A lesson in credit card insurance & irresponsible marketing

A few days ago, I got a call from a guy from XYZ bank. He wanted to introduce me to an insurance product that settles my credit card balance in case of death or if im diagnosed with a critical illness. aside from settling my balance, there is also a certain sum to be paid out to me/a nominee if the above happens (about 50K-100K).

he said that if i die, my family would not have to bare the burden of settling my credit card debts. i just had to stop him there.

now when did my family or anyone else aside from me became liable for my credit card debt? a credit card is a 'clean' credit facility - meaning no security is offered in exchange for the facility given. there is no collateral nor did anyone formally promised to XYZ bank "if sunny defaults, i will be responsible".

he then started to mumble out some technical mumbo jumbo about the credit card form that i signed containing such clause and my family is legally obliged to pay off the card debt if i die. he also said the 'mother's maiden name' part that i filled up (which is standard in all credit card forms for security check purpose) is naming that person as liable for my debt. my mother?!

 i was just giggling on the other end as he tried so hard to twist the facts. again, fact is, no one is going to be liable for my credit card debts when i die and they have no right to chase after anyone for payments. our country has strict laws protecting guarantors and banks actually have to adhere to strict guidelines before a guarantee is legally enforceable. credit card form?what a joke. there was never even another signature aside mine and only mine!

now, similar products such as mortgage insurance or housing loan insurance is fair as your house is offered to the bank. if you die and no one pays, your loan defaults and your house will be sold off to recover the loan. so there is a real burden on your family to continue servicing the loan. thus, an insurance for mortgage is actually an important thing an almost a necessity.

even so, if no family member gave a personal guarantee on the loan, the liability on them to pay if you cant pay due to disability or death is indirect. bank wont say "you pay because you are his wife, son, etc"..bank will say "if no one pays, bank will have to sell off the house so please pay or you would have to find elsewhere to stay"..

and so, back to the credit card case where there is no security offered and no guarantee given, it is wrong to sell this insurance saying if you die, your family wont be burdened etc because no, they are not legally binded. in practice, card companies usually would end up writing off your debt as a loss to them if you die and dont pay. so when you buy this insurance, you are paying premium to insure them from loss arising from risk of death!

of course, there is the pay out sum payable but that is actually just like a personal accident coverage and you could probably get it cheaper elsewhere. and if that guy marketed the insurance product as an accident/life policy, i would have spared him the lecture on the above. poor guy, he sounded agitated and probably just wanted to end the call at that moment.

well, there are cases where credit card debt could have a real effect on your family. firstly if the amount is large enough for the bank to sue for bankruptcy and exercise claim on your assets to recover the debt. i am not sure about the amount, probably minimum 30-50K. you probably would also have a housing loan that will default and thus the card company will have a claim on the sales proceeds, ie, less of the balance from sales of your asset after settling other loans would be left for your family (even so, im not sure if suing for bankuptcy in case of default due to death is legally possible)..

or if you have other loans, e.g mortgage, at your card issuing bank, you would probably be binded by a 'consolidation clause' whereby all your loans at the bank will be consolidated as one amount for recovery in case of default and thus, your credit card debt, regardless of amount, makes this figure higher.thus less of the balance from proceeds from sale of asset will be given back to your family.

finally, the bigger point in all this is that many times, especially when dealing with insurance products, marketers will try to create a need for a product so that you feel that it is necessary to have it. sometimes the need is real but sometimes, like the example above, it is fictional. fear is another thing that marketers, especially insurance agents, would try to put in customers as people dont like fear and would buy something if it reduces that fear.

i feel that we are very third world when it comes to marketing financial products. we need more people who don't just sell at all cost, but instead advise on product features and needs. people who dare to say "oh, i think my product is not suitable for you" if that's the truth.

p/s: the guy from XYZ bank apologized and claimed that he was taught that way by the training ppl to market the product.tsk tsk tsk...

I Need A Job With More 'Me Time'

Ok. Went to the gym today and of all the things I could've seen on the announcement board, I saw this poster of JB Arts Festival 2010. (Gym?Arts Festival?)

JB Arts Festival

It had been running since 29th June and I only found out about it today. Bloody missed some good performances. D'oh!
Besides revealing the fact that I haven't visited the gym for at least 3 weeks, it shows that either:

1) The festival had little promo, or
2) I was too busy to notice any promos, or
3) Both

I think it's really (2). Even if promos were there, I no longer have time to go search for it. It seems if I need to know about happenings around me, either I stumble upon it or someone has to inform me about it. I think it's sad, like I'm disabled or something.

Well, to be fair, couldn't really entirely blame the job for this. But I really need to manage my time better. Somehow, it all must fit in the 24/7 that I have. Work, family, ME, etc (not necessarily in that order). And if anypart of all that needs to be sacrificed, it must be 'work' I feel.

P/s: Thank God I'm not a doctor.

Oh, JB ppl, check out the festival yo! They also on Facebook.

I See The Light! ... Now I Don't!

maybe collecting my random thoughts, those 1-2-3-4-whine liners on my blog is a good thing to do...not so much of reminding everyone else of what i think, but more to remind myself who i am from time to time..

here's a start:

"if we don't stay and improve things slowly from the fundamentals up, and leave simply because we don't like things, things will never progress..once in every blue moon someone decides to stay and will be strong enough to make a difference but more likely than that, collective will for change no matter how small individually will decide the battle.."

i was inspired by my frustration that how certain things at work that i feel can be bettered will just be excused as 'culture' and live on...like unnecessary fear of the bos, or coming back from 1 hour 'lunch break' to continue work just after 15 minutes!

culture might be one reason that might push me away from my current job in the future but it is just not me to run away from being the change i feel necessary and subtly do my best to improve what's around me...i've done it before many times and each time i find no task is too big..i might not be able to change the whole corporate organisation, yet, but at least i am another guy in there which contributes to the number of people with the same mentality..and enough of 'me' who decided to stay would one day become significant enough to change 'culture'..

not just work..for example, i was stuck in a bad jam on my way back from work coz of some accident up front, and it is so tempting to shift into the emergency lane and cruise forward (which some cars are doing)..i was frustrated by this habit in our society..but then i thought, if i wont be big enough to change our driver's attitude, i will contribute to the number of people queing up in the jam like civilised people..

and u know what struck me? i noticed that if this was KL (to the extent of my experience in its gridlocks), the emergency lane would've been swamped..BUT..there were only about 1 car zooming past per 5 seconds just now, which is not bad!so i feel i've contributed to a new driving 'culture' by joining the rest in the line =)

and how i realize little things in life that we face everyday is beautifully connected to bigger things in our world..if u belief in something, the least u can do is live ur beliefs, be counted, and let market forces lead the way..but hey, most things in life is grey..what you believe strongly is right is exactly what someone else equally strongly believe is wrong..so in the process of it all, don't forget to maintain a certain degree of respect to others =)

What I Do At Work

a lot...sometimes things i consider nonsense...but here's what i am actually employed for...and fundamentally speaking, i like it...

i analyse loan propositions to come up with a credit decision...well, at least 'decision' for me right now is more of a recommendation as i don't have discretionary powers to decide...

i distinguish what we call the 5 C's...Character, Capacity, Capital, Collateral, Condition...and by that order shall my analysis be structured...

character is your creditworthiness and..erm..character (in credit sense that is..i don't care really if u don't believe in god)

here, i would ask questions like.."what's the guy's credit history like?" .. "how is the credit record of this company's directors?" .. "this guy a habitual defaulter?" .. "why does this guy pays his instalments late?" .. and i have customers personal reports to assist me..these reports are facts of the case..for example,

fact: report shows ur car loan is always overdue by 2-3 months...
story: "oo, this car is loaned under my name..but my brother is using it..he pays the loan"

then unless there is a way to prove beyond reasonable doubt ur story, the facts of the case read: this is UR loan for a car under UR name which U have legal obligation to pay...n U r not paying..meaning U r bad with paying back loans..

i also rely on other sources such as existing background knowledge (existing customer) and opinions given by colleagues or trusted persons, as long as the opinions are substantiated...experienced staff also are good at reading body language, reading between the lines, etc..

character is most important and thats why it is first of the Cs .. i don't really care what a person have to say about anything else but if it is proven that he is not creditworthy, its like showing many many doors but all locked with no keys. so, learn to handle some sort of financial commitment with banks early on..and don't be an ass if banks reject u coz u r no good in paying loans..

capacity is 2nd and almost equally important...it is the ability to service the loan..it can be from adequate to comfortable to non-existent..it is how much you earn vs how much u need to pay..it is about how profitable a company is or how well the cash generating ability...etc... (no, it does not assume u agree to consume instant noodles for the rest of ur loan tenure)

here, i would generally need income supporting documents...official documents that is credible and can substantiate how much you earn, and prove to me that what you claim to earn is true...for individuals, if u earn a fix salary, u'll have payslips, epf, bank accounts ... even if u don't get payslips, ur money must go somewhere, like a bank account..

u can tell me your grandma or grandpa's story about how much u earn and what sort of magic business u r doing that seems to be giving u abnormal returns, but if u can't prove it with acceptable supporting docs..its just not gonna work...

u can also tell me about how much u r going to get in the future when this becomes that, blablabla...but yea, what's the point if there's no evidence? but hey, banks do accept that uni graduates have better earning potential...and, at my bank at least, having a degree helps in some cases ;)

so that's pretty much the 2 most important things u can have in mind when u think about taking up a loan..of course, different loans require different depths of analysis and all cases are different...nonetheless, the above two C's will always be an integral part of the consideration process..

finally, banks (like yourself) are not charities...just use common, unbiased sense, and think..if u have millions of customers asking u for money (assuming u have the money)...what would you do? (hint: employ Sunny with awesomely crazy remuneration package)

aside from me badly needing to sleep soon despite how i can't get my eyes to shut now...the other 3 C's are kinda more technical and is usually a matter of compliance once the first 2 Cs are checked OK, hence, not worth my trouble writing and ur trouble reading unless u want to learn, which u dont need to coz friendly neighbourhood bankers like me exists...

contact me for honest help in credit..i don't promise i'll have the answer, but i promise i'll learn them up for u and assist u further..

The Rubbish That Must Be Taken Out Is Worth The Trouble

"The price of freedom of religion, or of speech, or of the press, is that we must put up with a good deal of rubbish."
Robert Jackson

Whoever Robert Jackson is, he makes good sense..

I'm taking this swipe at freedom of speech/press by exercising my own rights to freedom of speech..

No,i'm not against it..i'm just saying that a whole lotta ppl talking = a sizeable loada crap...

More dangerously, the pen IS mightier than the sword..put someone with a good ability to talk/write, with a dash of personality & humour, in front of an audience..n he/she will easily sway perceptions n his/her opinions/speculations will easily be taken in as truth..

So always question what u read/hear..doesn't matter how highly u hold the source in regard..which is why freedom of speech/media must exist so we have options..

and yea, unfortunately we'll hafta deal with more crap..not just written n spoken rubbish..but rubbish situations possibly caused by the rubbish written & spoken..

Oh,n physical rubbish in the form of more material to be consumed by more talking/writing.. ;-)

And now...i'ma gonna go google up "Robert Jackson"..