By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
A former Cabinet Minister believes Bahamians are “completely naked” against sharp banking practices, adding that the problem had become “endemic”.
Damian Gomez QC, who until recently was minister of state for legal affairs, told Tribune Business there needed to be “a complete rethink” of how banking was conducted in the Bahamas.
He accused the Canadian-owned banks, in particular, of “doing things they couldn’t dream of” in their home jurisdiction, adding that this was “unfair” to Bahamians.
Mr Gomez said that with virtually no protection available to consumers, he was set to assist numerous Bahamians on a “pro bono” basis in cases against the commercial banks.
And, given the relatively high returns and profits generated in the Bahamas by the foreign banks, Mr Gomez said these were effectively fuelling growth in other nations at the expense of this economy.
“I think the banks here need to be held to account for their lending policies,” Mr Gomez told Tribune Business. “We have really no protection as consumers; that’s the reality.
“The Central Bank is supposed to be here for us, but if you make a complaint they say they only deal with bank-to-bank complaints, so the public is left completely naked for practices that could be abusive, and that can’t be right.”
Mr Gomez cited “predatory practices” with consumer lending (automobiles, vacations, credit cards etc) as one of his primary concerns.
“There’s absolutely no policing of it,” he charged. “We’ve got civil servants who sometimes take home as little as $20 from their pay cheques, and the banks are charging these enormous rates for so-called administrative fees when they are getting salary deductions from the infrastructure that is put in by the Government and paid for by the Bahamian people.
“It is something that could not happen in England and Canada, and we ought to be giving the Bahamian public the same level of protection as in enjoyed in these developed countries.”
New, and increased, bank fees have also attracted the public’s ire, as the industry seeks to develop new income streams to compensate for reduced interest earnings - and increased provisioning - associated with its $1.1 billion ‘bad loan’ portfolio.
Mr Gomez told Tribune Business he was “partial to the public”, and “on board” with their concerns, as it relates to Bahamian commercial banking practices.
Tribune Business recently revealed the bitter loan dispute between CIBC FirstCaribbean and Malcolm Spicer, an Abaco-based former Cacique award winner who stands to lose his home and investment project designed to provide for his family in retirement (see other article on Page 1B).
CIBC FirstCaribbean has long argued that the matter is a simple asset/security repossession following the borrower’s default, but Mr Spicer and his advisers are alleging that the bank bears the primary responsibility for the situation.
They claim that the bank lent a sum, $855,000, that it knew was inadequate to complete construction of Mr Spicer’s project, and he only proceeded after receiving verbal assurances that more financing would be forthcoming.
They are also alleging that the loan amount was based on a realtor’s fundamentally flawed appraisal, in which it was calculated that the size of the physical buildings was “4 at 4,014 square feet = 12,042 square feet”. This, Mr Spicer is alleging, was never disclosed to himself.
Mr Gomez is currently “researching” Mr Spicer’s matter to determine if his help is needed, and he told Tribune Business: “There are others that I will be helping on a pro bono basis similar to this.
“It’s endemic. There needs to be a complete rethink of how the banking business is done in the country. We need to have the same sort of standards that pertain in Canada, where these banks are from.
“They are doing things they couldn’t dream of doing in Canada, and I don’t think it’s fair.”
Despite the odd annual loss caused by one-off writedowns, the Canadian-owned banks are still generating significant profits in the Bahamas amid a tepid recovery, with much of this money repatriated to their regional and global parents.
Bahamians, both individually and in the private sector, have also long complained that interest rates in this nation are too high compared to the rest of the world, placing businesses - and the wider economy - at a competitive disadvantage.
Mr Gomez argued that, as a result, the Bahamas was effectively helping to finance lending activities that helped develop other economies, while its own remained stagnant.
“What we’ve ended up doing is to support the employment of workers in the automobile industry elsewhere, and manufacturing industries elsewhere,” he told Tribune Business.
“We are paying such a high rate of return to the banks that we are in essence robbing ourselves of the opportunity to start our own manufacturing.
“It’s taking away from our jurisdiction the ability to develop, and keeping us in a state where we’re always struggling to reduce the unemployment level below 6 per cent,” the former Cabinet minister added.
“In the US, UK and Canada, over 6 per cent is regarded as a problem. For us, it’s a reality. We’re never going to get unemployment below 6 per cent if we’re paying these interest rates that are not sustainable from an economic and social development perspective.
“It’s important that something be done, because one of the impediments to entrepreneurship is a banking environment that doesn’t assist small businesses. That reality is the problem we are faced with.”
Mr Gomez said this was why he supported the recent creation of the Consumer Protection Agency, and expressed hope that it would lead to “real” political and public discussion on banking and development policies.
This, he added, had not occurred “for some time in the political arena”.
Comments
Entrepreneur 8 years, 3 months ago
Well said Mr. Gomez!
Any decent banker will agree with you. And I know there are many fine senior people in Canada who will, I trust, hear what you have so bravely said. And then take the necessary steps to reverse all of this. A more prosperous Bahamian society can only be good for the banks, but they have to change to deliver policies that help create that rather than thwart it.
Economist 8 years, 3 months ago
At long last a politician who has a conscience. Good job Mr. Gomez.
bogart 8 years, 3 months ago
Go to the head of the class. Ombudsman Gomez. Banks are not perfect. Regrettably having headoffices in the lower Caribbean where the dollar is not on par with the US creates a myopic view that Bahamians could be fleeced so that our profits can go to the Caribbean to support others. Better the Bahamas than them they should say.. Sadly the Governor of the Central Bank is leaving the fees charged to other forces to find equilibrium instead of speaking up that it is nonsense for banks to daily charge $10 to cash a cheque, especially to the poorest who cannot oen a bank account and maintain it. It is said that 10,000 Bahamians cannot find $5 dollars to go into the food store. Mr. Damien Gomez you have stood up to the bigger picture of Bahamians giving away their birthright to get Foreign investments and jobs created and the employed repaying heir salaries to the foreign banks where it goes out through the back door. Thank you Mr. Damien Gomez.
banker 8 years, 3 months ago
What's all this talk about foreign banks raping Bahamians? Don't like it? That's why we have a Bahamian bank -- the Bank of the Bahamas. It is for Bahamians by Bahamians so that we don't have to kowtow to foreigners and we have our own bank where the profits stay right here. So what is the problem???
Wanderer 8 years, 3 months ago
The problem is Sir, is that Bahamians have no protection from the banks, who implement their own policies and get away with whatever they CAN get away with (Including BOB). The poor client has no recourse to any problem, with an only option of getting a lawyer. Then finding a lawyer to fight the banks who have all the "top" lawyers. Then the money, then the Supreme court.....its an impossible circuit for most Bahamians and Gomez needs to be commended for bringing this to the forefront. Thousands of Bahamians have fallen prey to these bank practices and the common man is defenseless.
Wanderer 8 years, 3 months ago
A breath of fresh air Mr Gomez. At last someone held in high esteem speaks for the people against the usurious practices of these behemoths.
BaronInvest 8 years, 3 months ago
Loans for mortgages are at 1.75% across europe when you catch a bad deal... When i came here we were thinking about financing a portion and go a bit bigger on the construction. Was wondering who is so stupid to be pay these rates the banks "offer", you get better deals from the italian mafia... So Mr Gomez is right. You are an idiot if you finance anything here, even US Banks give you better conditions.
OMG 8 years, 3 months ago
First of all "banker says" would you like to be reminded that BOB is not profitable and gave out many large unsecured, un repayed loans to some Bahamians. What a way of doing business. Secondly I agree that banking here is a joke where we pay massive annual fees for credit cards and RBC charge $10 to cash a cheque on a RBC account in the bank where that account is held. In essence $10 for passing a piece of paper over the counter.
banker 8 years, 3 months ago
I should have mentioned that I was being sarcastic. Perhaps it was not entirely evident.
Entrepreneur 8 years, 3 months ago
The Spicer case is clearly becoming, or revealing, a bigger scandal.
It is absolutely self evident FCIB CIBC made whopping mistakes, and then may have lied about it under oath to the Supreme Court.
Isn't that a serious thing to do?
As Mr. Gomez makes clear, it is equally absolutely right that no Canadian customer would be treated like this for the best part of a decade - as Mr. Spicer appears to have been - without plaintiff bar lawyers screaming cover up and demanding punitive damages.
But with no plaintiffs bar to speak of in the Bahamas, no wonder the Spicer case, with its egregious issues, has attracted the interest of a QC and former senior Cabinet Minister, several law firms working on it without fees, and many others, looking to explore how these types of mistakes and cover ups exposed in The Spicer case link to the wider issue of abusive banking practices in the Bahamas which would likely never be inflicted on Canadian customers in Canada.
bogart 8 years, 3 months ago
Banks are not perfect. The 4,500 defaulted mortgagors did not all every last one of them made the error of defaulting. The mortgage relief of using 20 million in public taxpayers funds fails to take into account the point that the bank officers could have made many errors in all 4,500 cases!!! Fact that the banks have all changed their application process and spent millions of dollars in doing so was not done for just doing so, it was done to prevent defaults. Many alleged stories are out there about wrong doings including alleged not honouring certified cheques and asking the customer to return the cheque because a signature was not right and keeping the cheque and telling the customer to sue the person who they got the cheque from, another alleged story is the bank advertising repossessed house with the people still in it and selling house, another alleged story is the bank opening account while funds are still in escrow, another alleged story is that bank officer recommended contractor who was no good, another alleged story is the Spicers where it seems its like the TV ad where the lady questions the company fixing the car 3/4 of the way with only three wheels (and expecting them Spicers to drive it to the bank and make loan payments), alleged stories of payments on wrong accounts and house advertised for sale, another alleged story is the customer was not told or had a bank analysis of the full costs of owning the house to ensure that not only could they repay loan but also involving the house costs etc, many,many, many alleged stories where the blame may lie elsewhere and the customer may be eligible for public taxpayers funds!!!!!! An independent Commission is warranted to look into the 4,500 defaults of some 1 billion in bad debt, average mortgage homes valued of $150,000 X 4,500 is = $675,000,000 in collateral tied up, and affecting many businesses, construction, insurances, real estate, etc and if $100,000 is spent setting up this Commission then the remaining $19,900,000 could go further as the Commission will see who is at fault when giving out mortgage relief with public Funds. As the funds are for loan repayments which the customer is struggling to repay partilally the queston is who will pay the house insurance, the life insurance, the Real Property Taxes especially if the customer is struggling it is unlikely these additional bills are being paid,Also after the funds are given out will there be an audit which will of course be necessary to monitor and can persons be required to return these funds if someone else is the party who caused the default? Will the persons allowing the mortgage relief be held responsible? How can the govt tell if the bank is putting forth the right applicant if they were the ones to have possibly contributed to the default?
Wanderer 8 years, 3 months ago
I so agree with bogarts comments. I personally have heard some horror stories. I am not talking about clear loan repayments defaults where a customer borrows and cannot pay back because he doesn’t have the money. I’m talking about errors, mistakes, banks continuous change of staff so the newcomers do not understand the customers who had had problems previously. When Scotia closed shop in Eleuthera their customers had to deal with Nassau and I know of one particular story from Eleuthera where that has caused major problems with NO fault to the customer yet they are about to be removed from their home. Irregular and, I believe, illegal acts of throwing people out of their homes without warning, sometimes late at night. Missing documents, incorrectly filed and passed documents. The customer who has found errors or mistakes or problems with his/her account has no other recourse than to get a lawyer. Then try to find a lawyer willing to fight the bank. Most will give ‘conflict of interest” answers (ie hefty pay cheques they get each month from the banks) to customers needing to fight the bank. In Nassau there are lots of possible alternatives to the big lawyers, with of course hefty retainers required. Island folks are in an even bigger hole. Few lawyers, little knowledge of the courts and legal system, dependent for most on Nassau lawyers and so constant travelling to Nassau is necessary. I would also like to see, as he comments, some Commission set up to look into those $1 billion defaults and for all those who had a problem and couldn’t get it resolved and gave up, we would need these folks to come forward and their cases need to be reviewed. We’re talking peoples’ lives here. The homes that they have worked basically, all their lives for. It is not trivial.
Entrepreneur 8 years, 3 months ago
Bogart is to be applauded. So right....
In the Spicer case he not only had a 3 wheeled car forced upon him by the bank, and that his family ran along behind tirelessly holding up the corner missing wheel, but Spicer did make many thousands of dollars of payments for the "car" each month to the bank, but only for the bank to refuse to reply to any of the correspondence before then seeking to seize EVERYTHING Spicer owned...
Result: family ruined, retirement ruined, businesses ruined, members of the family's health ruined and the FCIB bank's response?
According to what appears to be the affidavit evidence as reported - just lie to the Supreme Court and hope to bully your way out of it!!!
Well,, one thing for sure the FIRST CARIBBEAN LOAN ADVERTS ARE TRUE - get a FCIB Loan and change your life...
They just fail to disclose what kind of catastrophic and cataclysmic change they have in mind....
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