Mortgages and Home Loan Industry Articles (6) March 2011

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  • Connective next for white label

    Connective has recruited a new head of sales and business development to develop and roll out a white label product.

    Michael Goerner, who was most recently head of commercial lending with Liberty Financial, has been charged with managing the roll out, which Connective principal Murray Lees called a "milestone".

    Lees has also promised that the final product will surpass the expectations of its broker network.

    “The move to develop a white label offering follows extensive consultation with our member brokers and this process has provided us with thorough understanding of their views and requirements," Lees said.

    Lees said brokers had a "strong appetite" for a white label, and had been prescriptive about the shape that the new offer should take.

    Prior to his role at Liberty Financial, Goerner has previously held roles in operations, sales and project management at BMC Mortgage Corporation, and the Commonwealth Bank.

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  • Get home loan pre-approval - why you should...

    Get pre-approved for your home loan...
  • ASIC mulls new exit fee guidance

    Credit watchdog ASIC is likely to issue an update to its guidance on "unconscionable" exit fees, following the Government's 'victory' in passing the ban.

    On Wednesday, Treasurer Wayne Swan hailed the banning of all exit fees from 1 July as a "victory for Australian families", despite widespread mortgage industry opposition due to competition concerns.

    However, the development implies that ASIC's previous guidance on the issue (Regulatory Guide 220), is now outdated. When contacted by Australian BrokerNews, ASIC has confirmed it is "contemplating an update" to its guidance, following the passing of the exit fee ban into law.

    RG 220 was developed after a full round of industry consultation, which culminated in providing definitions of what constituted "unconscionable fees" and "unfair contract terms" . As part of the guidance, ASIC had given the green light to DEFs, as long as they reflected loan costs.

    Gadens Lawyers senior partner Jon Denovan labelled RG 220 at the time as "a well thought out statement of law". "It strikes a fair balance between the interests of consumers and industry. We’ve all heard the story that the Telco that provides phones without an exit fee won’t be in business long.  The same applies to lenders," Denovan said. "The good news is that RG 220 recognizes the role that brokers, mortgage managers, and aggregators play in borrowers obtaining a loan and allows those costs to be taken into account in determining whether an exit fee is fair. Go ASIC!"

    Despite the ban on all exit fees, the 31 page RG 220 is still available on ASIC's website.

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  • Pioneer beefs up BDMs, seeks growth

    Pioneer Mortgage Services is recruiting new BDMs and looking at new funding options as it seeks to kick-start a rapid growth phase over the next 6-12 months.

    The mortgage manager, based in Queensland, has recruited two new business development managers - one in WA and one in Victoria - and plans to recruit further state-based representatives in NSW and South Australia in the next 6 - 12 months.

    Brad Driffill, who has left his role as a Vow Financial account executive to join Pioneer as its permanent BDM in WA, said the group had been in a "holding pattern", but was now focused on growth following the financial crisis period.

    "Now that they have got through the GFC and survived that, they are looking to expand and grow the business,” Driffill told Australian BrokerNews. “That requires greater volumes, and they need people on the ground in order to achieve that," he said.

    Steve Lake has joined as the group's new permanent BDM in Victoria, while Tony Dale heads the group's sales operations from Queensland. Dale has spent significant amounts of time developing the business in Victoria over the past six months.

    Driffill said the group will also be looking at expanding product options for brokers.

    "We will also be looking to bring on different funders underneath Pioneer's banner, to give more options to brokers, and possibly give them a bit of assistance in other associated products," Driffil said. "The vision for Pioneer over the next 6 - 12 months is to grow as much as possible.”

    Pioneer’s current funders are Adelaide Bank and >Resimac, which Pioneer said offers brokers a diversified residential offering.

  • Refinancing your home - is it for you?

    Refinancing your home - is it for you?
  • Non-banks will adapt to DEF ban

    With the ban on exit fees now law, the head of a non-bank lender has predicted non-banks will find a way to adapt.

    Pepper Home Loans chief operating officer David Holmes told Australian BrokerNews he believes most non-ADIs will have already run projections on how to restructure their products, but will continue to publicly oppose the ban in hopes it will be delayed or reworked.

    “They're absolutely running the numbers right now, but they're waiting for detailed legislation before they make any moves,” he said.

    Holmes said lenders will undoubtedly have a plan, but will not make such plans public because of intellectual property concerns.

    Likewise, Homeloans general manager of third-party distribution Tony Carn has admitted the company is already conducting research and working through models to absorb the DEF ban. Carn has even expressed tentative hope that the ban may even have its upsides, and may strengthen the relationship between non-banks and brokers.

    “It does provide a lot of opportunity. With the DEFs, a lot of customers were treated badly during the GFC by large corporate lenders who withdrew from the market and did a lot of damage. As a result, a lot of brokers have been reluctant to recommend non-banks because of the DEFs. With DEFs being abolished, brokers may be more comfortable with non-banks,” Carn remarked.

    Holmes has agreed, pointing out that many brokers saw their clients locked into higher rates when non-banks withdrew from the market during the GFC.

    “When RAMS was active in originating loans, they had a low interest rate but had high DEFs. A lot of people felt trapped when they left the market. That did put brokers off. The removal of DEFs will attract brokers,” he said.

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  • Exit fee ban ups claw back pressure

    Brokers are under increased pressure to ensure customers are put into the right loan the first time, following a ban on exit fees last week which is expected to mean an uptick in clawbacks.

    Speaking at an MFAA lunch in Sydney last Friday, Aussie Home Loans executive director James Symond said that the ban on exit fees was not a good move for the industry in terms of competition. However, he said the "good news" is that it will make brokers focus more on holding on to their customers for life.

    "They'll have to make sure the customer is in right loan, that they are maintaining contact with the customer, so that when that customer is ready to go again with their next transaction, they are the first point of call."

    Speaking as part of a panel discussion at the MFAA event, industry representatives agreed there was a possibility of increased clawbacks if customers increasingly switch lenders following the ban.

    However, AFG's NSW state manager Chris Slater also said the pressure on clawbacks created opportunity for brokers to do the job right first time.

    "The real issue is that hopefully you have done a great job, so that when they do that next transaction they come straight back to you to do the next deal and you get reimbursed - yes there is a claw back, but there's another upfront," he said.

    Slater said AFG was encouraging brokers to focus on a thorough needs analysis at the start of the client relationship, which presents a chance to ask clients what their future intentions are.

    "A lot of the time they won't know, but a lot of times there is an opportunity to say 'Listen, this is how we are remunerated, so if this is going to be a possibility I would like to know upfront'," he said.

    Slater said he knew of brokers who currently put a clause in their Finance Broking Contract reserving the right to recoup clawbacks. However, he added that he did not expect refinance numbers to jump radically above the 29 - 34% average of the last 5 years recorded by AFG due to the exit fee ban.

  • iSelect enters mortgage market through AFG

    Insurance comparison business iSelect has moved into the home loan arena after partnering with AFG.

    The move will see AFG providing iSelect with aggregation services such as loan comparison features and electronic loan lodgement. Under the agreement, iSelect will function as a licensed credit representative of AFG. General manager of home loans for iSelect, Cameron Clemens, said the move into home loans was a natural one for the insurance comparison company.

    “We have built a successful business over ten years by helping people to simplify their purchase of important but complex household products, like health, life and car insurance. Few products we buy during our lives are as important, or as complex, as a home loan, and we believe our commitment to simplifying things for consumers is perfect for this market,” Clemens said.

    AFG national account manager Bryce Deledio touted the move as one that will benefit consumers.

    “Combining our aggregation and support service with iSelect’s pedigree in helping consumers navigate complex markets has the potential to help thousands of Australian families,” he commented.

    In preparing for the move into the home loan market, iSelect has built a home loans team which will include mobile mortgage consultants throughout NSW, Victoria and Queensland. Clemens said iSelect Home Loans is experiencing strong uptake, and will look to expand its number of home loan consultants in the months ahead.

  • St George woos business borrowers

    As banks continue to offer sweeteners to entice home loan customers, St George has upped its proposition to business banking customers.

    The bank is offering business borrowers a pay back of up to 0.5% of the size of their business loan to switch to St George, up to $50,000. The  move comes as new RBA figures show business lending fell 01.% in January, and 2.4% over the past 12 months as demand for business finance flagged. St George COO Andrew Moore has told the Australian Financial Review the Westpac-owned bank is looking to expand its business customer base, along with growing residential lending.

    "We are looking to acquire new customers, which is a bit of a change from the approach at St George over the last few years, which have been dominated by the merger with Westpac and the global financial crisis," Moore said.

    Moore said recent competitive moves among the banks signalled a fight for market share in an environment of waning demand for credit.

    "Competition, whether it is in the home loan market, deposits or business lending, is as strong as it has ever been. Post-GFC, we are in a lower credit growth environment. To win business at the moment, you need to really fight harder for it and when there is low credit growth you have to take customers from competitors," Moore remarked.

    A St George spokesman told Australian BrokerNews the business banking initiative will be available to borrowers who apply for new business finance of $250,000 or more by 31 July, and open their primary business transaction account with St George.

    "The 'up to $50,000 towards switching right now' covers the cost to us of waiving your business finance establishment fees and the eligible costs to you of moving your business to us, in total up to 0.5% of the total amount of your new business finance, or $50,000 whichever is the lesser," the spokesman said.

    St George has also made moves to intensify its residential mortgage lending, raising its LVR from 90% to 95% for new to bank customers and offering a 100 basis point discount off its standard variable rate for the first year of its Introductory Rate Home Loan. The bank has also tried to woo brokers by returning to paying trail commission on loans between 30 and 60 days in arrears.

  • Price wars haven't convinced borrowers

    The high-profile mortgage price war between the major banks has yet to convince consumers, a survey has found.

    According to the Loan Market survey of 420 potential or existing borrowers, only 12% of respondents believed price discounting moves by the banks signalled genuine competition in the marketplace. Borrowers showed scepticism about the campaigns, with 45% saying the price war would only boost the profiles of the banks. While 20% of respondents said the discounting moves were a welcome development, they indicated they did not believe such pricing initiatives would last.

    “There’s obviously some scepticism among borrowers about the potential benefits of the major banks trying to outdo one another to win over customers, but the bottom line is there are some good deals to be had and customers can save a lot of money by choosing the right deal,” Loan Market COO Dean Rushton said.

    Rushton commented that though consumers were sceptical of the price war, they could still stand to benefit by switching lenders.

    "Australians traditionally are reluctant to change lenders but these developments are likely to have some customers reassessing their position," he said. “Right now we have variable rates greater than 1% below the banks standard variable rate from our panel of lenders. The opportunities are definitely there.”

    The survey also found that despite the high-profile nature of the price wars and substantial marketing resources devoted toward them, 23% of consumers were unaware banks were competing for home loan business.

  • DEF ban could sink borrowers in deeper debt

    The ban on DEFs could have the unintended consequence of tempting borrowers to take equity out of their home for frivolous purchases, it has been claimed.

    National Mortgage Brokers managing director Gerald Foley believes removing exit fees as a barrier to refinancing may prey on vulnerable borrowers who want to tap into their accrued equity for big ticket purchases.

    "By removing DEFs and making refinancing easier, you'll start to find some borrowers who are prone to tapping into increases in equity in their property may go back and refinance. People don't really refinance. They re-borrow on their properties," Foley told Australian BrokerNews.

    As people re-borrow on their homes, Foley said, they will continue to extend the life of their loans. Foley commented that each time borrowers refinance, it is likely they will extend the term of their mortgage another 25 or 30 years and leverage themselves deeper in debt.

    "At some point, people who are now getting closer to the age of spending less time in the workforce are going to have to say 'What's my strategy now to pay off this loan when I cease work?'," he commented. "If we make refinancing easier, some people will be tempted to re-borrow on a regular basis, continually tapping into recently gained equity and continually extending the term of the loan."

    Foley said this could especially be true of borrowers in lower socioeconomic circumstances, who feel they can only afford large purchases by tapping into their home's equity.

    "To a degree, this is generalizing, but there will be some people who go for big ticket, aspirations items and will be tempted to access their equity because it's easier to do," he remarked.

  • Smartline pitches for low income business

    Smartline is encouraging low income investors to dive into the property market, arguing that it isn't necessary to be wealthy to get into the market.

    In a media statement from the mortgage broking franchise, Smartline managing director Chris Acret said those on low incomes have the scope to invest by "doing their homework and thinking creatively".

    “The key is not to let a low income deter you from investing,” Acret said.

    “The best type of properties for the low income investor will be those that are at the lower end of the scale in price but with high rental returns,” he explained. “This will probably mean looking to the outlying suburbs of the major capital cities and to regional areas, such as mining towns. You should probably be looking at properties that are priced at $250,000 or less.” 

    Acret suggested a neutrally or positively geared investment strategy, and that these investors should be looking for an 8-9% yield - or $380 per week rent on a $250,000 property.

    "While that is a big ask, it’s certainly not impossible, particularly in areas such as mining towns," he said.

    Acret said there was now more opportunity for these investors, due to lenders offering higher LVRs of 95%.

  • Clash of rhetoric over fee-for-service

    Senior industry executives have disputed the value of a market-wide move to fee-for-service, with some arguing that a broker's value proposition is not enough to justify "slugging" customers with another fee.

    Despite many individual brokers in the process of moving to a fee-for-service model to top up declining commission incomes, AFG NSW state manager Chris Slater said AFG's position was that a wider market move to fee-based service could kill the "golden goose".

    "We like to have a debate about how we can get the number of customers who use brokers above 40%, and that’s where the rubber hits the road for us," Slater told an MFAA luncheon panel discussion in Sydney on Friday.

    Slater said putting another fee barrier between brokers and the other 60% of customers in the market - while 80% of those customers were using major bank brands - would not benefit the industry.

    He added that declining commission incomes and increased compliance responsibilities under NCCP were not strong enough justifications for brokers to begin "slugging the customer" with a fee-for-service.

    First Point broker Troy Phillips said a fee of $500 here and there would not help brokers, and argued that rather than a fee, the mortgage industry should work corroboratively to put greater pressure on major banks and lenders to increase their commission offerings, and that eventually "distribution talks".

    However, Advantedge general manager of broker platforms Steve Weston said that introducing a fee-for-advice was necessary to ensure brokers were not living on "bread and water".

    "Brokers aren’t getting paid for being in a professional industry like we are. We’ve seen commission cuts of 30 per cent. And we have to do more today under NCCP than we did. We need to address that revenue gap."

    Weston said that one way to do this was a fee-for-advice. "From a consumer perspective, they get value  and service from brokers. Our job is to articulate the value they are getting, and once they truly understand the value, they will be happy to pay," Weston said.

    Aussie Home Loans executive director James Symond said that fee-for-service already exists, and that it was up to individual businesses to make their decision.

    "A lot of people in the broking industry are already doing it - some of them extremely successfully," Symond said.

    "They see value in their service, they see value above and beyond the next person, so there is a fee-for-service proposition that exists. The industry needs to say,'Fine, if this exists, then let’s put some framework around it.'"

  • Suncorp scam leads to first broker ban

    Former finance broker Yan Li of Wolli Creek in Sydney has been dealt ASIC's first permanent ban under the NCCP Act.

    In February, Li was sentenced to 12 months imprisonment - though he was released on a 12-month good behaviour bond - following his role in what ASIC has labelled "serious fraud offences" in dealings with Suncorp Bank.

    The offences - committed between March 2010 and June 2010 - involved the creation by Li of false and misleading income and employment details included in loan applications submitted to Suncorp Bank.

    The offences were committed at the time when Li was the sole director of Amazon Funding & Realty Group.

    As a result of the ban, Li is permanently prohibited from engaging in credit activities, and from providing financial services, meaning that he will be unable in future to obtain an Australian Financial Services licence. The court conviction also means that Li is automatically disqualified for a period of five years from participating in the management of any company.

    ASIC has also cancelled the registration of Amazon Funding, which was registered to engage in credit activities under NCCP.

    Li was previously suspended from MFAA membership, as a result of the then alleged Suncorp offences.

  • GE looks to off-load loan book

    GE Money is looking to off-load its remaining $5bn loan book, it has been reported.

    The lender, which retreated from mortgage lending during the GFC, will seek to sell off its remaining mortgages, the Sydney Morning Herald has reported. Among those believed to be interested in the deal are Commonwealth Bank, a NAB-backed consortium and several non-bank lenders. Contacted by Australian BrokerNews about the sale, a GE Capital spokesperson declined to comment.

    Commonwealth Bank already purchased assets from GE's Wizard Home Loans in 2008, walking away from the deal with a $2bn loan book.

    Earlier this month, GE Money issued a letter to mortgage holders telling them their redraw facility would be frozen if they had missed a payment at any time in the previous 12 months. A GE Capital spokesperson told Australian BrokerNews at the time that the policy had always been in place, and the letter had been sent to borrowers following an operational audit which revealed some borrowers had been able to access their redraws in spite of their loans being in arrears. However, Intouch Home Loans CEO Paul Ryan rubbished the move, calling it a case of a "global giant" mistreating consumers.

  • Poll: Are aggregators doing enough?

    Australian BrokerNews is running a poll asking how many of our readers think that aggregators are doing enough to support them through the new compliance minefield.

    After complaints that some of the market's largest aggregation groups are failing to supply enough guidance and help - for both ACL holders and credit reps - we are putting the issue to a vote.

    Here's your chance to influence your aggregator! Do you think they are providing enough compliance support?

  • Bank of Melbourne eyeing aggressive growth

    The newly-rebranded Bank of Melbourne's CEO is seeking to triple the brand's impact in Victoria.

    Bank of Melbourne is set to launch in August, as Westpac rebrands St George branches in Victoria with the previously defunct name. Scott Tanner, chief executive of the new brand, has told the Australian Financial Review the company will look to expand far beyond the current St George market penetration in Victoria.

    "We are tripling the business, tripling the front-line staff, we're tripling the number of branches and ATMs, we're tripling the balance sheet," Tanner commented.

    St George currently holds a 4% market share in the state. With Westpac hoping the resurrected Bank of Melbourne brand will better connect with customers, Tanner told AFR he believes a 12% market share is possible.

    However, some Victorian brokers are sceptical consumers will be drawn in by the rebranding. Melbourne-based broker Vincent Power of Investors Direct Financial Group told Australian BrokerNews that rebranding St George branches will not necessarily capture the community feel of the previous Bank of Melbourne.

    "The public liked the Bank of Melbourne for many reasons. It had great customer service principles and was seen as friendly by many people. The Bank of Melbourne doesn't exist now. You can bring back a name but you can't bring back the soul of the place. Changing the name plate over the door is just a marketing exercise," Power commented.

    Smartline broker Tony Petrevski said the rebranding was not likely to see brokers writing more business for the former St George branches.

    "Personally in my 11 years at Smartline, I have only submitted three loans to St George, with the last one being in February 2008," Petrevski said.

    "It all depends on what service they will provide. It's all about the delivery from the back end that generates more business," Petrevski commented.

  • Commission increases dubbed 'highly unlikely'

    Holding the line on current commission levels is the best brokers can hope for in the foreseeable future, according to Advantedge's head of broker platforms Steve Weston.

    Speaking at an MFAA lunch in Sydney last week, Weston said that while he would be the biggest advocate of any "incredible onset" of competition that would lead to broker commission increases, "to be realistic, the best we can do is hold where we are".

    Weston told attending brokers that any hopes of commissions going up in the short to medium term is "highly unlikely".

    "Where we've got to I think is a fair place at the moment. Where we've got it is as good as we can get in the short to medium term that they [banks] are happy with commissions," he said.

    Due to the ultra-competitive price environment in the current market, Weston said banks were also likely to look closely at their commission pricing.

    "Lets face reality today, as much as we desperately don't want commissions to be cut - and certainly none of the major lenders have come out and talked about it - if you go up to the CFO and the CEO of the banks, well right now in the last month or two there is this amazing price war on again, so suddenly the CFO with a calculator - he's not listening to you or me - he's saying the broker channel is now more expensive it doesn't make sense again - this is reality how it happens," he said.

    Weston said any arguments made by the broker channel for holding commissions steady in the face of renewed pressure on commission levels may even be viewed as empty threats, following the increased broker volumes that flowed to the banks during the GFC, despite 30% commission reductions.

    However, Weston said that long-term the channel should not be looking just to "hold the line" on commissions, but instead should be striving towards the absolute answer of pushing broker market share up to 60% "where it more realistically belongs".

  • RP Data shows flat February

    Sydney was the only city in Australia to show capital growth in February as the overall capital city median price showed no improvement, according to the latest figures from RP Data and Rismark.

    The firms' latest Home Value Index has revealed that the market is 'treading water', with overall growth subdued. The average city dwelling value showed zero growth in February, although regional properties showed a minimal increase of 0.5% (seasonally-adjusted).

    However, Sydney was the only city to show overall growth in February of 0.3%. The average dwelling price fell in every other capital, with Darwin showing the biggest fall of 9%.

    Even so, While median house prices led negative growth - with only Sydney and Canberra showing growth of 0.1% and 3.9% respectively - units proved to be more robust, increasing in value in Sydney, Melbourne, Brisbane and Adelaide.

    RP Data's senior research analyst, Cameron Kusher, believes that the outlook for Australian property remains 'very subdued'.

    "Auction clearance rates have been a little weak, the number of homes advertised for sale is at the highest level it has been since we started collecting this data, and other lead indicators, such as the time it takes to sell a home, and the margin by which vendors have to discount their properties, are climbing again after reaching a plateau in recent months," he said.

    These conditions are in the favour of prospective investors, he added.

    "The large stock of homes available for sale should afford potential buyers increasing scope to negotiate on price and get the best possible deal."

  • DEF ban to strip $140m from big bank pockets

    The ban on exit fees will translate to a $140m loss for the big four banks, it has been claimed.

    In its latest equities analysis, Commonwealth Bank has claimed the ban on DEFs, set to come into effect from 1 July, will represent $140m in lost fee income across the four majors. The report also suggested the competitive impact of the DEF ban was questionable.

    "Smaller lenders have warned that the new regulation will have a mixed impact on competition," the report stated. "Exit fees were first introduced by non-bank lenders to recover costs associated with lower interest rates on mortgages, and by banning exit fees, smaller lenders may be forced to raise rates in order to remain profitable."

    Ahead of the ban, CBA, ANZ and NAB have all removed exit fees, with Westpac the last of the big four to still charge the fees. However, the lost revenue from the removal of the fees is not expected to have a drastic impact on the major banks' bottom lines. The CBA equity report has predicted the major banks will see a net profit after tax of $24.1bn in 2011, up from $21.4bn for 2010. It has also projected a cash return on equity of 16.6% for the big four, up from 2010's 16%.

  • Reporting regimen not all positive

    The implementation of a new "positive" credit reporting regimen this year could push more brokers into the non-conforming space, it has been claimed.

    Under current law, credit reporting has only included negative credit incidents - such as loan defaults and failed credit applications - being recorded on an individual's credit file.

    However, new draft legislation would see the inclusion of a range of positive credit information. This would include credit accounts held by a client, the dates they were opened and closed, the credit limits on these accounts and the client's credit repayment history.

    Oasis Mortgage Group's Graham Reibelt told Australian BrokerNews the legislation was a "draconian big brother step", that would empower lenders "enormously", and impact the majority of clients' credit worthiness in a negative way. He has also suggested it will also result in more brokers being pushed into the non-conforming arena, as it will increase the number of credit issues being dealt with.

    Consumer groups have voiced concern that lenders being able to access repayment data would show them if a customer has been late on any repayments in the past - by periods as short as one day.

    "For example, you have a Westpac credit card, and everything's fine, they love you to death, you've been with them for ten years, and they are happy to increase your limit," Reibelt explained. "But maybe you've been late making the payments a few times this year - maybe it was for health reasons, maybe you were travelling - but it was nothing major.

    "Well they [lenders] have the right to list you as a late payer for being one day late. You then rock up to apply for your mortgage if you are buying a house, and they will do a review of your history, and they'll say 'What makes you think you can afford the loan, if you can't pay your credit card on time?'"

    Reibelt said lenders would need to relax their credit policy to allow for late payments, and has predicted the new legislation will result in a credit scoring system similar to the US, where borrowers will need to attain a ceratin number of points or a score to be successful in their loan applications.

    As lenders are expected to start under the regimen with past data, they may also have the power to delve into a client's past credit position to uncover discrepancies in information supplied by brokers and clients, uncovering any incidents of mortgage fraud, according to Reibelt.

    "If lenders do do a bit of an audit, then they can uncover an awful lot of information that hasn't been disclosed fully to them," he said. He gave the example of a customer who may have understated the credit limit on their credit card, or have fallen behind on a store card.

    Reibelt said a few late payments don't always indicate that a client is a bad credit risk. "We don't always need or want the whole truth particularly when the information isn't of material importance. It's a bit like your wife asking,  'does my bum look big in this?'," he said.

  • Gadens asks ASIC to soften DEF ban

    The ban on DEFs may not be as far-reaching as previously thought, it has been claimed.

    Gadens Lawyers senior partner Jon Denovan has told Australian BrokerNews he will meet with ASIC next week to discuss the scope of the exit fee ban.

    "We will be asking for sensible class orders so that the ban on exit fees does not unintentionally prohibit payments that are appropriate and are not intended to be covered by the ban," he commented.

    Denovan said he believes the DEF ban was not intended to catch certain fees, including capital appreciation payments on shared equity loans, recoupment of capitalised LMI or the recoupment of the cost of providing honeymoon rates. Gadens Lawyers has previously advised that these fees would be covered under the ban.

    ASIC has previously confirmed to Australian BrokerNews that it will update its previous guidance on exit fees outlined by RG 220.

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