Tuesday, March 8, 2011

Extra Charges Opening a PC Financial Secured Line of Credit

A friend I’ll call Tim had an interesting experience trying to open a secured line of credit with PC Financial. He was told that the processing fee for home appraisal and basic legal fees would be $150. However, he was later contacted by another organization looking for another $83.

It turns out that PC Financial hires other organizations to handle some aspects of checking people’s credit worthiness. In this case, there happens to be a “Writ of Execution” against another person with the same name as Tim (including first name, last name, and middle initial). This other organization wants the extra $83 to cover their cost of having Tim sign an affidavit stating that he isn’t the same person as the deadbeat in addition to the cost of having the document properly witnessed.

Tim was a little suspicious and contacted PC Financial about this extra charge. PC Financial confirmed that the charge is legitimate. (I suppose that “legitimate” is in the eye of the beholder here. At least PC Financial thinks the charge is legitimate.)

At this point the offer from PC Financial seems to be a prime+1% secured line of credit for a one-time fee of $233. I’m not sure if that includes taxes or not. This brings up some questions for knowledgeable readers:

1. Is prime+1% and a $233 opening fee reasonable for a secured line of credit for someone with a pristine credit record like Tim? Is Tim likely to get a better deal elsewhere?

2. Is it now common practice for bank customers to be surprised by organizations they’ve never heard of asking for money to open accounts?

11 comments:

  1. I don't have the exact answers on this, but I am first!

    The fees and rate look pretty standard from what I've heard of HELOCs. Prime+1 seems to be standard these days, but if his credit is good and he negotiates hard, he may be able to shave a few bp off that rate. A few years ago you could get down to straight prime, but I doubt you'd do better than prime+.5 today, and even that may be tough (I only know one person with that rate, and that's with a lot of brokerage and other business at the bank). If the fee is already sunk, it may not be worth stopping the process to shop now.

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  2. So over 14 years ago I had the same done by Canada Trust (the trust company not the TD/CT beast of these days). They were offering a prime + 0.5 % Secured LOC, and they waved all transfer fees (but they were also quite vociferous in their statement of how much it might cost, which was over $400 back then?!?).

    PC Financial? Maybe CIBC screwing over Tim? Or is the back end now RBC? Not sure.

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  3. @Potato: I agree that shopping further only makes sense if the $233 hasn't been paid yet.

    @Big Cajun Man: I'm not sure who does the back end for PC Financial. But this isn't necessarily the same organization that does the credit checks for PC Financial (unless you have more information than I have).

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  4. When I opened my LOC through PC Financial, the third party I dealt with was FNF Canada. Here is a blurb from their web page (http://fnf.ca/):

    "... FNF Canada is a comprehensive and innovative transaction management service provider to large and small Canadian lenders. We specialize in facilitating all aspects of mortgage transactions; including title insurance, document processing, property tax management, appraisal management services and valuations for financial institutions."

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  5. @Anonymous: Thanks for the information. I wonder if FNF also specializes in charging people directly instead of charging their customers for services.

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  6. To compare : A person recently got a HELOC. The cost was almost $700 and was in the form of a first mortgage with a great rate and prime +.5 for the LOC portion. The transaction was with a "Big Five" bank. The transaction fee of $233 which was mentioned in the case above is pretty reasonable but the additional monies being charged seems after the fact [a "No No in my books] ... but still a lot cheaper than $700 mentioned earlier in this post.

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  7. I had the same thing happen when I bought my house but can't remember if was charged a fee. I think the fee charged your friend is unaccepable. How do we know if this company is not just using the fee to generate revenues?

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  8. @Larry: I'd like to know the same thing. PC Financial confirmed that they think the fee is legitimate, but I'm not convinced. Name collisions with deadbeats should be rare, but what stops a company that is subcontracted to check these things from reporting false positives for profit?

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  9. The pricing being offered for the secured LOC is fairly standard these days. Mine is at the same rate. I have heard TD may offer P + .05 and Royal Bank may offer Prime to a well qualified customer. As for the fees some institutions, as in this case, charge a nominal amount and some absorb all the costs for a secured LOC. There is a presumption that there will be no surprises. The were in this case resulting in some unexpected extra due diligence and cost on the part of the title company closing the deal. The borrowers should ascertain from pc financial where the source of this collection originated (credit bureau, sherrifs dept, etc) and attempt to have the record clarified at that source so this situation does not occur in the future.

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  10. I'm thinking of getting a HELOC with pc financial, I have been informed of the $150 fee to open the account but have been reading there may be a fee to close and it may/may not be portable? Someone also mentioned that it raises your home insurance. I have not committed to anything yet, the interest rate is very attractive.

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    1. @Anonymous: Closing fees seem likely, but I don't know how much they would be. I hadn't heard anything about HELOCs raising home insurance before, but insurance companies seem to take into account more information than they used to.

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