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ASIC commences civil penalty proceedings against major bank

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Australian Broker | 01 Mar 2017, 04:03 PM Agree 0
The regulator has alleged that the Big Four bank failed to properly assess borrowers' repayment obligations
  • Dave Robinson | 01 Mar 2017, 04:29 PM Agree 0
    Brilliant, I have personal knowledge of where they were giving out loans to people who couldn't afford it. When brought to their attention they said that it didn't matter....well guess what it did and it does. Will be watching this very closely and of course the repercussions that will flow through. If you are a broker that only used Lender Calc's for servicing then you could be in for a rough ride if ASIC starts looking at brokers as well as lenders.
  • Bye Bye HPI | 01 Mar 2017, 04:59 PM Agree 0
    About time!! .... The Banks (and other non-banks / trustees) have been misusing the using Henderson Poverty Index for years. Reasonable Inquiries are defined in ASIC v Cash Store [FCA] as being references to both income and expenditure. The reasonable inquiry provisions have been in the Consumer Credit Laws since 1996 (UCCC - S.72 (2) (l) now S.76 (2) (l) of the NCC) In 2008 the HPI 'cost of living' was around $900.00 per month wherein most single people's expenses exceeded that, sometimes by double.

    I know borrowers are disappointed if they are not approved for a loan - but saying no in the beginning rather than placing borrowers into debt obligations they can not afford is more responsible to both investors (banks / securitisers) and to the borrowers.

  • Frustrated! | 01 Mar 2017, 05:22 PM Agree 0
    Good to see that ASIC are now going to focus their attention to banks as well. I just hope that the investigation extends beyond the bank itself and ASIC start taking legal action against those who are writing the loan as well. yes Westpac need to pick up their game when it comes to monitoring its employees; however the individual that wrote the loan should also shoulder the majority of the blame as they are fully aware of what they are doing when they submit the application for assessment.

    I hear a lot of stories from clients/ prospective clients about their experiences when dealing with lenders direct. A hell of a lot of these loans should not have been approved in the first place. I have lost count of the amount of Interest only owner occupied loans that I have had to try and untangle where the sole reason why the bank offered the client interest only was to make the loan affordable?!
  • Bye Bye HPI | 01 Mar 2017, 05:29 PM Agree 0
    For any consumer effected by their Bank failing to make reasonable inquiries under the NCCP refer to the NCCP Explanatory Memorandum -

    601. An award of money may not be the most effective way of providing
    compensation, compared with varying the terms of the contract.
    Cancelling the contract (rescission) may also give a consumer an
    unfair benefit in the use of the principal of the loan.

    1. : Responsible lending

    Samuel was an electrician who earned $1,200 a week. He
    spent $600 a week on expenses. He went to a lender to get a
    home loan of $200,000. Samuel needed a loan with an average
    interest rate that he could pay off over the medium term.
    Instead, he was offered a loan for $500,000 with a high
    fixed interest rate and therefore repayments that he could
    not readily afford.

    As he was experiencing hardship, Samuel sought an injunction
    against the lender collecting his mortgage repayments.
    Samuel then sought compensation for the loss and damage he
    had suffered for being put into an unsuitable loan. The
    court, under section 179, ordered the lender to reduce the
    overall debt Samuel owed to the lender commensurate with
    what he would have owed if he had been provided with a loan
    that was not unsuitable minus:

    . the amount he had already paid to the lender; and

    . the amount in compensation for any loss and damages he
    suffered as a result of getting the unsuitable product.

    This recognised that Samuel received a benefit from the
    initial credit provided, but that he experienced loss and
    damage from being put into the unsuitable loan.

    Also read 594 - 600
  • | 02 Mar 2017, 07:15 AM Agree 0
    All banks shoud be investigated on how they lend to theire customers. This should goes to all other major vehcile finance lendes , i know some lenders are using centerlink payments for vehcile finance. Some are the vehcile lenders should be invesgate they are Macquarie leasing , Mercedes finance and all brokers. Westpac use to be very good in selling the low doc loan for people who are self employed.
  • It takes 2 2 tangle | 02 Mar 2017, 10:11 AM Agree 0
    While I welcome this from ASIC and no doubt all or many lenders have placed borrowers into loans that were less than suitable I also think that the consumer can always say no, they are not forced to take the loan or the higher loan amount. Some responsibility needs to be placed on the consumer as well and if they are not "savvy" enough to understand then they shouldn't get the loan in the first place no matter what amount. With all the Fintech stuff going on I wonder how long before a lender can "follow" a consumers spending through everyday bank account and credit card statements and then offer a loan based on their spending patterns, this would make budgeting a priority and help protect everyone from predatory lending and themselves.
  • Bye Bye HPI | 02 Mar 2017, 01:32 PM Agree 0
    It takes 2 2 tangle - I would agree with you in theory, however, unfortunately the way the world works today credit is a part of life. If we could all afford to purchase things using our own money (by way of old fashion savings) then we wouldn't need to borrow money ... full stop.

    It is a two way street ... I agree .... however, thankfully the Government finally passed legislation placing an onus on credit providers and credit assistant providers to actually undertake reasonable inquiries, and penalties (and compensation) for their failures to do so.

    If you read the EM (link above) it also provides that compensation may be decreased if the borrower makes false statements about their income and expenditure. I think the NCCP provides a good balance regarding responsibility.

    • It takes 2 2 tangle | 04 Mar 2017, 09:26 AM Agree 0
      Hi Bye Bye HPI thanks for the reply. Yes I agree credit is a part of life and I often wonder why credit/borrowing is not part of the school curriculum, perhaps ASIC could enforce that to help the consumer of the future? Ok so a little tongue in cheek.

      In relation to borrower making false statements, there is no penalty for the borrower who does this, sure they may get a payout lowered but why aren't they fined and ordered to pay compensation? Also NCCP states that the onus is on us and the lender to prove that what the borrower said is correct! WTF why isn't up to the borrower to prove what they said is correct.

      It appears that all the responsibility is on everyone else yet the borrower can say and do what ever they like with no repercussions. Pendulum has swung to far the other way.
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