THINKING MR
Finally,
some good news for borrowers! Those of you who follow this column (a sure indication of nothing better to do) may recall recent mention of the so-called Wagyu and Shiraz case. For those who do have better things to do here is a quick snapshot from that article: Following the banking royal commission living expense tests, which can have a significant impact on debt service capacity outcomes, have moved to a more individual level rather than a standard allowance as was previously the case. This has led to borrowers being compelled to detail living costs in great detail and lenders to trawl through bank statements in some bizarre attempt to establish the lifestyle costs of the punter. The premise being that borrowers have no capacity to adjust their lifestyles to meet their commitments. This whole laughable saga came to a head when ASIC had a crack at Westpac in respect of their responsible lending living expense testing.
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Mike Phipps, Director, Mike Phipps Finance
I will leave you with what Justice Nye Perram had to say in his landmark, and entirely sensible, skewering of the ASIC case: “I may eat wagyu beef every day washed down with the finest shiraz but, if I really want my new home, I can make do on much more modest fare,” wrote Justice Perram as he carved up the argument that a consumer’s declared living expenses should be the key to assessing whether they could meet loan obligations. “The fact that the consumer spends $100 per month on caviar throws no light on whether a given loan will put the consumer into circumstances of substantial hardship.”
We have a generational challenge to better educate borrowers to a point where they simply don’t need protecting This whole sorry saga has come into sharp focus over the last month, but we’ll get to that. First, a bit of history.... In 2009, Commonwealth legislation was introduced under the title of the National Consumer Credit Protection Act (NCCPA). The legislation formed the basis of what has come to be known as responsible lending and formed the basis of a premise that borrowers needed to be protected from the supposed predatory conduct of banks and other lenders. Over time, various regulations and accepted industry standards led to the farce we see outlined
MANAGEMENT
in the excerpt above. That is, an assumption that lenders see great benefit in lending to parties who cannot repay debt and that consumers are so unsophisticated that they need government legislation and regulations to protect them from themselves. Consumer protection groups and other vested interests hailed the progressive developments while others wondered at the intrusion of government in the guise of protection. And when I say protection... at last check the ASIC Responsible Lending Guide ran to almost 100 pages. ResortNews | November 2020
