A number of consumer advocates have predicted that complaints about irresponsible lending by brokers will trend upwards in future.
Speaking to Australian Broker at the Responsible Lending and Borrowing Summit in Sydney, Alexandra Kelly, principal solicitor at the Financial Rights Legal Centre of NSW said that while she had not seen any evidence of a “systemic problem” with fraud in the broker channel at present, more consumer claims could emerge once rates start rising.
“We’re still in the stage where some consumers haven’t gotten into trouble yet so we’re not necessarily seeing any issues yet because interest rates are very low,” she said.
If interest rates did start rising however, some consumers would feel the pinch, lead them to wonder whether the information supplied by the broker in their loan application was entirely correct, and approach their nearest consumer advocacy group.
“We’ve seen some very tightly wound consumers,” Kelly said. “That’s going to be the issue when there’s an increase and their mortgages start rising.”
Gerard Brody, CEO of the Consumer Action Law Centre in Victoria, agreed that there was going to be a spike in complaints.
“I think that a lot of loans – particularly broker loans – are generally higher amounts,” he told Australian Broker. “They encourage people to get bigger properties and that stretches people if interest rates go up.”
An increase in consumer complaints as a result of rate increases in the future was realistic, he said.
However, he noted that the lenders could do more to fix this issue now.
“At the end of the day, the lender has also got the same responsible lending obligations when it comes to requirements objectives, enquiries about affordability, and verification.”
