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Age discrimination in broking: Has ASIC gotten it wrong with over-50's?

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Australian Broker | 28 May 2013, 08:00 AM Agree 0
Supposed restrictions around lending to over-50's amounts to institutionalised age discrimination, argues one top broking author - but who's really to blame?
  • LYNNE | 28 May 2013, 10:58 AM Agree 0
    It isn't just ASIC it is also the individual lenders interpretation of this ridiculous idea!
  • ozboy | 28 May 2013, 11:12 AM Agree 0
    “I had a couple come in where the bank had done the wrong thing. They were both retired and they wanted to buy a block of land and build a house. So they put all of their assets into that and they bought this block of land. But the people who had financed the block of land didn’t tell them that they can’t finance the house because of their age. So they’ve got a caravan parked on that land now. It’s just not fair.”

    That is against the act. I hope you encouraged the couple to report the lender to ASIC.
  • BJ | 28 May 2013, 11:13 AM Agree 0
    Without doubt age discrimination exists and for good reason.
    How can ASIC enforce lending guidelines when there exists significant complexity in relation to longevity risk. There is not one single solution in the Australian market to manage longevity risk and brokers do not understand this area. Lenders do, well certainly at product stage.
    How does a borrower, not in a significantly strong financial position extinguish the debt? Downsize, use their super or some other combination. What about their changing health status etc etc etc. Providing good advice to borrowers over 50 is not just this loan is not unsuitable. Without getting into the provision of advice it is a mine field.
    By the way, ask yourself why it is that borrowers over the age of 50 can obtain finance in jurisdictions such as South Africa, many European countries, the United Kingdom and the United States. Why is it that lenders in these countries will lend and what process and solutions exist.
    Yes of course I know the answer, but I would be delighted if those that complain about the challenges of lending to the over 50’s, work it out and then write another book.
  • Terry | 28 May 2013, 11:20 AM Agree 0
    Im Fifty and now one of those potential cases. TI's nice to know that I'm now credit outcasts who now have to work to in 67 to retire. just great. I bet they still ant their taxes from me.
  • Jerry Gibb | 28 May 2013, 11:21 AM Agree 0
    I agree with the above . Just had a loan for a borrower aged 58 yrs of age with good equity and the Banks again limited the loan term ot 16 yrs of age. Would not accept an exit strategy of downsizing as option so ASIC you have no idea how hard you have now made it for older Australians to obtain finance if the borrowers only asset and strategy is to sell and downsize.Banks do not care about what you say or what is contained in legislation .
  • Allan Faint | 28 May 2013, 11:25 AM Agree 0
    Of course this is age descrimination. Unless the clients have a bucket of super and many dont, are buying an investment property, or agree to do over a much reduced term, clients in their 50's will be unable to buy a home. Even if it is obvious they will pay less in mortgage payments than in rent, these clients in their 50's will be unable to purchase a home. If client is in 50's and has separated, lost much of the super in settlement and only has enough for a small deposit for another home, they will be unable to buy a home. If client is in 50's and downsizing but will still have a substantial loan, the loan wont happen, and they maybe stuck renting for the rest of their lives. Maybe it was not assic's intent but it is how lenders an LMI, have chosen to interpret it, though it does seems to be hard to get those decisions in print. Once it was normal practice that people when they reached retirement and if about to live on pensions would choose to down size. Now it appears that it is assumed they will not be capable of understanding if they can afford something or not. So ASSIC and the banks are being nice enough to make the decission for them.
  • Country Broker | 28 May 2013, 11:28 AM Agree 0
    The ANZ will loom at Loans if you can clearly the way in which the borrower will meet the commitment ie sell and down size , use monies coming in , selling other assets at retirement time, seems to be a wrong lender involved , also highlight the issue of lenders not being familiar with the ASIC regulatory guidance notes or simply ignoring them!
  • QEDRisk | 28 May 2013, 11:45 AM Agree 0
    For once I have to agree with ASIC on this one. I was only discussing this with a broker client yesterday. The law doesn't have any black and white rules around this. It's about what is "reasonable" in the circumstances of an individual case.

    What I DO see far too much is lenders cowering behind the law as an excuse for them not to take what might be difficult credit decisions.
  • Broker north Brisbane | 28 May 2013, 11:47 AM Agree 0
    The age is not a problem with the right lender I am sick of hearing that this person can not get a loan because they are too old. I have had great success with getting older clients 30 years loans with a good exit strategy. Not all lenders will do the loan but many will. It is just brokers not looking around to see what lenders will do the loan. I would have written 10 possibly more this calender year with clients over 50 getting a loan that met there requirements. I don't think the lenders are saying no the brokers. The brokers are not selling the deal effectively to credit and then they take no as the answer. Some of the loans have been mortgage insured so the banks will do the loan they just need to be reassured that they will not end up on the tv kicking out some old grandma or grandpa because they missed the payment. The broker needs to go in and bat for their client, look at the situation and decide would you lend them the money if you were the lender and why are they in the situation of getting a loan at that level, answer those questions and if you would give them the money the bank often will lend them money, because they make money by lending it to people so they want to lend the money and give them a reason to do don't just treat the older clients like a 25 yo person starting out. Have a good story and look at the clients position, would you lend the money? then go from there and write the reasons why. explain any negative reasons away.
  • Andrew Abbott | 28 May 2013, 11:50 AM Agree 0
    The issue is not with ASIC nor the drafting of the NCCP, it just requires lenders to be reasonable. The issue is with the banks interpretation of the legislation (read lawyers and "Credit Professionals") causing significant consequence for people who are being denied access to capital to live their lives the way they want to. This and other issues around the over regulation of the industry needs to be addressed. Any future changes must be detail what problem it is solving, the extent of any problem and the consequences understood, something that is clearly not happening now.
  • Papery | 28 May 2013, 11:51 AM Agree 0
    whilst risk & credit appetite rule the landscape, many lenders/lmi will look for a reason to decline (as opposed to a reason to approve). Who says there isnt any credit rationing going on under the guise of Responsible Lending & NCCP... & dont forget that your friendly bank branch staff can get away with!
  • Peter Fast | 28 May 2013, 11:53 AM Agree 0
    I agree with Lynne. It is interpretation not just by lenders but individual assessors within the institutions.

    They all need to download the legislation and read it.
  • Steve McClure | 28 May 2013, 12:10 PM Agree 0
    This is the problem when lenders misinterpret the legislation, second-guessing and getting it wrong. ASIC is correct; they are not the one that lays down specific policy.

    Part of the crucial education processes around this legislation should be informing lenders of what CAN be done, rather than misinformation continuing and stopping reasonable (responsible) lending. Perhaps an industry association could take the lead here.
  • Compliance Guy | 28 May 2013, 01:06 PM Agree 0
    I think ASIC's role here is being mis-cast and the interpretation of how responsible lending applies to older borrowers could be more accurate. Parliament writes the law. ASIC is charged with supervising the industry to make sure it is complying with the law. Blaming ASIC for outcomes under the NCCP is like blaming a police officer for erecting the speed limit sign you just got caught disobeying or for passing the legislation setting the speed limit in the first place. There's quite a distance between those who make the law and those who administer it. What determines whether a loan is not unsuitable is a combination of facts specific to each borrower. We all recognise that you need some way of servicing and repaying a loan. It isn't ageist to recognise that someone in their mid 50's generally has less time to accumulate the necessary capital to repay a significant loan. In this situation a lender or credit assistance provider needs to take more care to satisfy themselves they aren't putting a consumer into a loan they cannot service or repay. To address this specific risk you have to ask a few more questions about the consumer's future intentions to but once you've turned your mind to it and have a reasonable answer there's nothing in the legislation preventing lending to older people. If a lender refuses to lend based on age, irrespective of the consumer's capacity or future plans to realise assets, downsize etc then that's an internal issue - not something imposed by ASIC. In fact it is something ASIC would probably like to hear about. ASIC's Regulatory Guide 209 gives specific examples to address lending to people over the age of 50 (see RG 209 paragraph 92).
  • Jude | 28 May 2013, 01:07 PM Agree 0
    This situation has been allowed to go on for way too long. Lenders blame ASIC, ASIC denies they are responsible, and at the end of the day the (older) borrower loses.

    Just WHAT is ''unsuitable" about downsizing? Older couples, singles and empty nesters have been choosing to do just that by choice for many years.

    It cannot be termed "not unsuitable" because downsizing is a lifestyle choice for a number of reasons - upkeep and maintenance of a large home being the major one.

    It is totally wrong, insulting and discriminatory to disallow downsizing as an exit strategy.
  • Allistar Walker IFL Associates Ltd | 28 May 2013, 03:10 PM Agree 0
    No problem in NZ, as long as client has an exit strategy, which they have usually thought about and even quite lucid about at that mature age.
  • mac | 28 May 2013, 05:09 PM Agree 0
    Yeah but if they end up retired still with a large debt that wont be cleared by downsizing unless property prices skyrocket what then? 55 years old and looking for a 95% loan? They really can't say yes to this what have they been doing all their lives. I know the option of renting their whole lives is not much of an option but what to do.
  • Jim W | 28 May 2013, 08:12 PM Agree 0
    I am over 60 and will settle a house purchase for myself this Friday.
    All that is required is to demonstrate the ability to clear the debt, and payment ability.
    Sale of your only home is not normally accepted, as no Bank wishes to become involved with forcing old Baby boomers onto the street.
    But it is a logical requirement for the Banks to have.
    Noted that the loan was worked on a 30 year basis.
  • Allistar Walker IFL Associates Ltd | 29 May 2013, 09:46 AM Agree 0
    There would be no approval for a 95% in older age groups and you are right, the lender should look at what have they been doing all there lives, which is why the exit strategy must be realistic and in line with the history and ability of the client.
  • Philthyo | 29 May 2013, 11:05 AM Agree 0
    Is it really that hard? Question - is the loan affordable & does it meet their objectives & requirements - tick - proceed. Question - can they afford it in 15 years time on a age pension? - unknown. The answer depends on how they manage their finances and loan over the next 15 years. So in some respects the customer has to take some ownership of the outcome at retirement and if this means that they have to sell and downsize then get them to put it in writing.
  • Stan Fournarakis | 29 May 2013, 11:12 AM Agree 0
    The banks as well as ASIC are making the rules and the laws very clear to work with in my opinion. Come up with an exit strategy (evidenced by documentation, diary notes held on file etc) and you have your loan. But in my opinion (33 years in finance) the person/s applying for finance have got it all wrong. Complaining at 50 plus results from very poor money management in ones younger years, lack of understanding what careful planning is say between the ages of 30 to 50, holding on to your job (with all its ups and downs), and not getting sucked in to this LIFESTYLE rubbish we are bombarded with day in day out. MOST of the times we should be in control. Fifty plus people should take onus of their previous actions. Sorry it may be a bit harsh to say this. Its my opinion only. Thanks
  • Philthyo | 29 May 2013, 01:08 PM Agree 0
    Bit harsh Stan - not all in their 50's have squandered their money on wine, women & song!!! Some of us are unfortunate enough to go through a marital/relationship split and need to start over again.
  • Haydn | 29 May 2013, 02:56 PM Agree 0
    "What I DO see far too much is lenders cowering behind the law as an excuse for them not to take what might be difficult credit decisions."

    Greg, all very well but YOU are not the one that might face the criminal and civil penalties contained in the NCCP Act. The use of the word "reasonable" is very subjective and it's the overkill penalties that are stipulated in the NCCP Act that are the issue. Treasury was reminded of this in the Industry Group discussions but it came to no avial. There was no support for the Finance Industry Delegation's concerns by any of the other major industry groups.
  • Stan Fournarakis Vic Broker. | 29 May 2013, 05:56 PM Agree 0
    I have read all the above commentary and it all makes sense. It is indeed individual circumstances that can bring about credit problems for 50 plus applicants. In my previous commentary i wasn't saying that this matter is cut and dry and not once did i mention the word divorce or any other personal hardship such as illness etc should not be put into the equation. I have interviewed 6-7000 applicants in my time. I've heard every story. Quite a few sad cases but most struck down by their own hand. I know i have been in both of these situations myself. I just want to highlight two things. Firstly, ASIC and the banks in general IN MY OPINION, whilst claim that they don't want to put people in financial hardship especially in this 50 plus age group, are really ONUS SHIFTING because they have lost mega bucks through litigation especially in the 80's, due to not so prudent credit decisions. I agree with the QED commentary above (Is that you G A?) that banks may be dodging those hard credit decisions. I'll tell you what though. Stick an average looking exit strategy in front of a bank by getting the wording right and the loan is approved. Is this still a numbers game when it fits? Or are banks really that careful? caring even? Doesn't look that way to me. Secondly, back to our customers. I've watched young people grow through smart planning in their late twenties and early thirties, who got it right the first time. You don't need exit strategies for them. However, MOST didn't have then and still haven't got a workable model for themselves let alone their offspring. The deposits are getting smaller and smaller. What were they taught by their parents and what are they going to teach their kids who will also turn 50 one day. So isn't it more like a combination of, ok, we have these credit rules that are indeed very grey, but, come on 50 plus applicant, convince me the broker before i can convince the bank on your behalf that the balance sheet you have put before me is strong enough to see you through. (again i exclude genuine cases of personal hardship) I am on the clients side. Work with me!
  • Maria Rigoni | 31 May 2013, 07:23 PM Agree 0
    The NCCP allows the banks to discriminate against all sorts of responsible borrowers under the guise of responsible lending.

    ASIC wants to protect people from themselves and make everyone else responsible if something goes wrong.

    The changes to the privacy act allowing positive reporting are going to make it hugely worse!!!
  • Donna J | 17 Jul 2013, 10:40 AM Agree 0
    Jim W
    My parents are trying to down size and the banks will not give them a loan even though they have a large deposit as they are nearly 60. They are looking for the same as you a long term loan (25years or so) but they have a plan to pay it in 8 years before retirement.

    Can I ask which bank you want with?
  • Jim W | 17 Jul 2013, 11:44 AM Agree 0
    In Reply to Donna J.
    The Bank involved was ANZ.
    LVR 60%
    NO loan conditions except max LVR 80%
  • billyboybliss | 15 May 2014, 12:53 AM Agree 0
    I'm 59 and my bank provisionally approved a loan but only on a 16 year term at weekly repayments of $550. That's a horrible lot of money to pay each week so I rang ASIC about the so called RG 209.109 that protects over 55's from discrimination and was told 'they're only regulations, not law, so the banks are not doing anything illegal'. What the... Why have a regulation that allows for banks to lend responsibly where older borrowers have good exit strategies. Clearly the banks have a greater demand to supply ratio for home loan products and can do what the hell they like... ASIC or no ASIC. ASIC after the damn GFC have cooked up a whole load of toothless regulations and have given the banks a 'get out of jail free card' to hammer over 55's. I won't mention 'which' bank but I suspect their loan assessors are having a free lunch on this loophole.
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