It seems like with the plug being pulled recently there are more sour opinions than ever.
I am an avid visitor to this site so based on what is normally posted on this website…I don’t expect this to be posted but I’m sending it anyway.
What everyone needs to remember is the company was only as good as its employees.
We have all read about employees that tell “horror stories” about how they were “forced” to sell 11 percent interest rates and how they “finally” got out after 10, 15, 20 years…I do have a question….why didn’t you get out sooner if it was so bad.
There is a reason.
I think if you take a look at the woes of competitors in the sub prime space, you see that these high rates/fees that were charged were for good reason and most employees and even customers understand that. Although HFC/Beneficial has recently taken huge losses…they have been small relative to competitors in similar niche’s. One thing is certain….the company folded because of the decision made by HSBC that the HFC/Beneficial model doesn’t “have much connection to the rest of the group”…not because the company is necessarily any better or worse than its rivals that it leaves behind.
The companies that made low rate/low fee loans to sub prime customers are either long gone or are knee deep in bail outs. What all this has taught us is that not only is tighter regulation certainly necessary but also there is a rationale for the high rate/high fee’s that were charged to the sub prime segment because they were indeed high risk.
A borrower that has recent delinquency after a BK or is currently delinquent on one or more accounts is high risk and the rate and fees needs to reflect that to offset the high future delinquency risk. One could argue that the sub prime segment possibly shouldn’t have been serviced in the first place… but no economist, CEO, or reporter predicted this current strain that the global recession has caused even in this modern economy which has resulted in hardships to all businesses…especially lending institutions.
While everyone is crying against predatory lending for the companies that took these high risks, we cannot lose sight of the fact that this segment will now be grossly ignored and it is now a larger part of the population especially with the current economy. So we now need to ask the question….is it worse that a high risk customer is asked to pay high rates and high fees or is it worse that they now have little or no options at all? We must also consider that while predatory lending has become a hot topic among congress and other media outlets…let us not forget that predatory borrowering was just as big of a part of this recent down turn. Lending companies are under HUGE scrutiny under the Equal Credit Opportunity Act and if a customer qualified..the loan HAD to be made..no exceptions. A borrower is just as responsible..if not more.. to decide if they can afford a loan.
One thing never changed through all of this…..If a customer qualified for a better loan then HFC/Beneficial offered they could always go get it. So if someone wants to campaign for the unfortunate subprime borrower that got ripped of by HFC/Beneficial…..it will be interesting to see how that same subprime borrower is treated now that HFC/Beneficial is gone. Will similar campaigns be launched against the companies that don’t cater to this segment now that it will be largely ignored? Will we see a subprimewatch.com advocate website in the future that fights for the rights of subprime borrowers that now cannot get loans?
Bankruptcies are at an all time high as is mortgage delinquency. Unemployment is getting worse by the day which means 2x mortgage delinquency will continue to worsen. Who is going to make a loan to that person with less than perfect credit? As the economy rebounds and consumers go back to work…banks be unwilling to again take a risk even on a borrower that was maybe was prime his whole life but lost his job as a result of the recession is now considered subprime. All he needs is a break to consolidate his bills and try and get back on track.
While many may celebrate the fall of HFC/Beneficial…we must now look to the future of the increasing US sub prime customer base. As the economy does rebound, what bank will be willing to take a risk on a borrower with less than perfect credit given what we now know? We will look back and realize that HFC/Beneficial catered to a clientele that companies will now be hesitant to service.
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