Skip Stephens recently graduated from college with a degree Ibusiness administration. While attending college, Skip built up alarge amount of debt, which currently includes student loans,outstanding credit card balances, bank loans, and so forth. Nowthat he has a good-paying job, Skip wants to clean up his debtposition to improve his credit reputation so that he can qualifyfor a mortgage when he is ready to purchase a house in a fewyears.
As a result of a conversation with a financial planner, Skipdecided that he should consolidate his debt into a single loan.Consolidation will help him monitor his debt better as he pays itoff, and such an action probably will also decrease the interestrate that he is now paying. It took some effort, but Skip was ableto find a financial institution that seems willing to offer him thetype of loan he needs. The firm, which is named Syndicated Lending,is a new firm that specializes in loans to riskier borrowers, so itappears to be the right fit for Skip. Much of Syndicatedâs businessis conducted electronically via the Internet. Although the companyhas a Website that gives some information about loans thatSyndicated offers, there is not much information about interestrates, application fees, and other charges associated with gettinga loan. When Skip clicked on the âInterest Rateâ icon onSyndicatedâs Website, a message appeared that said to contact thecompany directly. After many attempts, Skip was able to speak to aârealâ person at Syndicated. When he asked why more information wasnot available on the Website, the employee stated that the companydecided not to post interest rates because managers believed it wasunfair to publicize low rates to lure customers, knowing that mostborrowers are unable to qualify for such loans. In other words,managers felt that it was unethical to use the âbait andswitchâ1 tactics used by competitors. The employee gaveSkip some general information about the loans that Syndicatedoffers, but she would not tell him interest rates because thecompany had a policy of not quoting a rate until a thorough creditcheck was completed. As a result, to get an interest quote, Skipwould have to fill out and submit a loan application and he wouldhave to pay a $100 application/credit check fee.
Skip decided that he wanted more information about Syndicatedbefore deciding whether to apply for a loan, so he talked withpeople in the local area, searched chat boards and consumer opinionWebsites on the Internet, and so forth. Although much of theinformation he collected was positive, many people complained thatSyndicated was a âshadyâ organization that has a reputation ofchanging interest rates without notice and that it is not acustomer-friendly firm. Some of the people whom Skip talked withwent so far as to call Syndicated an unethical âloan sharkâ thatcould get away with unannounced interest rate hikes and otherchanges in loan agreements because the company knows that itscustomers cannot borrow from any other financial institution in thelocal area.
Now Skip is wondering whether it is wise to apply for aconsolidated loan from Syndicated, even though it appears that hecan improve his credit rating and lower his interest payments. Whatshould Skip do? Does it seem as though Syndicated follows unethicallending practices? Is it unethical to use âbait and switchâ tacticslike those that Syndicated accuses other institutions of using?Should interest rates be posted on the companyâs Website?
Skip Stephens recently graduated from college with a degree Ibusiness administration. While attending college, Skip built up alarge amount of debt, which currently includes student loans,outstanding credit card balances, bank loans, and so forth. Nowthat he has a good-paying job, Skip wants to clean up his debtposition to improve his credit reputation so that he can qualifyfor a mortgage when he is ready to purchase a house in a fewyears.
As a result of a conversation with a financial planner, Skipdecided that he should consolidate his debt into a single loan.Consolidation will help him monitor his debt better as he pays itoff, and such an action probably will also decrease the interestrate that he is now paying. It took some effort, but Skip was ableto find a financial institution that seems willing to offer him thetype of loan he needs. The firm, which is named Syndicated Lending,is a new firm that specializes in loans to riskier borrowers, so itappears to be the right fit for Skip. Much of Syndicatedâs businessis conducted electronically via the Internet. Although the companyhas a Website that gives some information about loans thatSyndicated offers, there is not much information about interestrates, application fees, and other charges associated with gettinga loan. When Skip clicked on the âInterest Rateâ icon onSyndicatedâs Website, a message appeared that said to contact thecompany directly. After many attempts, Skip was able to speak to aârealâ person at Syndicated. When he asked why more information wasnot available on the Website, the employee stated that the companydecided not to post interest rates because managers believed it wasunfair to publicize low rates to lure customers, knowing that mostborrowers are unable to qualify for such loans. In other words,managers felt that it was unethical to use the âbait andswitchâ1 tactics used by competitors. The employee gaveSkip some general information about the loans that Syndicatedoffers, but she would not tell him interest rates because thecompany had a policy of not quoting a rate until a thorough creditcheck was completed. As a result, to get an interest quote, Skipwould have to fill out and submit a loan application and he wouldhave to pay a $100 application/credit check fee.
Skip decided that he wanted more information about Syndicatedbefore deciding whether to apply for a loan, so he talked withpeople in the local area, searched chat boards and consumer opinionWebsites on the Internet, and so forth. Although much of theinformation he collected was positive, many people complained thatSyndicated was a âshadyâ organization that has a reputation ofchanging interest rates without notice and that it is not acustomer-friendly firm. Some of the people whom Skip talked withwent so far as to call Syndicated an unethical âloan sharkâ thatcould get away with unannounced interest rate hikes and otherchanges in loan agreements because the company knows that itscustomers cannot borrow from any other financial institution in thelocal area.
Now Skip is wondering whether it is wise to apply for aconsolidated loan from Syndicated, even though it appears that hecan improve his credit rating and lower his interest payments. Whatshould Skip do? Does it seem as though Syndicated follows unethicallending practices? Is it unethical to use âbait and switchâ tacticslike those that Syndicated accuses other institutions of using?Should interest rates be posted on the companyâs Website?
