Interest-free loan

Press, 16 December 1988, Page 12

Interest-free loan

Sir,—The United Building Society recently advised me that I had, after 28 years, won an interest-free loan of $4OOO, but to uplift this loan I must pay $l5O application fee, $2OO-$3OO solicitor’s fees to register the loan against my property, $l5O valuation fee if the value of my land is less than the total loans on the property. In addition, the society requires a wage slip, driver’s licence, proof of existing loans on the property, credit cards, with present limit and balance and details of any hire-purchase or personal loans I may have. I was told by more than one staff member that the loan would cost quite a sum and I should take the cash equivalent ($1000). Encouraging? I have also been told “the loan is interest-free, the charges are society policy.” When during the last 28 years were the rules changed? — Yours, etc., B. FROST. December 8, 1988. [The general manager (operations) of the United Building

Society, Mr L. Mickell, replies: “In making a loan from investors’ and depositors’ funds United, like all responsible lending institutions, has an obligation to those who provide the funds to see that their investment is backed by good and adequate security and that the loan applicant is credit-worthy and has the ability to meet repayments under the loan. With the exception of the driver’s licence, the information requested from Mr Frost is relevant to establishing the above. The driver’s licence would only have been requested by our staff as a means of establishing Mr Frost’s identity prior to discussing confidential account details with him. Presumably he was not known to our staff member and did not have any other means of identification with him. The valuation fee is collected on behalf of the valuer who is required to establish the value of the property offered as security and the legal fees quoted are an estimate only of the fee Mr Frost is likely to have to pay to his own solicitor for work involved in preparation and registration of the mortgage document. The application fee is to cover United’s costs in processing the application. The charging of an application fee is common practice and in accordance with the user-pays principle. A ballot win on terminating shares determines only that the loan will be interest-free and has never provided any exemption from fees or costs incurred in processing the loan or providing adequate security. The costs are not scaled relative to the value of the loan but represent a fair charge for the work involved. Because of the value of the loan in question, I can understand Mr Frost’s concern, but do not believe it equitable that other United customers should be asked to subsidise the costs of Mr Frost’s borrowings or that our normal prudential lending criteria should be waived.”]