Should consumers be able to trust their banks? It was already common knowledge that many people had taken out disadvantageous loans and mortgages with the Dutch DSB Bank long before the bank went into receivership. Shouldn’t they have taken more care with their own finance?

Former DSB customer Hilbert de Wit: “One of those advisors comes to your home and says, ‘Well, everything’s in order. We’ll take care of it all so you get your loan’, and lots of people get taken in.” Mr De Wit himself had a DSB mortgage based on shares. He works as an administrator and knows all about money and figures.

 

Why did he do business with DSB? “The low interest rate. I only had to pay 1.7 percent for the first year with DSB. Yes, very low. It was a special offer for that first year. I had to pay 3.2 the second year, still not too bad, but after that the rate kept going up, slowly but surely.”

 

Complaints
Mr De Wit moved his mortgage to another bank because of the interest rate increases with DSB. He eventually set up the Support Fund for Problem Mortgages and, so far, about 2500 people have registered, either as donors or injured parties.

 

Mr De Wit can give lots of examples of DSB customers who didn’t properly understand what the conditions attached to their mortgages or loans were. He also says many people are angry about the methods used to sell the financial deals. “Agents would inevitably arrive late so that in the end the contract would have to be signed in a hurry. They would also have forgotten copies of the general conditions but would promise to post them on later. Those were the sort of tricks they used.”

 

Not fun
Fred van Raaij, psychology professor at the University of Tilburg, thinks the general public is too trusting and not critical enough of banks: “We’ve done quite a lot of research on consumer behaviour. Most people spend months doing their new house up, but only spend half a day on their mortgage. As far as they’re concerned financial issues aren’t fun; they’re too complicated. If one bank says they can have a mortgage, they don’t find out whether they can get a better deal with another bank. So, the problems lie partly with people not bothering to look into things properly or, sometimes even, not at all.”

 

Monthly costs with cut-price outfits such as DSB Bank are, in the short term, far lower than with other banks. DSB, for example, took over all other loans and combined it with the mortgage. This meant people were paying less interest on their consumer credit. As Mr De Wit points out: “This is advantageous until, of course, the interest increases.”

Shares
Professor Fred van Raaij also thinks the DSB bank took too many risks. Mortgages were often granted to people who were unable to get credit or mortgages elsewhere. In addition, the DSB bank invested its customers’ money in shares, which always involve a financial risk. As a result, a lot of money has been lost over the past year. Even life insurance and other insurance policies were organised on the same basis.

Independent advisor
Mr Van Raaij warns against financial middlemen who work on a commission basis. They sell products to people who come to them for advice, but they also stand to benefit from the products they sell.

"Try to get to know the market," advises Mr Van Raaij, "but that is difficult for very many people. Get advice from an independent financial advisor. You pay them by the hour, but they give you advice without trying to sell you something. It will cost you money, but in the long run it will probably save you more."

Finally, Mr Van Raaij advises consumers to work out how much they spend every month. Once people know what's left over, they will have a better idea of how high a mortgage they can afford. And people should always save, to prepare for the eventuality that things may go wrong.