@TheFIGuy wrote:
Curious, if anyone who has had a CLD also had auto-payments set up with the bank. I have a friend who firmly believes that having auto-payments set up curbs CLD's. She has no factual evidence but will not drop the topic, so here I am to get general DP's.
I do believe someone who has auto-payments set up can as quickly default on an account vs. someone who pays their bill monthly on-time without issues. But, she does bring up a good point about a false sense of security for the banks with auto-payments setup. They "sorta" know that it's going to be pulled and may be returned vs. will the person pay us this month.
There are a crap ton of other variables that could play into a CLD, but just for good measure, if anyone has recently had a CLD, did you have auto-payments set up?
Her top argument: If you loan person (a) and (b) 1k and person (a) sets up auto-payments and person (b) just pays the balance monthly on-time without issues then a pandemic hits she feels more comfortable in person (a) paying her than the person (b). This scenario excludes all other data points about both person (a) and (b) just payment history at the moment.
Thanks, myFICO peeps!
There is _NO_ false sense of security from the bank's side with auto payment. Everything banks do is calculated risk, and their risk of default changes none with auto payment. After all, an auto payment is usually for the MINIMUM, and making MINIMUM PAYMENTS is VERY RISKY behavior for a bank.
Auto-pay is a convenience for the borrower, and a convenience for the staff, so they don't have tons of "oops I missed my payment please credit my late fee" calls. It is good customer service to have auto payments. Auto payments for the minimum, which are what *MOST* people have give the banks NO sense of security.
