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BFCSA investigates fraud involving lenders, spruikers and financial planners worldwide.  Full Doc, Low Doc, No Doc loans, Lines of Credit and Buffer loans appear to be normal profit making financial products, however, these loans are set to implode within seven years.  For the past two decades, Ms Brailey, President of BFCSA (Inc), has been a tireless campaigner, championing the cause of older and low income people around the Globe who have fallen victim to banking and finance scams.  She has found that people of all ages are being targeted by Bankers offering faulty lending products. BFCSA warn that anyone who has signed up for one of these financial products, is in grave danger of losing their home.


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BFCSA: Banking royal commission warned rigid lending would lead to economic gridlock

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Banking royal commission warned rigid lending would lead to economic gridlock

Australian Financial Review May 23 2018 7:00 PM

James Frost


Westpac and ANZ drove home the consequences of rigid credit rules on Wednesday as the Hayne royal commission was forced to weigh up the impact of tighter lending on economic growth.

The banks sought to explain how it was rarely a case of one-size-fits-all with small businesses and why they disagreed with the Financial Services Ombudsman's interpretations of their responsible lending obligations.

Treasurer Scott Morrison weighed in, warning any decision to "just throw more regulation" at the problem would carry the risk it "basically constipates the banking and financial industry", leading to fewer jobs and harder to acquire home loans.

The tension between the ombudsman and the banks on how to maintain a balance between protections and a healthy economy has been teased out in advance of Thursday's highly anticipated ruling by Justice Jonathan Beach on whether Westpac sought to manipulate a key interest rate benchmark.

Westpac's head of commercial banking, Alastair Welsh, and ANZ's head of home lending, Kate Gibson, said they did not agree with the ombudsman's interpretation of some elements of its responsible lending obligations and that if they were to be applied to small businesses universally credit to small business would be drastically curtailed.

Both banks have been questioned extensively about business loans they made to franchise operators that subsequently collapsed. The cases were referred to FOS, which made determinations in favour of the customers. However, the banks did not agree with the conclusions drawn.

Westpac's Mr Welsh said after reviewing the loan provided to Marion Messih, a customer for a Pieface franchise, he believed "the loan should have been made".

FOS found Westpac should not have lent to her, and required Westpac to repay the interest and fees to her, although she was still liable for repaying the principal.

FOS said Westpac had not applied a big enough interest rate "buffer" to test whether Ms Messih could repay the loan and suggested the buffer should have been 50 per cent which Mr Welsh described as prohibitively high.

"That would prohibit a lot of business lending and that would be very concerning for me," he said.

"It's a pretty challenging environment for small business out there, and if the banks are adding another 3 per cent on their ability to get a loan, a lot of businesses would struggle to get finance," he said.

ANZ also took similar issue with a determination issued by the ombudsman over its decision to grant a loan to a husband and wife who wanted to open a gelato franchise.

FOS found that ANZ breached the requirement to use due care and skill under the Banking Code of Conduct in granting the loan because it had failed to properly assess whether the loan could be repaid by examining whether the directors of the company, a husband and wife, had enough income to cover the loan.

ANZ objected to the assessment. Ms Gibson said a broader application of this interpretation would unnecessarily restrict credit.

"If banks accepted that definition, we would have to look at these applications and in the absence of there being an income available to service the debt in the event of default, under FOS's definition we shouldn't lend," she said.

"But I believe we do lend in those circumstances, and many small businesses get funding in those circumstances who would not be able to access that if that was the case – so I believe it would have a negative impact [on lending volumes]."

Ms Gibson was also questioned about a forecast for expenses contained in the business plan, which were outside benchmarks produced by the Australian Taxation Office.

"I don't think it should be mandatory that you use that for every application that comes through the door," she said. "It's a distinction; you can do it, but I don't think it should be done in every instance."



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