaulting borrowers. I have heard so many stories and while not universal, as there are many respectful lenders who do not abuse their clients, there are substantial numbers who do, intimidating borrowers with threats, raised voices, misinformation, threats of criminal procedures and on it goes. It is unfortunate that some bankers feel it necessary to stoop to such low levels of behavior but just as unfortunately, these strategies tend to work and the bankers collect far more than the borrower can possibly afford. So, they are encouraged to continue using these strategies. Ugly, but effective. Disrespectful, but it works.

Of course, having a third party professional (like us) intervene tends to diminish the perceived power of the bank. We are far less likely to be intimated by such tactics.

Recently, I was shocked beyond expectation. One of our clients received a rejection of an Offer In Compromise from the SBA with a remark in the rejection letter noting that the borrower had a very substantial IRA. While an IRA is fully protected and not accessible to creditors (as was the intent of Congress) the SBA agent stated he was rejecting the offer in part because he expected the borrower to show good faith and liquidate a large portion of their IRA to pay down the debt of the defaulted note.

I find this to be totally reprehensible behavior. First of all, the SBA is a government agency which presumably supports the borrower’s position. Second, it is simply wrong to pin the acceptance of a workout offer on the borrower liquidating their IRA to pay down a portion of the loan when this asset is purposely unreachable by creditors and was intended for retirement purposes. The banker knows this, the SBA knows this, and yet the SBA agent utilized knowledge of this asset to attempt to leverage dissolution to pay down the bank loan.

IT’S NOT RIGHT AT ALL.

We know this but the SBA, on official letterhead, stated this as follows: “I expect a substantial liquidation of your IRA to demonstrate Good Faith!” I cannot believe these words. This has nothing to do with “good faith”, its a major breach of rights granted by Congress and is a largely intimidating affront intended to muscle cash out of the borrower. An Offer in Compromise should be accepted on it’s own merits without asking the borrower to liquidate his IRA for the benefit of the SBA given that this is exactly what Congress intended to protect from unscrupulous predator creditors. Now we discover that the SBA is the unscrupulous predator creditor seeking IRA liquidation to support a debt reduction program and holding this as a condition for accepting an Offer In Compromise! I am disgusted. It is bad enough when a bank tries to liquidate an IRA but for the SBA to threaten this is simply unacceptable. Yet, it has happened.