Expose them!

• Hylton says FINSAC debtors' files should be open to public scrutiny

McPherse Thompson, Assistant Editor - Business

The files of all debtors in financial institutions whose insolvency led to their acquisition by FINSAC during the 1990s should be opened to public scrutiny, as well as the Commission of Enquiry, to determine whether borrowers were fairly treated, Patrick Hylton has suggested.

According to Hylton, the former managing director of FINSAC, establishing whether the bailout company treated debtors fairly required a careful and detailed analysis of the majority, if not all, of the tens of thousands of loans that FINSAC purchased from indigenous financial entities in which it intervened.

In addition to examining the cause of the collapse of the financial sector, the commission has been mandated to ascertain whether debtors, whose assets were seized by FINSAC and sold to the Jamaica Redevelopment Foundation, were fairly treated.

However, while recognising the importance of every loan, customer and their experience, Hylton, alluding to the number of aggrieved debtors who testified before the commission, said: "I do not think that if we have 20 complaints - or even if there were 50 or 80 - out of tens of thousands of facilities handled, that such a set of circumstances can lead to any reasonable conclusion regarding whether FINSAC was generally fair to debtors and the extent to which the approach to treating all debtors was similar."

Hylton, who testified at the enquiry at the Jamaica Pegasus hotel on Tuesday and again on Wednesday, said that in any financial institution, the experience was that persons whose loans were non-performing and were aggressively pursued were those with the most complaints.

determining fairness

Currently group managing director of National Commercial Bank, Hylton suggested that the only reasonable way to determine fairness "is to have every single debtor's file open to the scrutiny of the commission and perhaps the public."

If that was done, he said, the original circumstances, the record of the negotiations which took place pursuant to making the loans, the rationale for FINSAC's approach, as well as the response of debtors would become public knowledge so that an informed position can be adopted.

Such an approach should also be taken given that, to the extent that those loans were purchased by the government and funded with taxpayers' money, then every dollar of write-off reflected a benefit at taxpayers' expense.

"In those circumstances, taxpayers should be informed of who the beneficiaries (of write-offs) were and the magnitude of the benefit they received," said Hylton.

"That is why we considered it necessary for our approach to write-offs to be well structured and carefully justified, with that justification documented in all the circumstances."

good starting point

He said that in every case where a compromise settlement was reached, there would be a memorandum or case summary outlining the details. "These memos and case summaries represent a good starting point," Hylton suggested.

Challenging the oft-trumpeted notion that it was the high interest rate regime at the time that affected debtors' capability to repay their loans, the former managing director said that to the extent that the facts demonstrate very significant discounts and write-offs approved or offered by FINSAC, then the impact of high interest rates on the borrowers' ability to repay would be somewhat mitigated.

Hylton, who now runs one of the institutions that got into trouble, said one of the issues observed during the period when Government tried to rehabilitate the financial sector was that while borrowers would eventually negotiate settlements with FINSAC involving significant discounts on the sums outstanding, several of them would initiate payments as agreed and then default again, seeking new and further compromises.

"It was also our experience - and admitted by some borrowers - that they were using this as a strategy to try and get a better deal," he said.

mcpherse.thompson@gleanerjm.com