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Government Eyes 'Cap' On Salary Deductions

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

THE Clearing Banks Association’s (CBA) chairman yesterday said the Government’s proposed Borrowers Protection Bill aimed to put a “cap” on salary deductions, noting that a company would only be able to approve a certain percentage of a person’s wage to go towards loan payments.

Nathaniel Beneby Jr, who is also Bahamas market head for personal banking with Royal Bank of Canada, said that when dealing with delinquent homeowners, banks were finding persons had many other consumer loans they had not disclosed when applying for the home loan, or obtained subsequent to the mortgage being granted.

Speaking at a press conference on the Government’s mortgage relief plan to commence, Mr Beneby said that according to the Central Bank of the Bahamas, consumer loans represented $2 billion or 33 per cent of total private sector loans as of July 31, 2012.

“There needs to be a behavioural change in consumer spending”, he added.

Mr Beneby said one of the objectives of the proposed Burrowers’s Protection Bill was to ensure fairness when a lender is exercising its power of sale over a delinquent homeowner’s residence.

It was also seeking to address the issue of salary deductions.

Mr Beneby explained: “This issue of salary deduction is a major issue. The Clearing Banks are regulated by the Central Bank with regard to guidelines around debt service ratios.

“The Clearing Banks follow prudential norms in their lending guidelines. They report to the Central Bank not less than monthly, so the Central Bank has oversight and regulates the Clearing Banks. There are some lending institutions that aren’t regulated by the Central Bank and engage in lending, like furniture stores and car dealerships”.

“These persons have the ability to obtain salary deductions. Once they are able to receive 
their monthly payment through salary deduction, they will lend the money.

“What banks are seeing is that when we are discussing the reason for delinquency with mortgagors, at that time we learn there are lots of others consumer loans outstanding that either weren’t disclosed at the first instance, or persons received the loans subsequent to the mortgage being granted.

“This Borrower’s Protection Act is endeavouring to cap salary deductions. In other words, it will say a company can only approve a certain percentage of your salary to be deducted to go towards loan payments.

“It’s heartbreaking sometimes when we look at borrowers who have very little to carry home to their family”.

Mr Beneby said the Gvernment’s proposed Credit Report Act contains provisions allowing the Central Bank to supervise the credit reporting industry.

“This also will help to regulate and bring order to these other lending institutions that are not regulated, and do not have the oversight 
of the Central Bank”, said Mr Beneby.

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