An advocate for aggrieved bank customers has hit “irresponsible” mortgage lending in its submission to the royal commission.
Consumer Action Law Centre says irresponsible lending in the context of skyrocketing property prices in major cities and record-low interest rates have resulted in more Australians being in mortgage stress.
The centre’s submission has identified conducts and practices that it says have fallen below community expectations, including “irresponsible lending, particularly in relation to credit cards, car finance and home loans”.
It cites data noting that the number of Australian households facing mortgage problems has soared by almost 20% to more than 921,000 in the past six months.
“Irresponsible mortgage lending can have severe consequences, including the loss of the security of a home. Consumer Action’s experience is that older people are at significant risk, particularly where they agree to mortgage or refinance their home for the benefit of third parties,” it says in its submission.
The centre singles out major lenders’ use of benchmarking when doing affordability assessments as a “significant problem, and risks breaching responsible lending laws”.
“ASIC’s regulatory guide on responsible lending states that the obligation to make reasonable inquiries about a consumer’s financial situation ‘involves obtaining information about the consumer’s actual income, expenses and other circumstances that are likely to affect their ability to meet the financial obligations’.”
Despite this, the centre says its experience in assisting clients with disputes related to responsible mortgage lending suggests there is a reliance on the use of living expense benchmarks, such as the Henderson Poverty Index and the Household Expenditure Measure.
More submissions like this are expected in the coming days as the royal commission opened its public submission of evidence on Monday (22 January).
The commission will hold an initial public hearing on 12 February in Melbourne.
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