Rights vs. Right!

I am astounded by the audacity of bankers and collectors these days.  Think about the changes that are occurring.  Many acts have been passed to limit what and how these industries practice collection and yet nothing changes, at least not in a positive direction.

I am currently working with a couple of guarantors on a small SBA loan.  They held a franchise business that failed and now the doors are closed and they are unable to pay the loans associated with the business.

I called the banker and explained that I would like to pursue an offer in compromise and the man immediately stated he knew, not believed, but knew, my client had the ability to personally handle the note obligation.  This was long before he had seen any personal financials.  This man has further continued to pursue this matter as if this family had millions and was hiding the funds.

Both of the clients make a reasonable wage through their primary jobs, but they also have reasonable expenses, mortgage, child care (for 4 children), car payments, insurances, etc.  We have supplied this man with operating statements, financial statements, tax returns, paystubs, and more and he is holding his line.  In fact this morning he stated that my client showed the ability to pay $X,XXX.xx per month and he was sure if they tried harder that they could make the monthly payments.  Payments that are more than double the number demonstrated available.

Now in addition he is asking these people to liquidate their retirement accounts to pay off the debts in addition to maxing out their monthly ability to pay.  He claimed that most people would do so as it is the “right” thing to do.  I understand the banks position, but I would disagree completely.  What would be right would be for both parties involved who chose to take the risk of starting this business to take equal losses.  Think about it.  The bank is a partner in my client’s enterprise.  They lent money based on a business plan, the personal situation was a fallback, not the main idea.  The fact the business the bank invested in failed should not be solely the guarantors problem and it should not be up to a person to handle a business liability individually, but it is.

What is right is not always, and in fact is rarely the same, as what your rights are.  Because of the documents signed, the bank has the right to pursue these people personally for a business issue.  The bank has the right to take away their home, to harm their income, to liquidate all of their personal assets and to essentially ruin their lives.  These are rights, but are they right?  Is this the way it should be?  Why should someone hand over their PROTECTED retirement accounts to a bank because of economic decline?  They did not con the bank into lending money.  How would this be the right thing to do?

The bank has the right to accept any offer that is presented and can be proven to be equal or greater than what legal means can collect.  This is the guideline we are supposed to follow when presenting an offer, but most people would be able to offer a dollar were that the case.  They have houses that are under water, no cash and no assets.  The bank legally cannot get anything from them and yet they come forward with thousands of dollars offered from friends and family and the bank is unsatisfied.  These institutions ask for random percentages like 20% to give forgiveness.  Now 80% of your debts disappearing is a great success, but how do we pay a random figure?  Our offers are what is right, they are the maximum these people can pay and still emerge from this process able to go forward in life.  Every bank states that the guarantor should do the “right” thing and pay, but who makes sure the banks are doing the right thing?  From experience we know, there isn’t anyone.  The banks and SBA have no oversight to even follow their own rules and regulations.  There is no person to contact when a bank ignores the standards and demands unfair recompense.

To me there seems to be a major difference, a scary difference, between what we allow as rights and what is the right thing to do.

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