Small Business needs YOUR HELP TO STOP PREDATORY LENDING PRACTICES. Below are representations of small business who has filed complaints to the Federal Reserve in Washington, D. C. and St. Louis regarding Cass Commercial Bank in St. Louis, MO. I should tell you up front the Federal Reserve position is there is no mechanism for Small Business complaints, only consumer complaints. The Federal Reserve in St. Louis will send a Bank Examiner to review; however, with the backlog of complaints it is going to be months before the Federal Reserve will investigate. SMALL COMPANIES DO NOT HAVE MONTHS!
This particular business is A Women-Owned Business Enterprise (WBE) Certified Company and US Government Central Contractor Registered.
Where is our Government! It is time FOR CHANGE!
February 12, 2009
Federal Reserve Board
Attn: Bill
Re: Cass Commercial Bank - FDIC Certificate number 1068
History:
1. 35 year relationship with Cass Bank, always on time payments.
2. November 2005, Cass Bank renews Line of Credit $450,000 at 6.75%; adds building as security in addition to Inventory and Receivables.
3. March 2007, Cass Bank completes annual renewal of Line of Credit $450,000 and increases interest rate from 6.75% to 9.25%. Cass Bank claimed bank examiners stated this loan is a “criticized loan”. (According to the Federal Reserve there is no such terminology.) Cass Bank required, Small Business Owner to subordinate an additional loan in amount of $165,000.
4. September 2007 Cass Bank says it does not intend to renew Building Loan in January 2008.
5. January 2008, Cass Bank renews $278,000 balance on Building Loan to 04-08-08 (avoiding reporting on FDIC March 31 Call Report) and increases interest rate from 6.25% to 8.5%.
6. March 2008, Cass Bank calls in $450,000 line of credit.
7. April 2008, Cass Bank demands payment of Building loan, institutes default rate of 12.5%.
8. May 2008, Cass Bank renews Building loan to 10-08-08 at 8.5%.
9. October 2008 Cass Bank calls building loan – Building appraised at $1,700,000 loan balance $263,000.
10. November 2008, Cass Bank institutes default rate of 12.5%.
11. November 2008, Cass Bank agrees to extension to January 1, 2009 (avoiding reporting on FDIC December 31 Call Report) and hikes interest rate from 8.5% to 10%.
12. January 2009, Cass Bank institutes default rate of 14%.
13. February 2009, offers to renew loan at 10% increasing principal payments from $3,387.14 per month including interest to $10,000 per month plus interest.
14. Small Business continues to make payments of $5,000 per month on the Building Loan.
Complaint:
1. Small business has for many months sought financing with numerous financial institutions and continues to do so.
2. Small Company sells major surgical and research equipment. This equipment is high dollar. Cass Bank's action to refuse availability of a line of credit leave Small Business unable to finance equipment large purchases for customers and government contracts.
3. The CPA firm has stated they have found financial institutions are calling in loans on good customers to shore up their reserves. Cass Bank’s position is that “the loan remains outside their acceptable parameters” further, exacerbating the financial crisis and the liquidity of our Company as a going concern.
4. Cass Bank has not provided their policies nor the parameters for the above statement.
5. Cass Bank is only granting renewal on a short-term basis. This constant wrangling with the Bank is counter-productive and takes our focus away from growing our business.
6. Cass Bank is giving very short deadlines for response – last one was an offer of $10,000 principal payments was received February 10 and response required by February 12.
7. Cass Bank’s position is unreasonable considering the ratio of the loan, $243,000, to the appraised value of the building, $1,700,000, a loan to value ratio of 14%.
Expectations:
1. Continuation of Lines of Credit of $250,000 with competitive terms to support government contracts.
2. Renewal of the $243,000 Building loan at prime plus 2%, continuing the prior amortization of $3,387.14 per month until fully amortized in approximately January 2017.
3. Resolution of the term used by Cass Bank that the loan was a “criticized loan” according to Bank Examiners. (Federal Reserve in St. Louis has stated there is no such terminology.)
4. Provide the written policy/guidelines along with detail explanation “the loan remains outside their acceptable parameters”, per email from Cass Bank.
Look forward to your assistance to resolve this matter.
Sincerely
Controller of Small Business
________________________________________________________________________
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To: Mayor Francis G. Slay
Subject: Urgent -- Cass Bank is forcing us out of business!!!
Comment:
We are Small Business in St Louis. We have been in business 40 years. We have paid our mortgage payment every month to Cass Bank, never late, never missed a payment. The downturn in the economy has resulted in financial losses to the company in 2006 and 2007. In response to the economic downturn, the company reduced employees to maintain a healthy business. In March 2008 Cass Bank called $400,000 line of credit so we could no longer fund capital equipment purchases, including meeting committments for government contracts.
Cass Bank informed us they were not going to renew our $250,000 building loan when it came due in April 2008 on a building appraised at $1,700,000. The owner has no other personal debt and other real estate with no debt valued at more than two million dollars. Yet due to the losses, as a Sub-S Corp, creating negative Adjusted Gross Income on the tax form 1040 - no banks will refinance any of this debt. Not Regions, Not Comerce, Not Pulaski, Not National City, Not PNC, Not Delmar!!! It is not for the lack of trying. The banks simply are sitting on the TARP funds. They are not lending.
The CPA firm states we are not alone. Banks are calling loans from good customers to shore up their capital reserves. We see all this money going to the Big Corps and no one is undertaking the task of HELPing Small Business and put some teeth in an enforcement mechanism. Financial institutions such as Cass Commercial Bank are calling notes and loans of good on time paying customers, forcing them to the position where they will have to close their doors because they no longer have operating capital. Then financial institutions such as Cass Bank are going to take Small Businesses assets with fair market value several times greater than the loan committed toward those assets. I call it money grabbing. The bank - in this case - Cass Bank - in St Louis is planning to take the office building of 1.7 million with a loan of $250,000, sell it at a steep discount and pocket over 1 million dollars. We continue to make monthly payments on time every time even though the bank has called the note and refused to renew it as in the past. Soon remaining employees will be facing unemployment and their own foreclosures!!!
I urge your office to get involved in protecting St Louis businesses from these practices.
Please call Cass Commercial Bank, Jeanne Scannell 314-506-5572 (Direct) Vice President and Mark Benton Executive Vice President 314-506-5580.
Sincerely,
Controller, Small Business Company
A WBE Certified Company
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Controller, Small Business
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