During the ongoing enquiry into the 1990s collapse of the financial and business sectors and the events that led to the formation of the Financial Sector Adjustment Company (Finsac), it was revealed that approximately 24,000 loan accounts were sold to overseas debt collector Dennis Joslin, founder of the Jamaica Redevelopment Foundation Inc (JRF).

The bad debtors, as they were called, included thousands of entrepreneurs who followed the prescribed tenets for doing business and obtained loans endorsed by the financial institutions. On the basis of business plans and all that was required, including the ability to repay, the entrepreneurs were approved.

However, rapid increases in interest rates – up to 120 per cent – on the loans pushed the monthly payments way above the projections in the entrepreneurs’ business plans. The higher rates sustained over an extended period, a Government policy at the time, rendered many unable to properly service their loans, thus compromising revenue to commercial banks.

While depositors were protected in the fallout, the affected entrepreneurs have long contended that their plight has largely been ignored by the State, which caused the problem in the first place by implementing a bad policy.

Yola Grey-Baker

Borrowed $10 million; repaid $52 million; house repossessed and sold for $20 million; still owes JRF $85 million.

Life was relatively good for 70-year-old Milton Baker between 1952, when he started his construction company, and 1995.

During the 43-year period, construction contracts were steady and Baker was able to construct his dream home without having a mortgage to worry about.

With his home free of debt and jobs to do that required capital, Baker, in 1994, decided to borrow $10 million at 35 per cent interest to do two contracts, using his home along with two other properties as collateral.

No way could Baker and his wife Yola Grey-Baker, now married 12 years, ever envisage that their quest to continue the business that was so good would lead them to ruin.

The two contracted jobs – one a commercial building in Kingston, the other a shopping mall in Montego Bay – proved their downfall.

In the first case the owner of the building – a printery – was unable to pay Baker and eventually lost his printery to the bank as the economic noose tightened in the mid-1990s.

According to Grey-Baker, the other client simply refused to pay, even after being taken to Court.

Grey-Baker, now a member of the Association of Finsac’d Entrepreneurs (AFE), insists that although difficult, the loan was being serviced when it was sent to Finsac.

According to Grey-Baker, she has documents from the bank informing that interests being charged on the loan had reached a whopping 120 per cent.

Their debt was one of the 24,000 eventually sold to JRF.

As the interest clock ticked the Bakers repaid close to $52 million in cash and insurance policies, but the balance kept growing.

Pressured to keep up payments on the loan, which had reached $75 million in 2007, the Bakers decided to sell their Grosvenor Terrace family home but were informed by JRF that the home was not theirs to sell.

“We had an offer for $50 million, but JRF sold it for $20 million,” Grey-Baker said.

At about 7 o’clock one morning in August last year, she said, the police and a JRF bailiff visited her home and changed the locks. “We were told we had to leave by 11:00.”

Grey-Baker said that after the sale of the house she received a notice from JRF demanding further payments of $85 million that is owed to the debt collecting agency.

Grey-Baker has since taken on the battle alone as her husband, she said, has taken the entire episode extremely hard.

“For almost two weeks after they put us out of our house he did not speak a word, he just walked around in silence,” she said.

Mechesk Willis

Borrowed $480,000; repaid $1.5 million; house repossessed and sold for $3.5 million; still owes more than $7.5 million

Mechesk Willis and his family of five now live in one room in the New Haven community of St Andrew. Physically disabled, the 59-year-old is unable to work and is barely eking out a living.

His daughter, who helped in supporting the family, recently lost her job and Willis now fears for his two young sons, saying that he is in no condition to adequately assist and has nothing much to offer.

But in 1994 Willis owned a four-bedroom Patrick City house and a small fabric business with strong potential for growth. That’s where his problems began. Wanting to expand his business, Willis took a $480,000 loan from a commercial bank that year to purchase material, using his house as collateral.

At the prevailing interest rate Willis was able to meet the agreed monthly payments from the proceeds of his fledgling business. However, mere months after negotiating the loan the bank told him his monthly payments had increased – interest rates had gone up.

The small business could not carry the higher payments and instalments were invariably missed. During that period Willis said he was informed that his loan was with Finsac.

As he struggled to meet the payments demanded by the collectors, further misfortune hit Willis in 2001 when an accident left him paralysed, effectively ending his business.

He said he made payments of $1.5 million to the JRF on the $480,000 loan, but by then the amount owing had reached $11 million and they wanted to settle immediately.

His house was now in jeopardy. With discussions about a sale of his house on in earnest, Willis said he tried to block any such transaction through the Courts, but the ruling went against him.

In 2005, the JRF sold his house for $3.5 million and turned up later one rainy morning telling him he had to leave. He contends that his house was worth more, a position held by real estate professionals who valued a typical Patrick City house at the time between $5 million and $6 million.

According to a still distraught Willis, everything, including school books, was thrown out of the house into the downpour where they were destroyed.

Interestingly, in the Commission of Enquiry last week former finance minister Dr Omar Davies testified that directives were given to Finsac not to sell residences valued under $5.8 million.

“I never knew about that directive,” Willis told the Sunday Observer. “All I know, small people like me don’t get any help at all. I have nothing now.”

The JRF, Willis said, told him he still owes them more than $7.5 million as interest continues to accrue on the balance.

Trevor Donegal

Borrowed approximately $80 million; repaid $89 million; now owes JRF just over $1 billion

Along Upper Waterloo road in St Andrew the Palermo townhouse complex stands as a stark reminder to Trevor Donegal of how his life changed dramatically.

In 1995, Donegal started the housing project, just as he had done for numerous others in his career as a housing developer.

But this one, which turned out to be his last, was different. In the middle of construction, interest rates on his $80-million loan began to skyrocket.

By the time the complex was finished his debt had ballooned and potential purchasers were unable to take up mortgages as the rates of 20-odd per cent from building societies made loans difficult to service.

His housing units were not moving while the interest rate on his loan climbed.

Donegal said in desperation he arranged a special deal with a bank to sell the houses, but by that time it was too late.

“When all the houses were sold the total amount I received was far less than I owed the bank,” said Donegal.

“There was no overrun on the construction cost or anything like that, it was just that the increased interest rate on the loan at the time pushed up the debt,” he added.

Donegal, making it clear that construction is capital-intensive and financing typically has to be sought to do major developments, reminded that stable interest rates played a critical role in projections.

“Remember, there is very little income while the project is under construction,” Donegal said.