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.