Credit Crisis. Karen Cox Coordinator Consumer Credit Legal Centre. Consumer Credit Legal Centre (NSW) . Consumer Credit Legal Centre (“CCLC”) is a community legal centre specialising in credit, debt and banking for NSW consumers, particularly disadvantaged consumers.
Coordinator Consumer Credit Legal Centre
Consumer Credit Legal Centre (“CCLC”) is a community legal centre specialising in credit, debt and banking for NSW consumers, particularly disadvantaged consumers.
CCLC operates the Credit and Debt Hotline, the first port of call for NSW individuals experiencing financial difficulties and the key referral point for financial counsellors across NSW.
There are clear differences between the situation in the US and Australia including:
Number of calls to the Credit and Debt Hotline regarding the imminent repossession of the caller’s home by calendar years to March.
Calls to the CCLC legal advice line regarding home loans and home equity products by calendar years with 2008 projected from the first three months.
Reserve Bank estimates 40,000 people are one month behind in mortgage repayments with 15,000 more than 3 months overdue
Arrears in Western Sydney are 2.5 times greater than those in other parts of NSW (15 repossessions per week in Blacktown for example)
3,948 writs of possession issued in NSW in 2007 = 75 homes being repossessed each week
30% increase in increase in 2007 in people accessing their superannuation to prevent the repossession of their homes
1990 - 2481
1991 - 3287
1992 - 2288
1993 - 2005
1994 - 1300 (estimated)
1995 - 1522
1996 - 1806
1997 - 1568
1998 - 2162
1999 - 2095
2000 - 2151
2001 - 2671
2002 - 2189
2003 - 2361
2004 - 3061
2005 - 4873
2006 - 5368
Repossessions only part of the story
CCLC call data – Jun 2006
UCCC – Unjust Contracts
Whether at the time the contract, mortgage or guarantee was entered into or changed, the credit provider knew, or could have ascertained by reasonable enquiry of the debtor at the time, that the debtor could not pay in accordance with its terms or not without substantial hardship.
Code of Banking Practice
Before we offer or give you a credit facility (or increase an existing facility), we will exercise the care and skill of a diligent and prudent banker in selecting and applying our credit assessment methods and in forming our opinion about your ability to repay it.
Mortgage Finance Association of Australia Code of Practice
A Member must suggest or recommend to an applicant only those arrangements for finance that the Member genuinely and reasonably believes are appropriate to the needs of that applicant after undertaking an assessment of the applicant’s capacity to repay the loan.
A Residential Loan Member must always make such enquiries as are reasonably necessary in all the circumstances to determine an applicant’s capacity to repay the proposed loan.
Credit has is regulated by states and largely not included in federal financial services regulation. Some benefits but some large drawbacks:
Weaknesses in UCCC provision:
Code of Banking Practice provision is non-specific, and can lead to a lowest common denominator approach.
There is considerable profit in the large grey area between clearly can’t pay and can repay entire debt comfortably.
The role of brokers
Credit & Debt
Proposed National uniform legislation - Bill out for comment that includes:
A brave new world?
In relation to credit generally
In relation to responsible lending in particular:
Where to from here?
COAG recently announced that the Federal Government will assume responsibility for mortgage brokers, mortgage lending and advice with the details to be reported on in October 2008.
Appears they could be planning a partial take-over of credit as in the UK where first mortgages are regulated by the Financial Services Authority and other credit by the Office of Fair Trading.
We are planning to write to the Federal and State government Ministers immediately asking for: