September 25, 2008

CONSUMERS COULD BE AT RISK OF LOSING THEIR HOMES: CONSUMERS BUREAU


The Manitoba Consumers’ Bureau is advising consumers to be cautious of advertisements offering the loan, lease or sale of a big ticket item, regardless of their personal credit status.

The ads may encourage the purchase of big ticket items such as vehicles, electronics, furniture and appliances, and can sometimes put consumers’ homes at risk by using them as security in order to guarantee loans to purchase these items.

Manitoba’s Consumers’ Bureau warns consumers to be wary of loan, lease and purchase agreements that have any of the following terms and conditions:
· Large documentation fees for setting up a loan agreement. Most financial institutions do not charge any documentation fee for a loan. A documentation fee of several thousand dollars for a small loan is excessive.
· Long lease terms for big-ticket items. The average lease for a car is just over four years and a computer slightly less. A lease for these types of items that locks a consumer in for 10, 25 or even 50 years is extremely expensive.
· Using the consumer’s home as security for a personal loan or lease. Consumers who allow a business to put a caveat on their home for a small loan or lease should be aware they are at risk of losing their property if they default on the agreement. For example, if a consumer gives the business a $100,000 caveat on their home to secure a $15,000 loan, the business could soon own the consumer’s home if they are not able to make the loan payments.
· High-interest terms. Consumers should check with several different lenders before agreeing to a loan or lease. If a typical prime interest rate is five per cent and the lender wants to charge 30 per cent for a loan, the consumer should shop for a better rate.

Consumers can protect themselves by recognizing a disreputable business:
· A disreputable business may attempt to wear a client down over many hours of negotiation and confuse them with several different salespeople and many pages of documents. Consumers feeling pressured, confused or tired should take any documents home to review before signing. If the business refuses to let the consumer leave with the unsigned documents, then consumers should take their business elsewhere.
· Consumers considering a loan with any of the above terms are encouraged to get advice before signing. They should call other lenders for additional loan options and should review documents with a lawyer or accountant.
· Before providing any down payment, consumers should be clear whether the document they are signing is for a lease or a purchase, and the item specified in the document is the one they want.
· Consumers should not sign any blank papers or papers that have blank parts; information can be added later without the consumer knowing. Consumers should demand copies of all signed documents.

Consumers entering into a loan with any of these excessive terms, who feel they have been pressured into signing an agreement or who did not get the item agreed to, should contact the Consumers Bureau at 204-945-3800 or 1-800-782-0067 (toll-free), or via email at consumersbureau@gov.mb.ca. The bureau will provide information on rights and remedies in loan, lease and purchase agreements.