NASSAU| The Consumer Protection Commission has launched an investigation into Scotiabank’s lending practices amid a barrage of complaints from the bank’s mortgage clients.
Frustrated Scotia clients have pleaded with the government to look into the bank’s policy of forcing clients to give them several months notice before paying off their mortgage or pay an exorbitant penalty fee in lieu of notice – despite already raking in hundreds of thousands of dollars in interest on mortgages.
A similar practice has been adopted by CIBC FirstCaribbean, which requires mortgage holders to give six months notice or pay a six-month penalty, which could amount to thousands of dollars.
This serious concern has prompted Consumer Protection to write to the Clearing Banks Association and request a review of this wildly unpopular policy, designed to dissuade clients from searching for better mortgage rates at competing banks.
A staggering amount of clients’ mortgage payments go to the bank in the form of interest as their profit for giving the successful applicant the loan. The longer the term, the more interest the client will pay over the life of the loan. Hence, some clients’ efforts to pay off their mortgage in a shorter period or move to another lending institution with lower interest rates.
Since 2021, when six of the seven lending institutions reduced their loan rates to bolster lending conditions, banks have been battling to keep their clients and attract new ones.
“Approximately six of the seven lending institutions reduced loan rates during the last six months of 2021, in an effort to bolster lending conditions. Rates for mortgages and consumer loans were lowered by the majority of lenders in both the third and fourth quarters,” according to the Central Bank of the Bahamas.
As a result, interest in commercial credit and mortgages both rose by 1.6 percent.
One client called on the government to “read the Riot Act” on banks and warn them “to buckle up or buckle out.”
“All they’re into is what they can drag out of the Bahamian people and successive governments have allowed this to happen,” he added.