Posted By: MN Banker
Loan Disbursements - 11/29/07 05:22 PM
We have a practice at our bank that makes me very uncomfortable; however I'm not sure how big of a deal it is. Basically, when we have a customer wanting a loan for debt consolidation, we just cut them a check and leave it up to them to pay off what they said they were going to. Other banks I've been to actually send the payments or make the checks payable directly to the company.
My concern is that typically these are underwritten assuming they are paying off certain debt, but we don't actually confirm whether that debt gets paid off. Also, the customer doesn't actually put anything in writing regarding which debts they are paying off - it is just documented on the credit report by the lender. So, if they end up defaulting and we find out they didn't pay off what we though we were going to, we can't really go after them for fraud since they never put it in writing (correct?)
Do any other banks out there do it this way or see any problems with it? Thanks a lot!
My concern is that typically these are underwritten assuming they are paying off certain debt, but we don't actually confirm whether that debt gets paid off. Also, the customer doesn't actually put anything in writing regarding which debts they are paying off - it is just documented on the credit report by the lender. So, if they end up defaulting and we find out they didn't pay off what we though we were going to, we can't really go after them for fraud since they never put it in writing (correct?)
Do any other banks out there do it this way or see any problems with it? Thanks a lot!