Westpac receives $35M fine from ASIC over home loan breaches

Is it now common place for lenders to verify actual living expenses by requesting statements/transaction histories for a given period, or are declared expenses sufficient?

 

When will we get to ‘responsible borrowing’ practices?

Why is it the banks fault to lend people money? It’s their risk to take. If the loan goes bad it’s their risk.

And how can you ‘box’ borrowers in? Everyone circumstance is different.

Putting the responsibility of lending into the banks is akin to putting the responsibility of how much someone drinks into a barman... oh wait, we do that too

Blacky

 

Pretty much a vexed issue I reckon.

Probably most applicants for loans consider they can afford it and ask the bank to lend them other people's money (which is an aspect which tends to be forgotten or overlooked) and get peed off when told No. Yet sometimes when the answer is Yes and it later goes down the tubes, it ain't their fault but the lenders'.

I can recall only one person admitting it was they who stuffed up and that was many years in regard to a margin loan - no, it wasn't me!

It'd be great if there were not only a charter of lending practices by the financial institutions but also a charter of borrowing practices.

Hehe, will we get to a situation where people who have a loan of any nature will have all their income garnisheed by the bank and only receive a regular allowance based on their determined expenses when they applied for the loan until it's paid out? Damn, there goes that discretionary lavish family dinner at KFC I was planning to have for Christmas.

 

Where's the RC for irresponsible/fraudulent borrowing by individuals?

The whole thing is a sham imo.

 

I'm in two minds on this one. The banks had it coming and they have been shafting customers for too long but also hearing some of these individuals that claim they have been used should take responsibility of their own actions.

 

I hear what you're saying but I think a whole industry is being witch hunted for the serious woes of a few. And there is no accountability for the borrowers who lied to the banks. Seems very one sided to me. Personally, I don't feel right to bite the hand which has fed me well for a very long time, even if that same hand has flicked me from time to time.

That's just my personal view mate. ​

 

I was having a coffee with a business manager from another bank yesterday, this came up. We came to the conclusion that there's more too it than things like living expenses. I suspect it's more a case of Westpac looking the other way with regards to fraud in applications from overseas borrowers.

Prior to 2015 Westpac was well known to be the go to bank for overseas investors, particularly in China and Malaysia. Many of these investors couldn't produce required documents such as payslips, but Westpac was approving the loans. There was many cases of brokers and bankers producing false payslips and other documents. Hundreds of applications were submitted that were almost identical, mostly just the names and addresses changed.

Westpac was well aware of this, I heard they even had a special team to process these loans. They simply turned a blind eye because they knew that whilst most of these customers had the cash to pay the loans, the customers couldn't meet the document requirements to qualify by Australian standards.

Early 2015 ASIC finally caught on (it wasn't exactly a secret in the industry). Westpac made an announcement that they'd detected fraud in some overseas applications and would no longer accept new applications from non-residents. Despite the high levels of fraud, Westpac was not concerned about the viability of the loans.

In other words, Westpac knew about the fraud, but they also knew that these clients could pay, so the bank deliberately looked the other way.

I suspect that the fine has little to do with living expenses and a lot to do with ignoring fraud.

 

It used to be a don't ask don't tell policy. Its like someone who knows their spouse is having an affair but doesn't ask them about it so they can pretend it is not happening.

 

You hear skeletons rattling in the closet but you decide against opening the door.

 

You don't want anything to come out of the closet!

 

Bankruptcy may involve garnishing of wages for a period. It pays to plan to pay off loans.

 

I can see your point of view. If lenders can lend without checking people's ability to pay, it can inflate prices of assets to unsustainable levels. This would place the economy into a depression once enough people can not pay. Then you see asset prices deflate and more people in trouble. Irresponsible lending creates systemic risk.

 

Perhaps some common sense being delivered by The Federal Court.

No wagyu for you: ASIC loses landmark case against Westpac
Sarah Danckert
August 13, 2019 — 10.32am

The corporate watchdog has lost a landmark case against Westpac Banking Corporation over the bank's alleged breaches of responsible lending laws after a judge found borrowers could ditch luxury food items like wagyu steak and shiraz for more humble fare.

The Federal Court on Tuesday dismissed the Australian Securities and Investments Commission's case against the bank after finding the regulator had failed to prove its case.

https://www.theage.com.au/business/...ark-case-against-westpac-20190813-p52gii.html

 

Gee this is what many of us have been arguing. Well done judge!!!

 

This could be the green light the economy needs. Less focus on Stan subscriptions and Afterpay payments showing in a persons past history.may allow lenders to take a less irrational path ?

 

Does it mean saving account bank statements should no longer be required for new mortgage applications?

 

I walked my assistant through our process of verifying living expenses this afternoon, just before I saw the court result.

I'll continue to use the same process which is looking at average spending in various categories over the last 6 months. I then apply a 'sensible' test to it, such as eliminating one off expenses, or expenses where that have stopped recently. I also rationalise some things between living costs and luxury costs.

For example: This client spends $700 on food, plus $400 on eating out per month for two adults. I can appreciate where the money is going and it's not a problem with their incomes, but it's fairly easy to see that they could save $400 a month or more by not using Uber Eats. They also had a regular debit of $156/mth that appeared to be ongoing, but stopped 2 months ago, so it has been ignored.

I think this result is going to mean a process of verification is still important, but I don't think it will need to be quite as littoral. If an argument can be made to ignore some expenses, then it's more likely to be accepted.

Big sigh of relief, you probably don't have cancel Netfix.

 

Just got an email from St George. Interesting....

As at the 20th August St George will be updating the way we collect expenses and liabilities. Come and hear about the new and updated expense categories, the Introduction of Debt to Income Ratio's and how we use expenses to determine HEM's.

 

I don't like to analyse bank accounts never have. Way too much is open for interpretation.

I've always thought best model is HEM but used more intelligently such as having an inbuilt scale based on household incomes which they kind of do now. I would add in loan to income ratios tests and would have kept assessment rates a touch higher.