OT Anybody Know Normal Bank Policies?

This goes back many years but it has bothered me alot.My grandfather left me $10000 invested with one of the big Canadian banks.Every few years I renewed the investment with them and happily drew out the interest every 6 months.When I started feeding a few calves my assistant bank manager suggested that I consider taking a secured line of credit on the investment certificate.I did and it worked out very well for many years.I worked full time and we would have up to 40 calves on hand from week old when I bought them to 7 months when I sold them as corn fed red veal.I also rented 35 acres for crop.

Almost 20 years ago a new strain of Bovine Viral Diarhea came through the area and hit me really hard .I was using part of one of the barns at my families dairy farm and the vet wasn't optomistic about keeping the virulent form of BVD out of the dairy herd so I called deadstock and liquidated my herd.

I went to my bank and explained that I would be having trouble making my line of credit payments and wanted to surrender the Guaranteed Investment Certificate and close the line of credit.The credit line was less than the amount of the certificate sitting in thier vault so I figures they would manufacture enough service charges to eat the difference and call it even.At this point I just wanted to move on.I should also mention that the bank had changes managers by this point.

I was told that he couldn't just take the GIC and cancel the line of credit.My certificate had to go to the head office and be put on a bond auction but he wasn't optomistic about what it would bring because it was only 4 months to maturity.I struggled along until the maturity date on the GIC and paid off the bank then cancelled the line of credit.I had to borrow from relatives,sell everything I owned of value and max out my credit card but I survived until that maturity date.

Does anybody here know what normal banking procedures would be in a case like this?Almost 20 years have passed and I still wonder if that bank manager didn't want to help me because we had butted heads in a small way before,or if he was too lazy to do the paperwork of sending my proposal up the line for approval (A couple of local small businesspeople have told me he was bad for that) or was he following some kind of normal proceedure that makes no sense to me.It's all water under the bridge now but I still wonder every day.The loans I had to take to survive those 4 months took years to pay off and I never really got back on track.

I would say yes to all of the above of your concerns. A little bit
of everything there.

They have a rigid formula tat you sign up to, and I would say
he was in the right to lay out things the way he did.

A friendlier fella might have found ways to make it work
anyhow, and helped you out. But not obligated to do so.

If you appeared to be at the end of the road and not going to
come back for more business with the bank, this was the end
move, then to many bank folk I you wouldn't be worth going
the extra mile for, as you are out the door and gone anyhow,
why work extra to help you?

And if there were head knocking between ya then that almost
always enters into it, the big shots in a community learn to run
over and head knock with the unimportant people, while
smooching and back stroking the even bigger power people in
town..... It sounds like you took on things in the other order
and well there you are, as you say water under the bridge.

Paul

Sounds to me that he gave very good advice as you could
have lost around 20% by selling out at the time. I have a loan
on a house I sold and they wanted to pay 20% less than its
value and was not even two months old on a 30 year loan at
8.5 % these buyers know how to make money off of you. Be
glad that the Banker gave you good advice and let it go.
Walt

If you owed less than the GIC was worth at maturity, it seems to me that they could have just let the interest on your line of credit accumulate over that period, so long as there would be enough in the end to pay everything off, and just wait for the payout to satisfy the entire debt. When I was with PCA, we often carried loans past due if there was a future event coming that would pay it off.

But strictly speaking, they probably couldn't just accept the certificate and say your loan was paid, until they converted that certificate to cash, either by selling it prior to maturity, or holding it to maturity as I noted above. Seems like they could have accommodated you, if they wanted to.

Guess I'm a little curious why it was such a hardship to pay interest on $10,000 for 4 months- even at 10% annual interest, that's only $333 total for 4 months.

Normal bank policy is to [i:9822c7c0c7]separate you from your money in the most efficient manner possible[/i:9822c7c0c7]. I used to work for a bank.

Chip thats a Big 10-4.When you deal with a bank its the same as dealing with a Rattlesnake you gotta keep a close eye on them and sooner or later they'll bite you as they can't help it its just their nature.

I'll go along with that. Most of them are too dumb to do anything else.

A president of one of our local banks was usually so spaced out you wondered how he could find his way the men's room, let alone be president of a bank.

2:30 one afternoon, I was sitting in his office BS'ing after we'd completed some business. His phone rang. Someone wanted to talk to him. He told the guy to come in at 3:00. After he'd hung up the phone, he said, "Why did I do that? I have someone else coming in at 3:00".

We continued to talk. About ten minutes later, he got up, put on his coat, and said, "I hate to break up a good conversation, but I have to be in Utica (a town 13 miles west) at 3:00.

I never did figure out what happened to the two guys who were supposed to see him at 3:00.

Same bank. A local used car dealer closed his lot and went to work for the bank. Story going around was that he owed them so much money, they gave him a job to work it off.

A local IH dealer closed. The Parts Manager went to work for the same bank. Guess anything qualifies you to work for a bank.

I could go on.

The hardship was that at the time I was handling a lot of money but keeping little of it.The calves I shot were mostly stuff to go in the next month or two to cover the crop expenses and keep the cattle side of things going.I was charging 5-600 a month in feed but paying it off every month out of cash flow.At the time I owed money all over but had no sales to cover my accounts.

The banks up here are pretty rigid on this kind of stuff. Not sure which one of the banks you dealt with, but I know the one I deal with has about 4 or 5 options when it comes to interest-bearing GIC's. I usually go with the option of a 3-year term but carries some flexible redemption options, i.e. for the first year you can cash it in each month on the date of deposit. After the first year you can only cash it in on the annual anniversary date. They have others that are locked in for the full term that pay slightly higher interest (not that it makes a difference at current rates), but I prefer to have a little flexibility. But yes, the way you were treated sounds like normal bank policy (in Canada).

At one time the banks were into Term Deposits which could be cashed early at a reduced interest rate but you don't hear much about them anymore. They would be assignable as security on a loan like a GIC is but the rates are pathetic.

The terms of the line of credit also required a minimum percentage of the principal repayed each month as well as the months interest

I think a "line of credit" is the same thing as what we used to call a revolving loan, where you have a maximum amount it can go to and is paid down when product is sold. The interest is payable monthly but I haven't heard of a specified amount of principal that had to be paid per month, although each bank probably has variations in policy. I know the bank I dealt with preferred to see a revolving load get nilled out or close to it at least once a year. If it got stuck at the limit or never fell below, say half the maximum, they often wanted to extract that amount and put it on a separate term loan that would be paid down over five years or so and had to be secured by something like chattels or land mortgage.

Revolving loans, lines of credit and credit cards can get away on a guy in a hurry. In your case an unforeseen circumstance can come up which, when combined with rigid bank policy, can cause a lot of sleepless nights.