CALLED UP BY BANK.

Waikato Times, Volume 102, Issue 17223, 5 October 1927, Page 8

CALLED UP BY BANK.

POWER BOARD OVERDRAFT. AN ERSPHATIC PROTEST. At the Thames Valley Electrical Power Board's meeting at Tc Aroha on Tuesday, Mr J. M. Strange presiding, the clerk, Mr Sprague, read the letter he had written the Minister of Finance respecting the calling up of the board's overdraft by the bank. It was as follows: —"I am directed by the board to bring under your notice the drastic action of the Bank of New Zealand in demanding the repayment of a hypothecated advance on loan account of £40,000 owing to the board refusing to pay the increased rate of interest, viz., 7 per cent as demanded by the Bank. For your information I will detail the leading up to tliis demand. My board arranged with the A.M.P. Society for a loan of £IOO,OOO, in amounts of £SOOO per month, the first payment to be made, on May 1 of this year. The Bank of New Zealand had arranged with the board to advance by hypothecation £40,000, this amount being liquidated by the A.MP. Society';* payment of £SOOO per month, the board drawing approximately £ISOO and the balance £3500 was retained by the Bank in reduction of the advance. The amount owing to the Bank on August 19, 1927, when they demanded payment was £32,224 13s Id, when the first deed of hypothecation was prepared by the solicitor acting for the Bank and the board, the rate of interest stated therein 'was current rate as fixed by the Bank from time to time.' The Bank would not agree to this agreement, and instructed its Wellington solicitors to prepare a fresh deed of hypothecation, inserting claim (1), viz.,''That the Bank interest on any advance owing thereon shall be at the rate of £6 10s per centum per annum, and payable on the last days of March and September of each year.' This we contend was a fixed trading contract and agreed upon by both parties. The Bank states lhat if Lhe rate had fallen the board would have received the benefit of the reduction.. If this was its contention why did it not agree to | the first deed which embodied the provision. However, lhe board is not concerned with what might have happened. It will be seen that the rate of interest slated in the deed, viz., £6 10s pur centum per annum, had nothing to do with overdraft rates of interest., but was a binding contract. The Bank's action may have been a verv serious matter for the district. The possibility of adding to the present large number of unemployed, together witii the restricting of the board's operations to the direct del/imenl of the larming community, for whom we arc largely" functioning, should not lightly be considered by any institution. The Minister of Finance, replying to the Council's letter of September 12 complaining that the Bank of New Zealand has demanded repayment ot a hypothecated advance on loan account owing to the Powder Board having refused to pay the increased rale of interest viz., 7 per cent., as required by the bank said the rate of interest on overdraft was raised by the Associated Banks in May last and the Government has no power to interfere in their trading policy. Approval of this rate is being given under section 14 of the Local Bodies' Loans Act, 1926, to those local authorities who apply for the same. The question of lhe interpretation of the conditions of (he deed of hypothecation appears to be one between the board and the bank.

Farmers' Union Congratulations. The Putaruru branch of the Farmers' Union wrote \ongratulating the board on lhe. stand it had taken. The branch considered that the board's action was in the interest of consumers and deserves the. wholehearted support of every local body throughout Lhe. county. Advice was received lhat Messrs C. E Macmillan and Samuel, M's.P., with lhe. General Manager of the Bank of New Zealand, would interview the .Minister of Finance if the board desired.

Letters were also received from Mr Mr F. F. Ilockly, M.P., advising that he was willing to go into the matter with the Minister of Finance on behalf of the board.

The chairman: "That's all right. The Minister's opinion must be obtained in regard to raising of interest. We simply want to protest against the action the bank Mas taken. 1 do not sec any benefit in sending a delegate to Wellington. I do not think we could do anything more. Other banks had been approached to accept the board's account. The matter was left at the last, meeting for the Finance Committee to report, and until replies were received from the other banks nothing further could be done. Mr Howie: We must fight them to the bitter end. Mr Flaft: We have nothing from the Bank of K.Z. beyond the announcement that the overdraft had been called up. The bank had not the decency to write us and explain the position. We are in the same position to-day as we were a month ago.

Mr Gorleit: We can change our account. At the next meeting I am going to move that way. 1 don't care who knows it.

Mr Arthur contended that they should write members for the districtpointing out that there was a breach of faith on the bank's part. It was resolved to hold the matter over till next meeting.