The following summaries provide further analysis of the key themes or conduct that was raised in public submissions received by the Commission.
Figure 5: Consumer lending and personal finance submissions: Key themes
The Commission received over 990 submissions relating to consumer lending issues which identified unfair or irresponsible lending practices by lenders. The primary concerns raised included:
- failure by lenders to take into account the financial or other cirumstances of a borrower when approving a home or car loan, particularly where the borrower was a low income earner, on an aged or disability pension, or otherwise unlikely to be able to service the loan;
- failure by lenders to apply any criteria for suitability when offering credit products or increases to credit limits, including offering high-limit products to individuals who had disclosed gambling problems, or to students or other low income earners who had not demonstrated capacity that they would be able to meet repayments;
- recommending the sale of products to consumers that were not suitable for their needs and attracted additional fees, charges or risks, including offers of overdrafts, personal loans or credit products when applying for a home loan; and
- targeted marketing by lenders to vulnerable markets, including advertising reverse mortgages to elderly consumers.
More than 870 submissions relating to consumer lending and personal finance primarily raised concerns about improper conduct by a financial services entity. Common types of improper conduct identified in public submissions included:
- falsification of loan application documents by bank employees, including inflation of income or asset values, forgery of signatures, and backdating of documents;
- intimidating or inappropriate behaviour by bank employees, often following the default of a loan, including consumers being harassed about repayments, or being coerced into signing a settlement agreement;
- unauthorised disclosure of a consumer’s personal information to a third party, including disclosure to abusive parties in the context of family violence; and
- facilitation of unauthorised transactions by staff members, or failure to respond to reports of unauthorised or fraudulent transactions.
Over 650 submissions referred to poor administration or processing errors by financial services entities in relation to consumer lending and personal finance functions. Issues included:
- lenders setting up incorrect facilities for consumers, including approving a business loan when a consumer has sought to take out a domestic mortgage, or approval of a credit facility instead of a personal loan;
- incorrect calculation of interest or fees charged;
- loss of documents or records relating to a consumer’s banking arrangements;
- closure of accounts without instruction from the account-holder, and in many cases this was said to have occurred without notification;
- general concerns about the training and expertise of staff involved in sales and approval of loans and credit products; and
- delays in responses from a financial services entity to address the consumer’s concerns.
The Commission received over 590 submissions that primarily related to excessive fees charged for consumer products. Issues related to fees and charges that often featured in submissions included:
- unreasonable discharge or break fees charged by lenders that submissions suggested had been used to dissuade the consumer from refinancing their loan;
- excessive fees charged for routine transactions, including foreign currency and international transaction fees;
- high interest rates being charged on loans or credit products despite lower interest rates being available to new customers or when requested;
- difficulties with finding information about fees and charges for a financial product within the product disclosure statement or the financial services entity’s website;
- application of default interest rates, overdraw fees or other penalty charges without notification to the consumer; and
- failure by lenders to diclose adequately fees, charges and interest during the sale of a credit product or approval of a loan.
Redress and dispute resolution
Over 410 submissions were primarily about the experience of consumers with redress and dispute resolution processes. The issues raised included:
- difficulties arising from the jurisdiction of external dispute resolution bodies, including monetary limits or time limitations;
- lack of enforcement of determinations made by external dispute resolution bodies, including the Financial Ombudsman Service (FOS), often resulting in lenders failing to take any action in relation to redress;
- lenders failing to consider a complaint properly unless legal proceedings had been commenced;
- the ongoing costs for a consumer of pursuing legal action against a lender, and the disparity in legal resources available to consumers when compared to financial services entities; and
- lenders continuing to charge default or penalty rates while a matter was under consideration by an external dispute resolution body.
Changes to terms of lending
The Commission received more than 205 submissions that related to a lender making unilateral changes to the terms of a loan. Key themes included:
- withdrawal of pre-approval or in-principle approval of a loan without explanation, often causing the loss of deposits or other financial hardship;
- substantial reductions in timeframes for repayment of a loan where there had been no breach of terms, in some cases requiring consumers to repay large amounts in under a month;
- lenders giving assurances about the rollover or continuation of loans that were then called in; and
- banks defaulting loans without giving any prior notification to the borrower, and subsequent concerns about the sale of property and enforcement of guarantees following default.
Brokers and intermediaries
In addition to submissions relating to conduct by ADIs, the Commission received over 130 submissions that focused specifically on conduct by intermediaries such as mortgage brokers, aggregators, and introducers. Many of these issues reflected concerns raised about conduct by lenders, but emphasised that the consumer had thought the broker or intermediary was acting on their behalf and in their best interests. Issues raised included:
- brokers encouraging consumers to take out loans they were not able to service;
- falsification of loan application information by mortgage brokers, including inflated income and asset valuations and forgery of signatures;
- conflicts of interest involving brokers only offering products from specific lenders, often seen to be related to commissions received; and
- the sale of credit products or loans by third party vendors such as car sales staff or staff of retail outlets.