BFCSA Blog

Led by award-winning consumer advocate Denise Brailey, BFCSA (Inc) are a group of people who are concerned about the appalling growth of Loan Fraud around the world. BFCSA (Inc) is a not for profit organisation in the spirit of global community concern and justice.

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Interest-only borrowers brace for mortgage crunch Australian Financial ReviewJan 17 2018 11:00 PM Duncan Hughes   EXCLUSIVE  Queensland property investor Peter Button "grabbed the profit and ran" when his interest-only loan expired and he realised that refinancing would trigger a hefty increase in repayments. "I saw a refinancing issue coming over the horizon, it was easier to just get rid of it," said Mr Button who recently sold his two-bedroom apartment in the Brisbane CBD. But he's one of the lucky ones. Thousands of home owners face a looming financial crunch as $60 billion of interest-only loans written at the height of the property boom reset at higher rates and terms, over the next four years. Monthly repayments on a typical $1 million mortgage could increase by more than 50 per cent as borrowers start repaying the principal on their loans, stretching budgets and increasing the risk of financial distress. "The...
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Royal commissioner Kenneth Hayne is forcing at least eight insurers to air a decade of dirty laundry ahead of his inquiry, including QBE Insurance, IAG, Suncorp, Allianz Australia, Zurich Australia, Westpac Insurance, CommInsure and ANZ’s OnePath Insurance.   ASIC cracks down on junk insurance sold by car dealers The Australian 12:00am January 18, 2018 Ben Butler, Michael Roddan   The banking royal commission will be urged to look into worthless “add-on” insurance sold by car dealers — usually in return for hefty commissions — after action by the corporate regulator that has so far clawed back more than $120 million in refunds for ripped-off consumers. Both Allianz, which yesterday agreed to pay $46.5m in compensation to more than 68,000 customers who bought the dud product, and the Consumer Action Law Centre, which has been campaigning on the issue, said they would include add-on ­insurance in their submissions to the royal commission....
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What kind of company sells a dud like this to its customers? Sydney Morning Herald Jan 18 2018 - 7:44am Peter Kell Peter Kell is Deputy (and currently Acting) Chairman of ASIC   It is tempting to wonder why a person might pay more than $6000 for insurance cover that was capped at a maximum payout of $6000 – or why someone would buy an insurance policy under which they were never eligible to make a claim. But the real question should be why a company would treat its own customers that way by selling them such a policy? There can be no justification for such behaviour. Unfortunately, ASIC has found these practices are all too common in the add-on insurance sector – and we are determined to see them disappear. Too many consumers have simply not understood what they were being sold. We have commenced a two-stage strategy of seeking...
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Chinese property buyers disappear in 'perfect storm' Australian Financial Review Jan 17 2018 11:00 PM Su-Lin Tan   Major Chinese developers have warned that the decline in foreign buyers in the residential property market has reached critically low levels as taxes and credit restrictions all but collapse demand. They said foreign buyers have dwindled to as low as 1 per cent of off the plan sales, down from close to 40 per cent two years ago, and as a result the total residential market could shrink by up to 20 per cent. The countrywide increase in penalties on foreign buyers - South Australia was the latest state to introduce a 7 per cent surcharge on January 1 - at the same time as banks slash lending and China imposed more capital controls have kept foreign buyers away. "From our point of view, they [foreign buyers] are disappearing severely. The banking policies,...
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Fraud and scandals costing DIY super funds billions Sydney Morning Herald Jan 20 2018 - 12:15am John Collett   EXCLUSIVE  The true cost of fraud and financial misconduct for the one million Australians who run their own super funds is more than $100 billion over the past 10 years, a new report suggests. That's more than three times higher than the $30 billion in publicly reported losses from financial misconduct and fraud for the 10 years to June 30, 2017. Superannuation research firm Rainmaker has calculated the damage is actually $103 billion once you include the loss of investment returns from no longer having the money to invest. DIY super funds are increasingly popular because many people want the flexibility to invest in a wide range of assets, including property. Tax Office records show more than a million self-managed super funds (SMSFs) held more than $700 billion in assets on June...
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Murray warns against SMSF property borrowing The Australian 12:00am January 20, 2018 Michael Roddan   The surge in self-managed super funds borrowing large sums of cash to plough into investment properties is threatening to hit the retirement savings of tens of thousands of Australians, as falling house prices and stalling rents ­reduce earnings. The fast rate of growth in borrowings has prompted renewed warnings by financial system inquiry head David Murray that market risk in self-managed retirement savings funds is “higher than it has been before”. The latest figures from the Australian Taxation Office reveal the number of DIY super funds that have borrowed from the bank to invest in property has doubled over the past five years to more than 50,000 accounts. Now, almost one in 10 SMSF owners has accessed limited recourse borrowing arrangements, which are mostly used to fund property investments. SMSF borrowing for property has ballooned from...
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Lenders offering discounts on interest-only investment loans Australian Financial Review Jan 19 2018 11:00 PM Duncan Hughes   A new round of lender discounts  is reducing the cost of investor loans by up to 130 basis points. Bank of Queensland and Suncorp are offering deep cuts to their advertised interest-only investor rates to boost their loan books, a key driver of profits for lenders. The discounts are being offered through mortgage brokers, who act as an intermediary between lenders and borrowers. Best discounts are for lower-risk borrowers with a deposit of at least 20 per cent.   Borrowers will have to complete more rigorous affordability tests than in recent years because of regulatory attempts to prevent excessive debt and cool over-heating property investment markets. That might include restricting the use of some forms of income (such as bonuses), more evidence of regular income and closer examination of household expenses (such as...
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Ian McPhee: banks need to focus on customers The Australian 12:00am January 19, 2018 Michael Roddan   Australia’s most senior bank bosses have been advised by their own industry body to adopt a stronger focus on serving customers rather than corporate interests and to get out on the front foot with staff and the community. Former auditor-general Ian McPhee, who is overseeing a wide-ranging governance review on behalf of the Australian Bankers’ Association, also warned the sector yesterday against “backsliding” on early progress, saying it was disappointing six banks had failed to meet a deadline for banker remuneration reforms. His comments come as bank executives are set to face deeper scrutiny over the next few months from the banking royal commission looking at misconduct in the sector that is set to gather pace in coming weeks. In a bid to overhaul their tainted image, banks two years ago agreed to target...
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Builders hit as demand for units declines The Australian 12:00am January 19, 2018 Lisa Allen, Robyn Ironside   Builders across Australia’s east coast are starting to feel the squeeze as demand for apartment construction weakens amid a fall-off in foreign buyers and the threat of interest rate rises. It adds fresh concern for a sector that is cooling, with analysts warning the Reserve Bank needs to carefully manage the path to rising interest rates as the economy recovers. “There is absolutely no question we have seen a considerable softening in the construction end of the residential apartment space,” Martin Monro, the managing director of listed construction company group Watpac, told The Australian yesterday. “The manipulation of interest rates would clearly impact the housing market … if people can’t see a possibility of interest rate rises they should not be buying property in the first place. “We have seen a correction because...
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Nine out of ten flipped properties sold for a profit in 2017 Australian Financial Review Jan 18 2018 6:03 PM Larry Schlesinger   Nine out of 10 properties flipped by investors last year sold for a gross profit, according to analysis by CoreLogic. Flipping refers to buying and selling a property within one or two years in the hope of making a quick capital gain by either buying undervalued property, benefiting from rapidly rising prices or from adding value in some way such as through renovation, subdivision or securing a development permit. While 89.1 per cent of homes resold within one year made a profit and 89.9 per cent resold within two years made a profit in 2017, the proportion of loss-making flipped sales is expected to rise in 2018 as house prices, especially in Sydney and Melbourne, start to ease and obtaining investor loans becomes harder. The CoreLogic figures also...
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Former CBA planner banned after cutting and pasting signatures Sydney Morning Herald Jan 18 2018 - 1:04pm Clancy Yeates   A former Commonwealth Bank financial planner has been banned from the industry for five years after the corporate regulator alleged she cut customer signatures from documents kept on file and pasted them onto new documents. The Australian Securities and Investments Commission on Thursday said it had banned Kimberly Holgate, of Wagga Wagga, for conduct that was likely to mislead clients, and was not in their best interests. Ms Holgate was an authorised representative of CBA's Commonwealth Financial Planning business (CFPL) between January 2014 and October 2015, when she was reported by CBA to ASIC and dismissed. In a statement, ASIC said it found that Ms Holgate had "engaged in conduct that was likely to mislead by cutting clients' signatures from documents held on file and pasting them onto new documents." As...
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Rising cost of essential services putting the squeeze on homes The Australian 12:00am January 15, 2018 David Uren   Government-led costs are squeezing household budgets much more than the private sector, with prices of essential ser­vices such as health and education far outstripping near-­record low inflation. Outlays on childcare have doubled in the past six years, while primary and secondary education costs for the typical household are up 50 per cent, detailed household budget figures from the Australian Bureau of Statistics show. Overall, households are spending 23 per cent more on ­essential services, with prices influenced by government, than they were five years ago, while spending on goods and services with prices set by the market is up by 15 per cent. [Which is to say, this article tries to pass off the costs of privatised and corporatised essential services as charges imposed by government. Note in the graph below that...
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Unfair loans face ‘perfect storm’ The Australian 12:00am January 15, 2018 Michael Roddan   The royal commission into banking and financial services is being urged to investigate systemic irresponsible lending in the $1.7 trillion mortgage market, as victims flood law firms with claims they’ve been saddled with unpayable debts. Josh Mennen, superannuation and insurance principal at Mau­rice Blackburn, said his law firm had seen a dramatic increase in the number of borrowers complaining about unfair credit contracts. Under responsible lending laws introduced in 2010, banks and mortgage brokers must not make loans to customers who will not be able to repay them. Lenders must also adequately test whether customers can meet repayments, and must avoid providing loans that are unsuitable for borrowers. “Despite those protections, we’re seeing that for the past decade, bank mortgage lending has been free and loose — particularly with interest-only loans,” Mr Mennen told The Australian. Interest-only...
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NAB and Westpac’s Secret Bailout Revealed Kris Sayce     3/12/2010 Facebook36Twitter https://www.moneymorning.com.au/20101203/nab-and-westpacs-secret-bailout-revealed.html   Where would we be without KRIS SAYCE??   It’s time for an apology. No, not from your editor. We’re always right, so there’s no need to apologise [wink]. Instead the apology needs to come from the Australian mainstream financial press. The same financial press that told you Australia’s banks were strong. That Australia had the best prudential regulation in the world. That Australian banks were different to all those dirty foreign banks. But an apology also needs to come from the banks who themselves claimed things were different here. And that Australia’s banks didn’t have the same solvency problems as US and European banks. Why do they need to apologise? Well, two years after the global financial markets collapsed, a secret bailout of two of Australia’s biggest banks has been revealed. This is pretty big news. Or rather, you’d...
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  Banking royal commission: Fears customers are being shut out from having their say ABC News13 January 2018 Stephanie Chalmer   It has been six weeks since the financial services royal commission was announced, but victims of bank misconduct remain in limbo about when, how, and even if they can have their voices heard. While the major banks and some advocacy groups were invited to prepare submissions weeks ago, members of the public still have no way to lodge their complaints. The commission's website provides no way for the public to do so — just a general contact email and mailing list. The Australian Council of Trade Unions (ACTU) has launched its own website to accept public submissions. "We want the commission to hear everyday stories from everyday people, who in some instances have had their lives destroyed," said ACTU president Ged Kearney. Fresh in the minds of the unions is...
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APRA details new rules for home lenders The Australian 12:00am January 11, 2018 Michael Roddan  How will APRA know what FAKE DATA looks like?  They have no experience in looking at fraud and fake stats!!!  The banking regulator will push ahead with rules requiring lenders to hand over more data about the levels of borrower indebtedness, after finetuning its reporting requirements in the wake of industry complaints about the rushed timetable for the new standards. The Australian Prudential Regulation Authority yesterday finalised the rules governing the data that banks must hand over on their residential mortgage-lending operations. APRA has been warning the banking sector of heightened risks in the $1.7 trillion residential mortgage market, and has been urging the banks to monitor lending more closely. The regulator is requesting that banks give it information on borrowers’ debt-to-income ratios, increases in debt limits and loans to unincorporated private businesses. The rules will...
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Australian banks blitz debt markets for $9 billion as funding costs fall Australian Financial ReviewJan 10 2018 11:00 PM Jonathan Shapiro   Australia's big four banks have raised $9 billion in the first 10 days of the year, taking advantage of the most favourable conditions in capital markets since the financial crisis. The frantic pace of issuance exceeds the $5.25 billion raised by the major banks in January 2017 as they lock in lower funding costs and further reduce the need to compete aggressively for deposit funding. On Tuesday, ANZ Banking Group issued $3 billion of three-year and five-year debt in the Australian market, paying a rate of 3.13 per cent for the five-year tranche. The margin ANZ paid for the five-year of 77 basis points over the bank rate is a 30 per cent decline from the 111 basis points paid by the Commonwealth Bank when it sold five-year bonds...
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Reports of corruption in public service renew calls for federal ICAC ABC News10 January 2018 Henry Belot and Lucy Barbour   The number of public servants who say they have witnessed corruption has doubled in three years, reigniting calls for a national anti-corruption commission. A survey of the bureaucracy revealed 5 per cent of respondents said they had seen misconduct, with cronyism and nepotism the most common charge. The Australian Public Service Commission (APSC) has admitted there is some corruption in the bureaucracy, but stressed it remained rare and staff were vigilant to the threat. But former New South Wales Supreme Court Judge Anthony Whealy said corruption could be more widespread than many realised. "We know that in the public service whistleblowing is absolutely frowned on," Mr Whealy told the ABC. "People who work in the public service, in many instances, would be afraid to report their superiors or even their...
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    ACCC's criminal cartel cases seek jail time, big fines from companies Australian Financial Review Jan 8 2018 11:00 PM Patrick Durkin   EXCLUSIVE  The competition watchdog is set to launch its first criminal cartel cases against a series of high-profile Australian companies seeking multimillion-dollar fines and up to 10 years' jail for senior executives, Australian Competition and Consumer Commission chairman Rod Sims has warned. "2018 will be a very big turning point for cartel enforcement and cartel deterrence," Mr Sims told The Australian Financial Review. "We will very likely have three to four domestic-based criminal cartel actions in 2018. It is very unfortunate we need to take action against individuals but I think that is what is needed. We have had a criminal cartel unit going for a couple of years and it is starting to pay dividends." Under the criminal cartel laws, executives can face jail terms of...
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Households Under The Mortgage Stress Gun In December Digital Finance Analytics(blog) 3 Jan. 2018 Martin North   Digital Finance Analytics has released the December mortgage stress and default analysis update. Across Australia, more than 921,000 households are estimated to be now in mortgage stress (last month 913,000). This equates to 29.7% of households. In addition, more than 24,000 of these in severe stress, up 3,000 from last month. We estimate that more than 52,000 households risk 30-day default in the next 12 months, similar to last month. We expect bank portfolio losses to be around 2.8 basis points, though with losses in WA rising to 4.9 basis points. Households in NSW are showing the most significant rise in stress, thanks to larger mortgages relative to income, while income growth is slow. Martin North, Principal of Digital Finance Analytics said “the number of households impacted are economically significant, especially as household debt...
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