Tag: NAB

On The Banking Royal Commission

The first full day contained a number of significant revelations, including that millions have been paid by the banks in remediation, the fact that some entities appeared not to be fully cooperating with the Inquiry and others admitted conduct “falling below community standards and expectations”.

Remediation includes $250m to 540,000 home loan customers, relating to fraudulent documents, poor processes and failure in responsible lending practices.  In addition $11m remediation was paid to to 34,000 card customers relating to responsible lending. Also $128m was paid relating to add on services, including a significant amount for car loan add ons and  $900,000 for home loan add ons relating to 10,500 consumers. Also remediation of $90m was paid relating to car loans to around 17,000 consumers relating to fraudulent documentation and responsible lending obligations.

I discussed the issues raised by the first day of the current hearing rounds on ABC Illawarra this morning.

A good summary also from Australian Broker, looking at the NAB “Introducer Programme”.

Banks’ mortgage practices came under heavy scrutiny on Tuesday, as the Royal Commission began the second round of hearings in its inquiry on misconduct in the financial services industry.

Prime Minister Malcolm Turnbull announced the Royal Commission in November last year, to investigate how financial institutions have dealt with misconduct in the past and whether this exposes inherent cultural and governance issues.

According to ASIC figures, banks have paid almost $250m in remediation to almost 540,000 consumers since July 2010 for unacceptable home loan practices. Reuters data show that Australia’s four largest banks – CBA, ANZ, Wetpac, and NAB – hold about 80% of the country’s $1.7trn mortgage market.

During Tuesday’s hearing, officials shone a spotlight on National Australia Bank’s (NAB’s) “introducer program,” which paid third party professionals for referring their customers to the bank for loans. Unlike brokers, they are not required to be licensed or regulated by the National Credit Act.

NAB fired 20 bankers in New South Wales and Victoria last year and disciplined 32 others, after the bank’s review identified around 2,300 home loans since 2013 that may have been submitted with incomplete or incorrect information.

According to Rowena Orr, a barrister assisting the Royal Commission in Melbourne, the bank derived more than $24bn-worth of home loans when the misconduct took place from 2013 to 2016. “The introducer program was extremely profitable for NAB during the period where misconduct occurred, she said.

The Introducer Program still operates up to this day, with some 1,400 “introducers.” There were about 8,000 of them from 2013 to 2016, said NAB banker Anthony Waldron, who was put forth as a witness for the inquiry.

In an open letter released on Monday, NAB CEO Andrew Thorburn described the incident as “regrettable and unacceptable.” He said the bank has made changes to the introducer program, and has also cooperated with the Royal Commission’s requests for information over the last few months.

“The simple fact is that none of these issues are acceptable. They should not have happened in the first place, and they show that we haven’t always done right by our customers or treated the community with respect. This is not good enough,” Thorburn added.

NAB Ventures invests in BRICKX

The fractional property investment property BRICKX has today announced that NAB Ventures, National Australia Bank’s corporate venture capital arm, has invested in the home-grown startup as part of  a $9 million (AUD) Series A funding round.

Here is an ABC segment on BRICKX from 2017, which discusses the concept.  It can either be seen as an innovative way to facilitate housing affordability, or the ultimate in the financialisation of property. You decide!

BRICKX is a revolutionary new and affordable way for Australians to invest in residential property by buying ‘Bricks’ in a BRICKX property. This unique approach, called fractional property investment, means people can invest in quality residential properties for as little as a few hundred dollars.

NAB Ventures – which supports businesses and entrepreneurs in their quest to build leading technology companies – saw the investment potential in democratising property ownership in the Australian market.

The value of BRICKX in providing Aussies with a financial stepping stone to achieve the Australia Dream of home ownership was another driver for investment.

Anthony Millet, BRICKX CEO, said: “Housing affordability continues to be a priority for Australia’s banks, so the alignment between BRICKX and NAB Ventures has a strong and unified purpose. BRICKX is expanding rapidly and this high profile and experienced group of investors will help us in our goal to assist millions of Australians to get their foot onto the property ladder.

“The prohibitive costs and high deposits needed to gain access to the property market, has left many out in the cold. However, BRICKX has opened up the residential property asset class as an alternative investment to any of the traditional investment options.

“Considering the recent volatility in the cryptocurrency and stock markets, Australians are recognising the longer-term stability of property prices.”

Todd Forest, Managing Director of NAB Ventures, said he was excited to invest in BRICKX and help support a new way of approaching property ownership.

Forest said: “The aspiration for property ownership has long been the Australian dream, however buying a property often has challenges for many consumers – such as the rise in house prices in some areas and trying to save for a deposit.

“BRICKX is disrupting this journey, in how it provides consumers with access to the property market and engages with them in creating a pathway to property ownership.

“NAB Ventures has scanned the market globally, to identify a range of companies and business models that attempt to solve for this, particularly as NAB looks to support its customers along the full home ownership journey.

“NAB Ventures chose BRICKX as the leading opportunity, based on its unique business model, exceptional user experience and the opportunity to leverage the platform to innovate and help more Australians with their home ownership goals.”

Founded in 2014, BRICKX launched to retail investors in September 2016 and has grown to offer 14 properties across Sydney, Melbourne and Adelaide along with more than 9,000 members.

The NAB Ventures investment in the ‘Series A’ funding round for BRICKX follows on from Westpac’s Reinventure investment in late 2017. Since the Reinventure investment, the number of BRICKX members has grown by nearly 25%.

News Corp is quietly selling NAB home loans

In Finance, things are not always what they appear to be. The point made in the recent Productivity Commission report! See this excellent piece from James Fernyhough of The New Daily showing NAB’s connectivity and influence across the home loan industry – a classic example of vertical integration and more.

Fans of Married at First Sight and My Kitchen Rules may have noticed over the past few days that popular property website realestate.com.au has started advertising a new product: home loans.

According to the ad, you can now go through the entire process of buying a house – from searching for properties and applying for conditional approval, to actually getting a mortgage – through the website.

This process will no doubt seem extremely convenient to many house hunters. And given the huge popularity of realestate.com.au – it claims to have 6.45 million visitors a month – take-up is likely to be high.

But there is something consumers really need to know about it. Realestate.com.au Home Loans is not an independent initiative. Far from it. It is a deal between Rupert Murdoch’s News Corp, which owns 61.6 per cent of realestate.com.au, and big-four bank NAB.

The first part of the deal with NAB

Last June REA Group, the company behind the realestate.com.au website, signed what it called a “strategic mortgage broking partnership” with NAB. Only now, though, has it started widely marketing this new deal.

So what is the nature of the deal? Well, on the face of it, realestate.com.au appears to be a mortgage broker in its own right. But that is not actually the case.

What REA Group is actually doing is piggy-backing on a mortgage broker called Choice Home Loans. In other words, while the branding may be realestate.com.au, the actual mortgage broking firm is Choice Home Loans.

And who owns Choice Home Loans? NAB does.

The second part of the deal

Another key part of the deal is that house hunters who use realestate.com.au can actually apply for “conditional approval” of a mortgage through the website.

Conditional approval allows you to bid for a property at auction, among other things. It must be provided by a mortgage lender. In this case, that mortgage lender is NAB.

So to re-emphasise the point – if you get conditional approval through realestate.com.au, it will be provided by NAB.

The third part of the deal

However, getting conditional approval with NAB does not commit you to a NAB home loan.

So what happens if you do buy a house through realestate.com.au? Well, you then have to pick a lender. And here you have a choice.

First, you could choose a realestate.com.au ‘white label’ loan. This is a loan that on the face of it looks like it is provided by realestate.com.au.

But once again appearances are deceptive. REA Group does not have a mortgage lenders’ licence. So while these loans may be branded realestate.com.au, they are actually provided by a nationwide mortgage lender called Advantedge.

And who owns Advantedge? NAB does.

If you don’t fancy the realestate.com.au home loan, there are other choices. First, there is a range of NAB mortgages.

And then, there is a list of mortgages from other providers – more than 30 of them, including big names like Westpac, ANZ, Commonwealth Bank, Macquarie, ING, ME, UBank – the list goes on.

Oh, and by the way, that last bank mentioned – UBank – is also owned by NAB.

REA Group assures The New Daily that its (or, to be precise, NAB’s) mortgage brokers do not spruik the realestate.com.au, NAB or UBank loans to their customers at the expense of other loans.

But the rules around this are fairly fuzzy. The Australian Securities and Investment Commission told The New Daily that, while mortgage brokers must not mislead or misrepresent the products they are selling, they also do not have a “duty of care” to their customers.

This means there is a lot more leeway for favouring certain products.

Also, unlike financial advisers, mortgage brokers can and do take commissions from lenders. That’s why you don’t have to pay for their services.

So even if NAB/REA Group don’t sell you a NAB loan, they still get the commission.

None of this is illegal. But the depth of NAB’s involvement in the new service is not made clear on the website. And given NAB is a vested interest, consumers really need to know how deeply involved the bank is before they make one of the biggest financial decisions of their life.

Fitch Affirms Australia’s Four Major Banks

Fitch Ratings has affirmed the ratings of Australia’s four major banking groups: Australia and New Zealand Banking Group Limited (ANZ), Commonwealth Bank of Australia (CBA), National Australia Bank Limited (NAB) and Westpac Banking Corporation (WBC). The Outlook on each bank’s Long-Term Issuer Default Rating (IDR) is Stable.

The rating review focuses on the Australian-domiciled entities within each group and therefore does not encompass their overseas subsidiaries.

KEY RATING DRIVERS

VIABILITY RATINGS, IDRS AND SENIOR UNSECURED DEBT
The Long- and Short-Term IDRs and Stable Outlook on all four banks are driven by their Viability Ratings and reflect their dominant franchises in Australia and New Zealand as well as robust regulatory frameworks. Stable, transparent and traditional business models have proven effective in generating consistently strong profitability, while the banks maintained a conservative risk appetite relative to many international peers. High exposure to a heavily indebted household sector and increased focus on conduct related issues from authorities offset some of these strengths.

Australia’s banking regulator has been critical in helping the banking system manage rising macroeconomic risks – including historically high household debt and house prices, low interest rates and subdued wage inflation – through strengthening underwriting standards and increasing capital requirements. This has contributed to improving the banks’ ability to withstand a severe downturn in the housing market and household sector should it occur.

However, a severe downturn is not Fitch’s base case. We expect Australian house prices to remain high relative to international markets, with modest price rises in 2018. Overall, property prices should be supported by low interest rates and population growth. Offsetting this is high household debt, falling rental yields, increasing supply and rising dwelling completions.

Household debt could increase further, driven by historically low interest rates and high house prices, as residential mortgages make up almost 70% of household debt. Household debt reached 188% of disposable income at end-September 2017. Combined with low wage growth and high underemployment, this leaves households increasingly susceptible to higher interest rates and deteriorating labour market conditions.

The four major banks dominate their home markets. Their combined loans accounted for 80% of Australia’s total loans at end-December 2017 and 87% of New Zealand’s gross loans at end-September 2017. The banks have simplified their businesses and footprints with a strong focus on their core banking operations in Australia and New Zealand, or are in the process of doing so. They have well established and long standing competitive advantages and strong pricing power – manifested in strong earnings, profitability and balance sheets – which is likely to be maintained over the next two to three years.

The increased focus on conduct and competition by authorities has resulted in the establishment of a number of inquiries, the outcomes of which are uncertain. This could limit the banks’ growth potential and pricing power, pressuring the banks’ company profiles and ultimately affecting their ratings, although any significant impact appears unlikely to arise within the next two years.

Conduct related issues may also negatively affect our view of risk appetite and ratings if they indicate widespread failing within a bank’s risk-management framework. All four banks have faced a number of conduct related issues in the previous few years, although we continue to see these as isolated cases and believe risk-management frameworks remain robust. CBA has faced particular scrutiny following the August 2017 announcement of failures related to its anti-money laundering and counter-terrorism financing requirements. This, combined with a number of other infractions, prompted a regulatory inquiry into CBA’s governance, culture and accountability. Findings of systemic failure by this inquiry could pressure CBA’s ratings.

Disruptors, particularly in the digital sphere, are increasing in prominence, although they remain a small part of the system. The disruptors also pose some longer-term risks to the franchises of the major banks, although management appears to be addressing this pro-actively with strong IT investments, which we expect to continue.

Fitch expects the banks’ credit risk appetite to remain tight. We believe the banks have robust risk management frameworks. Regulatory intervention and oversight provide an additional restriction on the banks’ ability to take larger risks by weakening underwriting standards. Fitch expects additional regulatory scrutiny on serviceability testing in 2018, particularly around the assessment of borrowers’ expenses, which should further strengthen underwriting. Limits on growth rates for investor and interest-only loans has seen the pace of growth in these products slow; we see these as riskier types of mortgages relative to amortising owner-occupier mortgages. The growth rates of these products could be further curtailed by proposals by the regulator to have them carry higher risk-weights than amortising owner-occupier loans.

We believe the banks’ asset quality is likely to remain a strength relative to similarly rated international peers, although some weakening is possible through 2018. Large losses are not probable without an economic shock, such as may occur if there was a sharper-than-expected slowdown in China. Industries, such as retail, may come under pressure from soft consumer spending due to low wage growth, high household debt and competition from online retailers. However, given the banks’ limited exposure to the retail sector, our base case means any deterioration should be manageable.

Fitch believes the Australian major banks are well-capitalised and will meet Australian Prudential Regulation Authority requirements for “unquestionably strong” capital ratios well ahead of the proposed deadline. Implementation of the final Basel III framework should not be onerous either. Comparisons of risk-weighted ratios with international peers are difficult due to the Australian regulator’s tougher capital standards relative to many other jurisdictions. These include, among other factors, higher minimum risk-weightings for residential mortgages through Pillar 1 and larger capital deductions.

Funding remains a weakness relative to similarly rated international peers. Fitch expects the banks to continue relying on wholesale markets in the medium-term, although strengthened liquidity positions and swapping borrowings into the functional currency – usually either Australian or New Zealand dollars – help offset some of this risk. The banks’ funding profiles are also supported by access to contingent liquidity through the central bank, if needed, and the likelihood that they would benefit from a flight to quality in a stress environment.

Profitability growth is likely to slow in 2018, reflecting Fitch’s expectations for slower asset growth, competition for assets and deposits, higher funding costs and a rise in loan-impairment charges from cyclical lows. Cost management will remain a focus, but could be affected by continued technology investment and regulatory-related costs.

NAB Job Cuts 1,000 Jobs as ‘Digitisation’ Takes Hold

From Investor Daily.

NAB staff were informed by chief people officer Lorraine Murphy yesterday that “the next phase in transforming our business is underway, as part of a three-year process”.

In November 2017, InvestorDaily reported on the major bank’s plans to cut 6,000 jobs and create 2,000 new digital-focused jobs by 2020.

A NAB spokesperson told InvestorDaily approximately 1,000 jobs will be cut every six months for the next three years.

InvestorDaily understands the exact number of job losses in the first half of 2018 will depend on the number of voluntary redundancies and redeployments into digital-focused roles.

“The proposed new structure will reduce the layers and complexity in the bank so that we can be simpler, make decisions faster and be even closer to our customers,” the bank said in a statement.

Ms Murphy said there was “no doubt” this transition was right for the bank business.

“We will acknowledge the contribution that people who are leaving us have made. We will show through our actions that we care,” said Ms Murphy.

Staff that leave the bank will have “world-class support” through the bank’s career transition program titled ‘The Bridge’, which will offer employees made redundant with six months of support and resources.

“We said we would provide the utmost care and respect for all of our people. This remains our priority,” Ms Murphy said.

“I encourage you to ensure that all of our people understand the changes and are supported, and that those who remain with us can deliver the type of bank we have promised our customers – a simpler, faster bank.”

InvestorDaily also reported on comments made by NAB chief executive Andrew Thorburn, who signalled the number of bricks-and-mortar branches was declining.

“What’s happening is that more and more customers are using their mobile device and online banking, and some branches are being used less and less and less,” Mr Thorburn said in November.

“And as that happens, like any business, we need to adjust.”

However, in a statement, the Finance Sector Union (FSU) expressed concerns that the job cutting “does not meet community expectations”, pointing out that with the royal commission underway, Australian banks are being watched closely and NAB should take this responsibility to “rebuild its brand”.

“This is not just 6,000 workers that will lose their jobs – it’s 6,000 people that will have to go home and tell their families they no longer have work,” said FSU national secretary Julia Angrisano.

Many of the workers whose jobs would be axed or made redundant will have been at the bank for years and were a driving force behind NAB’s profits, Ms Angrisano pointed out.

“It’s not like NAB is in trouble – they can afford to retrain their workers. They made $6.7 billion dollar profit last year,” she said.

“Post retrenchment support is too little too late, workers need to be re-skilled to move into the jobs of the future now.”

NAB and Comprehensive Credit Reporting

NAB has today commenced Comprehensive Credit Reporting (CCR) for personal loans, credit cards, and overdrafts, as announced in October 2017.

NAB is the first major bank to start participating in CCR, well ahead of the Government’s mandatory scheme.

NAB Chief Operating Officer, Antony Cahill, says NAB has taken a leadership position on CCR since the start.

“Under Comprehensive Credit Reporting, we now have a more holistic picture of a customer’s credit situation, so we’re better able to make sure our customers receive the right type and amount of credit for their individual circumstances.

“We believe CCR is good for competition, and will mean better outcomes for customers.

“A number of smaller players have been participating in CCR already, and the Government recently released draft legislation to make it mandatory for all the major banks.

“We’re pleased to be going live with CCR today, and we look forward to seeing it roll out across the industry.”

About Comprehensive Credit Reporting:

  • Most Australians have a credit report. CCR will mean credit reports will represent a more balanced reflection of their credit history.
  • For decades, a credit report has contained only negative information – information like when someone’s defaulted on a loan, and how many credit enquiries they’ve made.With Comprehensive Credit Reporting, positive credit information will be added – including which accounts have been opened, credit limits on those accounts, and details of monthly payments made as well as missed.
  • This will provide a more complete picture of a customer’s situation, and mean that lenders like NAB are better able to match our provision of credit to a customer’s individual needs.
  • NAB has commenced CCR for personal loans, credit cards, and overdrafts. Later this year, other types of lending will also be included. NAB is phasing its roll out of CCR to ensure a smooth transition for customers

NAB Trims Loan To Income To 7x

From Australian Broker.

NAB has made a change to its home lending policy amid concerns over the rising household debt to income ratio and as APRA zeroes in on loan serviceability.

From Friday, 16 February, the loan to income ratio used in its home lending credit assessment has been changed from 8 to 7.

“Regulatory bodies have raised concerns about Australia’s household debt-to-income ratio, which has risen significantly over the past decade,” said NAB in a note to brokers.

It said it is committed to ensuring its customers can meet their home loan repayments now and into the future.

With the new change, loan applications with an LTI ratio of 7 or less will proceed as normal and will be subject to standard lending criteria, according to the note.

For an application with an LTI ratio of more than 7, the bank will automatically decline or refer it depending on the income structure, i.e. pay as you go or self-employed.

NAB said its serviceability calculator will be updated to reflect these changes.

The bank introduced an LTI ratio calculation for all home loan applications last year. It was also last year when it started declining interest-only loans for customers with high LTI ratios.

As Australian Broker reported in July 2017, the bank extended the use of LTI calculation to determine the credit decision outcome for all interest-only home loan applications.

NAB said then that tougher serviceability assessments for interest-only loans would help strengthen its lending policies.

The bank’s latest change to its credit policy comes after after ANZ and Westpac made changes to their assessment and approval of borrowers.

Westpac recently introduced strict tests of residential property borrowers’ current and future capacities to repay their loans, to identify scenarios that might affect their ability to service their debts.

From 26 February, brokers who make changes to a loan application that has been submitted to Westpac will have to resubmit it.

Similarly, ANZ added “a higher level of approval for some discretions” used in its home loan policy for assessing serviceability. It was also reported to be clipping the discretion of its frontline mortgage assessors.

Stricter assessment of borrowers’ ability to repay their loans will likely become the norm now that APRA is focusing on serviceability in its proposal that targets higher-risk residential mortgage lending.

The prudential regulator released a discussion paper on 14 February proposing changes to authorised deposit-taking institutions’ capital framework and addressing what it calls systemic concentration of ADI portfolios in residential mortgages.

NAB waives customer confidentiality clauses for Royal Commission

NAB has waived customer confidentiality clauses which otherwise may have silenced customers wishing to give evidence to the Financial Services Royal Commission. Well done NAB!

 Sharon Cook, NAB’s Chief Legal and Commercial Counsel says:

If any of our customers want to make a submission to the Royal Commission we encourage them to do so and we will waive any confidentiality obligations they have agreed to when resolving an issue with NAB.

We are doing this because it is important to us that we support customers being heard by the Royal Commission.

We have also communicated to our people we fully support them making a submission to the Royal Commission if they would like to.

The other majors have taken a similar stance, though some are a little coy about whether staff may also speak out!

Financial Stress is Increasing in Australia as Cost of Living Pressures Mount

After the ME Bank Survey, and our Household Finance Confidence Index both showed the financial pain many households are in; now National Australia Bank’s (NAB) latest Consumer Behaviour Survey, shows the degree of anxiety being caused by not only cost of living pressures but also health, job security, retirement funding as well as Australian politics.

From NAB and Business Insider.

Of all the things bothering Australian households in early 2018, nothing surpasses cost of living pressures.

Source: NAB

From the National Australia Bank’s (NAB) latest Consumer Behaviour Survey, it shows the degree of anxiety being caused by not only cost of living pressures but also health, job security, retirement funding as well as Australian politics.

The higher the reading, the more anxious it is making Australians.

Somewhat surprisingly, it was not the gaggle in Canberra that caused the most anxiety for households in the latest survey, but rather persistent concerns surrounding living expenses.

“[The index] was basically unchanged in Q4 2017 at near survey lows with job security causing Australians the least stress, consistent with a strongly improving labour market,” said Alan Oster, NAB Group Chief Economist.

“That said, the cost of living is still weighing most heavily on them, highlighting the disconnect between low levels of economy-wide inflation and consumer focused costs.”

That was reflected in the detail of the latest survey, revealing some alarming statistics as to just how many Australians are struggling at present.

It found around two in five Australians suffered some form of financial hardship over the survey period, especially among lower-income earners.

Over 50% of low income earners reported some form of hardship, with almost one in two 18 to 49-year-olds being effected.

As seen in the chart below, after a steady improvement in late 2016 and early 2017, those reporting financial hardship have increased in recent quarters, coinciding with steep increases in gas and electricity charges for many Australian households.

Source: NAB

“Being unable to pay a bill was the most common cause,” the NAB said, adding this came in at over 20%.

“Not having enough for food and basic necessities was next, impacting one in three low income earners.”

Some 18% of respondents reported not having enough for food and basic necessities in the latest survey.

Source: NAB

Nearly half of those consumers also reported they were “extremely” concerned about their current financial position, nominating paying their utility bills as the biggest impact on their financial position.

Source: NAB

“While consumers told us they were a little less concerned about their household’s current financial position in Q4, being unable to pay a bill — particularly utilities — continues to have by far the biggest impact on those households most concerned about their finances,” Oster said.

With cost of living pressures still creating anxiety among households, the NAB asked respondents how much extra income they would need to alleviate those concerns.

In short, a lot, especially for those in the big capital cities and households with children.

“On average, consumers told us they need an extra $207 a week – or $10,764 per year,” Oster said, adding that “this varied according to where we live, our income, gender and family status”.

“It ranged from $221 in New South Wales and the ACT to $132 in Tasmania, and from $214 in capital cities to $186 in rural areas.

“Consumers with children need $258 and those without $191”.

Source: NAB

 

While Oster admits that how consumers “feel” doesn’t necessarily correlate with how they really spend, it underlines the point that many Australians think they’re getting squeezed financially.

If it wasn’t already apparent, this likely ensure the next federal election campaign will be centred around alleviating the perceived cost of living pressures facing many Australian households.

A Viable Alternative To Pay Day Loans

National not-for-profit, Good Shepherd Microfinance, has made a bold move into online lending with the support of NAB to launch Speckle – a fast online cash-loan which offers a better alternative for people seeking small cash loans under $2,000.

They also cite our updated research on the Pay Day Loan market in Australia.

We think this is a significant move, and could tilt the lending landscape towards consumers, who according to our research are more likely to reach for short term credit, thanks to wages and costs of living pressures, and the greater availability on online finance.  Speckle is a cheaper accessible alternative.

With an increasingly casual workforce, the rising cost of living and low wage growth, recent research has found that one in five households in Australia have used payday loans[1] in the past three years. To address this need, Good Shepherd Microfinance, backed by NAB, developed a product that is better for customers by keeping the fees and costs as low as possible.

Adam Mooney, CEO at Good Shepherd Microfinance, said for the first time people will be able to access a low cost alternative that is different to anything else in the market.

“In most cases, Speckle loans are up to 50 per cent cheaper than other small cash loans. Most lenders charge the maximum fees allowed by law. As a not-for-profit program, Speckle is significantly cheaper for customers.”

“Every day we see the negative impact of high cost loans on individuals and families. In addition, the latest research shows that the number of women using short term cash loans continues to increase and women tend to use these loans at an earlier age than men[2].

“It was clear that we needed a better solution for anyone who needs to use small cash loans. Speckle will enable people to access lower cost credit when they need it most,” said Mr Mooney.

Building on their long-term partnership, NAB and Good Shepherd Microfinance have joined forces to develop Speckle using leading edge technology and with the help of skilled volunteers from across the bank.

Andrew Thorburn, NAB CEO said the bank shares Good Shepherd Microfinance’s mission to create fair and affordable financial products that address the gaps in the market.

“We know there are many people who, because of their financial situation don’t typically qualify for mainstream finance, are having to turn to payday loans. We’ve worked with our long-term partner Good Shepherd Microfinance to develop Speckle as a better alternative.

“At NAB, we want to support people to improve their financial resilience so if times get tough they can bounce back better. It’s important that everyone can access appropriate credit. 

Good Shepherd Microfinance also offers no interest or low interest loans and referrals to financial counselling and other services to ensure that people are able to get the financial support they need.

To be eligible for a Speckle loan, applicants must be over 18, earn more than $30,000 a year (not inclusive of government benefits), and can’t have had two or more small amount credit contracts in the past 90 days. Where applicants are deemed unsuitable they are referred to other financial support.

Background:  

About Speckle:

  • Speckle is a fast online cash loan for amounts of $200 – $2,000, that is around half the cost of other similar loans.
  • Speckle’s fees include a 10 per cent establishment fee and two per cent monthly fee compared to the market norm of 20 per cent and four per cent.
  • Repayment options range from three months to one year, and are flexible so customers can pay as early or as often as they wish with no extra fees. Speckle loans are offered by anot for profit organisation which puts customers at the heart of products and services that are fair and affordable.

About Good Shepherd Microfinance and NAB’s partnership:

  • NAB has backed Good Shepherd Microfinance to create Speckle NAB and Good Shepherd Microfinance have been working together for over 15 years to provide people in Australia with access to fair and affordable finance through the No Interest Loan Scheme (NILS) and StepUP low interest loans.
  • The partnership has seen more than $212 million in no and low interest loans provided to over half a million people in Australia doing it tough.
  • Last year more than 27,000 loans valued at almost $30 million were provided to people on low incomes through a national network of more than 180 community organisations in 694 locations across Australia.
  • Good Shepherd Microfinance are leaders in the development and delivery of microfinance programs for people who experience limited access to financial products and services.
  • NAB has committed $130 million for lending to people on low incomes and together with Good Shepherd Microfinance aims to reach 100,000 people each year.

About payday lending in Australia:

  • The use of short term cash loans by households in Australia has more than doubled in the past 12 years (from 356,000 in 2005 to 786,500 in 2017).
  • Use of short term cash loans by women (25.4%) is growing faster than the market growth (22.3%).
  • Women are using cash loans at a younger age than men. In the 20-30 year range, women represent 34% and men 15%.[3]
  • 4 million adults in Australia were facing some level of financial stress in 2016 and around 25 per cent of the population lack access to any form of credit such as a credit card or personal loan.[4]

[1]2018, Digital Finance Analytics, ‘Women and Pay Day Lending – An Update 2018, page 2

[2]2018, Digital Finance Analytics, ‘Women and Pay Day Lending – An Update 2018, page 2 & 4

[3] 2018, Digital Finance Analytics, ‘Women and Pay Day Lending – An Update 2018,

[4] Financial Resilience in Australia 2016, Centre for Social Impact and NAB