Australia could follow US on pre-loan counselling

by Caroline Dann17 Sep 2012
New measures which are forcing pre-loan counselling on risky borrowers in the US could be adopted on a more voluntary level here in Australia, claims a leading industry figure.
 
 
Kym Dalton, executive chairman of consumer financial literacy company CreditED told Australian Broker Online such measures would help develop awareness of responsibilities, particularly in low-doc lending.
 
The US will be adopting the system on the 1st January 2013, requiring certain classes of borrowers to receive ‘pre-purchase counselling’.
 
These include non-conforming (sub- prime) borrowers, first-time buyers and line-of-credit borrowers that are to receive ‘high cost mortgages’ secured by their principal place of residence.
 
It’s part of a change to the Dodd-Frank Act, the Truth in Lending Act and the Home Equity and Protection Act (HOEPA) in the US.
 
Dalton said a similar system could be put in place in Australia, but on a more voluntary basis.
 
“I believe that the industry would be well served to note global trends and to close the responsible lending loop by ensuring their customers certify that they understand the nature of their responsibilities, voluntarily, to forestall the need for additional regulation to ensure consumers are protected,” he said.
 
“There’s a global recognition that choices facing consumers are complex and that for certain vulnerable sections of a community, existing disclosure and responsible lending requirements may not be sufficient to ensure that consumers fully comprehend their responsibilities.  
 
“Disclosure and comprehension are not synonyms,” he said.
 
 
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COMMENTS

  • by Coast Broker 17/09/2012 9:59:07 AM

    When does a loan applicant become responsible for his or her own ability to meet a commitment. What next making it compulsory for loan repayments to be made directly from someones pay.

  • by Keith Bridges 17/09/2012 10:04:16 AM

    What on face value this concept may have merit, requirements of NCCP say we as brokers must investigate potential borrowers' lifesytyle, cash flow, and discretionary spending etc, the list goes on, so lets add another meeting to the whole process. Absoulutely ridiculous

  • by Casey 17/09/2012 10:15:55 AM

    I dont use the program myself but I think you'll find that the whole premise of the education is exactly that. Putting the ownership of the decision to proceed back unto the borrower. Ignorance is difficult to us as an excuses when education is required before signing on the dotted line.