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Lenders accused of ‘systemic fraud’

by Michael West | Jun 3, 2013 | Business

Going public: Consumer rights campaigner Denise Brailey is set to reveal evidence of alleged fraud. Photo: Fiona-Lee Quimby

Veteran consumer rights campaigner Denise Brailey is to make public 2500 private emails and bank documents from Monday to expose what she describes as ”Australia’s subprime crisis”.

Ms Brailey claims that lenders and mortgage brokers tampered with documents to provide more credit for borrowers with ”low-doc” loans.

She says she is making private documents public after years of trying to get corporate regulators to investigate the banks and other lenders over what she alleges is ”systemic fraud” in the ”low-doc” market.

Low-documentation loans are made to borrowers such as business owners who can’t prove a regular income, but the borrower signs a declaration as to estimated income. The loans usually carry a higher interest rate than other loans, as they are seen as more risky.

Of the borrowers who have asked for help from Ms Brailey’s action group, Banking & Finance Consumers Support Association, 1170 of them claim their loan application forms (LAFs) have been tampered with. In most cases, the income figure has been increased to justify more credit. “There is not one clean ‘LAF’ among them,” said Ms Brailey, 70, a consumer advocate from Western Australia. “This is Australia’s subprime crisis.”

The banks and the corporate regulators reject Ms Brailey’s claims. They say fraud in the low-doc loan market is the fault of ”rogue” mortgage brokers.

The Australian Securities and Investments Commission, which oversees lending in Australia, said there is no evidence of fraud.

“ASIC has not received any documents from her in the form of LAFs which show any evidence of fraud,” ASIC Victorian regional commissioner Warren Day said.

However, Ms Brailey says ASIC is being ”tricky”. “More than 100 of my members sent their LAFs and their discrepancies [on the LAFs] to ASIC last year,” she says. “They all got ‘bugger off’ letters telling them to get a lawyer.”

Ms Brailey says the release of her data proves the banks were pulling the strings, using mortgage brokers as ”agents” to push credit on those who could not afford it.

Ms Brailey has spent a lifetime counselling victims of financial malfeasance. She won plaudits for exposing property investment spruikers such as Henry Kaye and Kovelan Bangaru. When the debenture spruikers Westpoint and Fincorp were imploding, Ms Brailey was a champion of the victims whose life savings were in tatters.

Without any government funding, the consumer advocate has managed to help thousands of people over the years who are about to lose their homes.

She went to Canberra last August to testify before the Senate inquiry into banking. She had amassed claims from some 400 victims of low-doc loans. That number has risen to 651 (including couples it is 1170).

At the height of the credit boom in 2007, low-doc loans were running at 10 per cent of all loans. It has since fallen to 1 per cent, and the size of the market, according to Reserve Bank figures, is $57 billion.

Most of the loans are secured over property. Ms Brailey said many of the loans are due for refinancing now and the Financial Ombudsman Service has reported a ”spike” in the number of complaints.

Included in the trove of emails made public today are the passwords for a program called the Service Calculator. The mortgage brokers would enter the passwords to get into the banks’ portal to determine whether a loan would be approved.

This is the ”smoking gun” that everybody refuses to talk about and which the regulators and the FOS refuse to investigate, Ms Brailey said.

By the numbers


  • Memberships:  651
  • People: 1170
  • Most members are couples


  • Sample size: 23.5% of members surveyed so far
  • Actual respondents: 153 pp/c (“per person/couple”)
  • Total Loans: 250
  • Total Loan Book surveyed: $97,630,550 =  $97.63 Million
  • Average Loan Size:  $390,522
  • Average numbers of loans “per person/couple”:  1.63 loans per p/c
  • Falsely stated as self/employed on the LAF:  38.8%
    Fraudulent FULL DOCS Loan arranged by Bank Managers/Officers:  14.8%
    Fraudulent LOW DOCS Loan arranged by Bank Managers/Officers:  20.8%
  • TOTAL toxic loans arranged by Bank Managers/Officers: 35.6%
  • Fraudulent Loans (Full and Low Doc) arranged by Brokers: 64.4%
  • HOMES LOST: arranged by Bank Managers/Officers  24.24%
  • HOMES LOST: arranged by Brokers 75.76%
  • Ages of Borrowers:  Under 40: 6.5 %
  • Ages of Borrowers:  41 – 50: 20.9 %
  • Ages of Borrowers:  51 – 65: 55.6 %
  • Ages of Borrowers:  66 – 70: 11.1 %
  • Ages of Borrowers:  71 over: 5.9 %

Michael West established Michael West Media in 2016 to focus on journalism of high public interest, particularly the rising power of corporations over democracy. West was formerly a journalist and editor with Fairfax newspapers, a columnist for News Corp and even, once, a stockbroker.

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