You know, there is a saying… if something sounds too good to be true, it usually is. Well, I almost lost out by falling for something that just sounded way better than it should. Have you heard about the Legacy Group, or investing in various Rural Banks in the Philippines? The rates that they paid were fantastic! Really, one of the lower end products paid 20% on your investment. Other plans paid 25%, even more. There was one plan that offered you ten times your money in six years! Wow! Talk about a great rate of return… if you actually got it!
I had been hearing about these Rural Bank Investments for years. There is an expat who lives in Cebu who got involved in these investments, as an agent. Actually, on paper, I believe that it was his wife who was doing the selling, but the fellow was heavily involved himself too. I am not going to name his name, because that is not too important at this point, and I honestly do not believe that he was unethical or dishonest in the whole scheme of things, he lost out himself, most likely.
You see, over the holidays, all of the banks affiliated with Legacy were closed down (at least temporarily) by Philippine regulators. During the month of December, the Bangko Sentral ng Pilipinas (Central Bank of the Philippines) put thirteen different Rural Banks into receivership. The word was that they were involved in unsafe banking practices. And, after all, how could it possibly be safe to offer ten times your money in 6 years? Well, these banks were always touted as having PDIC (Philippine Deposit Insurance Corporation) insurance on deposits. The upper limit on PDIC was P250,000 until recently, it was increased to P500,000. Well, in truth, not all of these investment vehicles were PDIC insured. Even those that were insured are not guaranteed to be paid. So far the PDIC has said they would pay those who lost money, but “they are not sure when.” That is not a very comforting statement, if you ask me.
About this time last year (January 2008), when it was starting to become evident that bad economic times were facing us in the near future, a close friend and I were talking over drinks. We were both looking for a vehicle where we could safely put some money, and have it earn a good rate of interest. We discussed Legacy, and my friend told me that a friend of his had used Legacy Group in the past and always got his money as promised. I was so close to putting some savings in there, but something in the back of my mind told me that it was too good to be true.
Well, I can’s say that it was not true, but I think Legacy did get in over their heads. As soon as the financial crisis hit and money started getting tight, it appears that Legacy was overextended.
I’m glad that I didn’t get into the whole Legacy/Rural Bank thing.