Overdraft facility placed accounting lecturer in debt trap - Finsac commission of enquiry
Published:Friday | March 18, 2011 | 12:00 AM
Dionne Rose, Business Reporter
Anthony Hutchinson, an educator in Manchester, saw his bank debts climb after he exceeded an expensive overdraft on which he paid 53 per cent per annum, and later as his loan was taken over by Financial Sector Adjustment Company (FINSAC) and its collection agent, Jamaica Redevelopment Foundation (JRF).
Hutchinson, a lecturer in accounting, in his witness statement to the FINSAC enquiry, said his loan climbed from J$1.6 million in 1995 to J$12.7 million by 2008, even after having paid down some J$5.5 million.
Hutchinson was a part-owner of 19 acres of land at May Day in Manchester, where he had put 17 acres of the property into farming and rented the other two acres to the May Day All-Age School, which used the space as a playground.
He borrowed the J$1.6 million under a 'special agricultural facility' from National Commercial Bank (NCB) in 1995 to refinance an existing overdraft at the bank.
The interest rates on the loans were 53 per cent per annum on the overdraft; and 27 per cent on the agricultural facility for the first year.
Transfer of debt
Hutchinson said from time to time, he sourced funds from the account and that sometimes he would exceed the limit of the overdraft with the excess capitalised from the loan, which eventually reached a principle of J$3.8 million.
In May 1999, the educator was advised by NCB that the debt had been transferred to Recon Trust Limited, a subsidiary of FINSAC Limited. The correspondence at the time showed that he owed J$5.5 million and that the bank still retained administration of the loan.
After receiving the letter, Hutchinson, in his witness statement, said he continued to negotiate with NCB to cap the loan and for the bank to have a sale of the lots he owned.
He said in May 2001, after consistent negotiations, he received a letter from Refin Trust Limited, another FINSAC subsidiary, informing that the loan would be capped at J$5 million. He was given two months to July of that year to clear the debt.
Hutchinson said he immediately increased his efforts to conclude negotiations with the Government to sell them the two-acre lot leased by May Day school.
The Commissioner of Lands had valued the property at J$3.4 million at the time. But the transaction was not completed in time for him to meet the July deadline. An extension was requested and granted to December 2001, with a rider that it came with an interest charge of 25 per cent per annum.
Hutchinson, in his witness statement, said on October 23 he made a payment of J$700,000 to FINSAC, from the sale of some other lots. He disclosed, however, that he did not meet the deadline to pay off the J$5-million debt because of the slow pace of negotiations for the two-acre sale to the Government.
In 2002, he was informed that the debt had reverted to its original amount and was now at J$8.5 million, a significant amount which he said comprised of unpaid interest on the loan.
He was later informed that the debt had been sold to Joslin Jamaica Limited, which was contracted to carry out loan collections on behalf of the JRF, a subsidiary of Beal Bank of Texas.
Hutchinson, in his witness statement, said an initial meeting with JRF indicated that he now owed J$15 million, an amount he disputed.
Negotiations with the Government to purchase the two acres of land was concluded in 2008, and that the J$5.5 million proceeds was paid over to JRF.
JRF then later told him that he still owed J$12 million, but that climbed to J$12.7 million a month later. The debt collector also held on to title of property that was used as security for the loan.
"JRF has continued to hold my title and have put the property up for sale. About four years ago, a valuator attended at the property on behalf of JRF. At the time, he told me that he would report a value of J$30 million," said Hutchinson.
"If this is so, were I to be allowed to complete the subdivision and sale of the lots, I would be able to pay off the loan and retain the property which is my home. I have lived there for more than 30 years."