A leading financial figure is concerned rumours of ‘low doc scams’ could result in a government investigation into all forms of lending.
Kym Dalton, chairman of consumer education company Credit ED, told Australian Broker Online there was a real possibility of a “contagion effect.”
“We already have senator John Williams calling for a Royal Commission into the banking sectors’ practices on the back of the current allegations.”
“There’s the real possibility of a ‘contagion effect’ to all lenders and all forms of lending, where there’s perceived vulnerability on behalf of the borrowers, such as first home buyers and non-conforming borrowers.”
He implored brokers dealing with these vulnerable applicants to “exercise responsible scepticism.”
“It’s vital that brokers and lenders, when lending to those considered more vulnerable, make sure that their customers genuinely comprehend the nature of the obligations they’re entering into.”
He said encouraging clients to undertake education programs, such as CreditED’s certificate-based course, was a positive move.
“[They] provide learning benefits to consumers, with a measure of comprehension providing compliance benefits to industry,” he said.
He also called for low doc loans to be renamed and rebranded, as the term was “out of date.”
“[It was] borrowed from the US in the mid-90s, and it’s no longer descriptive of the practices involved in this form of lending.”
“What are now deemed low docs should be considered a sub-set of ‘specialised lending’ products that rely on specialised income verification criteria.”