Aug 11

According to the latest research by Ratecity, Aussie household are holding $86.3 billion more debt this year than in 2009. While much of this debt is unsecured and therefore is not reflected in home loan commitment figures recently reported, credit cards and personal loan debt is higher than ever.

In an analysis of data from the Australian Prudential Regulatory Authority (APRA), RateCity found that households borrowed $771.3 billion in June – 12.6 per cent more than in the previous year $685 billion. This includes personal loans, credit cards, and owner occupied home loans.

The risk of over-borrowing is something that is greater today than this time last year. This is despite the interest rates being put up a number of times by the RBA over the past 12 months.

Aug 10
Credit card fraud and bank account fraud is rife in Australia. One of the methods used by thieves is having a skimming device fitted at the “mouth” of the ATM machine to copy the person’s card details. A micro-camera would capture the pin number as the person keys it in. The gang would have then transferred the skimmed data to a counterfeit card and the robberies were easily perpetrated remotely in many cases by thieves located overseas.Most new ATM machines in Australia have shields placed onto their key pads, or are chip and pin “capable”. That is, they use computer chips to store information rather than the more easily-cloned magnetic stripes. All Australian ATMs must be chip and pin “capable” by January 1, 2011.

While bank fraud victims are generally compensated by their bank fairly quickly, the experience is traumatic and can stay with you for some time.

All Banks, credit unions and building societies must subscribe to the Electronic Funds Transfer Code, which protects consumers who use electronic banking such as ATMs and Eftpos, or telephone and internet banking, to transfer funds. This does offer some form of protection.

The Australian Securities and Investment Commission has a detailed “Fido” page on its website, which clearly details the rights of customers – and the obligations of banks – when fraud occurs.

The ANZ Bank offers a Fraud Money-Back Guarantee which will fully re-credit a customer’s account “as long as they have not contributed to the loss and have notified the bank promptly”. The bank will reimburse claims of up to $10,000 within five business days of receiving completed documentation.

The rules and responsibilities around bank fraud perpetrated online, are far less clear. Who is responsible where Customers respond to a convincing “phishing” email,  -  is it the fault of the bank or personal negligence on the customer’s part?

Generally common sense must prevail. If you receive an email with links to your bank, PayPal or any other website that requires a login to an account, it is clearly a very high risk behavior on behalf of the customer.

Banks claim their protective technology is now more proactive than reactive. NAB claims that they can now detect 90 per cent of fraud cases “within minutes or seconds”. The big four banks use technology that throws up red flags when transactions fall outside the customer’s normal usage patterns – patterns based on geography, amount and time.

There are now also extra layers of security such as tokens which display changing numbers that must be punched in to complete an online transfer, as well as SMS alerts to inform customers of any large money movements.

There are times when the bank will question the validity of a fraud, and in these situations, things may not go so smoothly. Small says a bank has to protect itself from false “victims” and the bank has a highly trained team of fraud examiners which will question customers – politely, of course.

Jul 29

Australians have made more mortgage applications during the June quarter than in the March quarter.  According to a report by Veda Advantage, Home Loan applications were up by 2.3 per cent in the June quarter. Whereas consumer demand for unsecured credit has dropped with credit card application numbers being down by 9 percent.

While we have seen a minor increase in demand for mortgages over the past three months, the results over the past 12 months are showing a home loan application drop of 20.3 per cent compared with the June 2009 quarter. The most significant reason for the lower numbers on an annual basis is the changes introduced by government to the First Home Buyer Entitlements. As these dropped off so did the home loan application numbers.

According to a spokes person from Veda Advantage there’s no sign in Australia of  a US-style sub-prime mortgage crisis.

Veda Advantage statistics on bad credit instances including loan defaults, arrears, bankruptcy and the like suggest that the Australian numbers of bad credit loan applications have actually fallen over the last couple of years.

Consumer credit quality has improved. Over the last two years households have adjusted to the tougher economic conditions by being more cautious and people with poor credit history seem to be staying out of the home loan market.

Jul 16

The Financial Services Ombudsman has come out with a publication about what evidence a financial institution needs to show to establish to  the Ombudsman satisfaction that, on the balance of probabilities, it sent a document to a customer’s last known address.

It is expected that clients have the person that serves the notice complete a proof of service form and attach it to a copy of the default notice that was sent. Having read through the FOS note it seems this would be perfect and provide FOS with all the information they need.

There are a number of standard proof of service forms that should be used to make sure that the claim for payment is legitimate.

We find that using a proof of service form provides sufficient proof and if Court proceedings follow, we have all the service information on the one document that we need for a proof of service affidavit. Also the proof of service forms contain the correct service information for that state or territory so it ensures the client complies with the state legislation service requirements and the NCC service requirements as well.

Jun 29

The Premier of Tasmania has come out with an offer of $2 million in no-interest loans to help Tasmanians suffering from financial stress.

NILS Tasmania will manage a $1 million fund for essential household goods and expenses and another $1 million fund to help start small businesses.

These funds are a part of a $5 million Community Development Finance Fund announced during 2009.

David Bartlett has told a budget estimates committee the loans will be extremely helpful for low income Tasmanians trying to get back ‘on their feet’.

“The research shows us that the additional support for expanded items and services under the micro-finances program will greatly assist people facing financial hardship and help raise financial literacy and reduce dependency on emergency relief,” he said.

Jun 17

This is the first time since November 2006 when households believe that their Credit Card Debt is a Greater Problem than their Mortgage Debt.

According to the survey conducted, Victorians are Australia’s best savers.

It also showed the proportion of respondents nominating holiday or travel as their motivation for saving was 55.8 per cent, up from  55.0 per cent in March.

The Melbourne Institute household financial conditions index rose 17.2 per cent to 33.7 in June, up from 28.8 in March.

Credit card debt overtook mortgage debt as the main form for households, up almost 3 per cent, to 36.6 per cent.
The proportion of Australians saving grew marginally.

“About 48.8 per cent of Australian households saved part of their income in June 2010, up from 46.2 per cent in March,” the report said.

The June survey revealed three quarters of Australian households fully own their own home or have a mortgage, falling from 79.8 per cent in March and 78.8 per cent a year ago.

Just over 30.5 per cent of households said they would put new savings into deposit-taking institutions, while bank deposits remained the most popular form of savings.

More than 40 per cent of households said they were debt free, while a third said they held mortgage debt, down almost four per cent since last quarter.

Almost 60% of households interviewed indicated that they use only 10% of after tax income to apply towards debts.  Clearly debt balances continue to grow.

Queenslanders were more likely to run into debt than those in other states, while NSW and Victorian residents were more likely to save than their counterparts in other states.

The outcomes kept wages growth just inside the RBA expected 4.5%.

Jun 16

There has been a marked increase in Australian Home Loan Arrears in the first quarter of 2010.

According to a report released by Standard & Poor’s Ratings Services, arrears rose by 0.19 per cent to 1.44 per cent in the March quarter, while subprime RMBS arrears grew 0.67 per cent to 12.24 per cent.

“While we observe that the RBA has increased the official rates 6 times in a row and this may have contributed to higher overall arrears levels, we believe any worsening impact on RMBS collateral performance due to factors such as increased interest rates would likely be moderate and temporary,” Ms Chaplin said.

“In our view, if interest rates continue to rise, some first-home buyers who entered the property market when interest rates were historically low, and self-employed borrowers whose cash flows are more sensitive to economic conditions and borrowing costs, are likely to be most affected. Nevertheless, we believe the overall impact on defaults and losses is likely to be low if property values are preserved.”

Jun 10

RBA is hoping the current levels of household debt will not escalate. The levels of debt are manageable for the time being, but the governor of the Reserve Bank of Australia hopes that they do not climb much beyond their present level.

In a talk to the Western Sydney Business Connection yesterday, which surveyed current global and domestic economic conditions, Stevens noted that “households have serviced the higher debt levels very well. The arrears rates on mortgages, for example, remain very low by global standards. As a result the asset quality of financial institutions has remained very good.”

The debt to household income ratio stood at 156 per cent at December 2009, up from a post GFC low of 151 per cent earlier in 2009 and, apparently, continuing its steady climb. This ratio has doubled over 12 years and increased fourfold since financial deregulation commenced almost 30 years ago.
Governor Stevens would like to make sure that people do not get ‘carried away’ with borrowing in anticipation of future property gains as these are neither certain nor quantifiable.

“One would have to think that, however well households have coped with the events of recent years, further big increases in indebtedness could increase their vulnerability to shocks – such as a fall in income – to a greater extent than would be prudent.”

“It may be,” Stevens said, “that many households have sensed this. We see at present a certain caution in their behaviour.” Stevens went on to cite modest growth in consumer spending (which he linked more to consumer caution than to the absence of last year’s stimulus payments), an increase in savings rates and wariness toward borrowing.

Stevens noted that increased interest rates must have certainly had the affect desired to bring debt appetite down but also said “the level of rates is not actually high by the standards of the past decade or two. We can’t rule out something more fundamental at work.

“We can’t know whether this apparent change will turn out to be durable. But if it did persist, and if that meant that we avoided a further significant increase in household leverage in this business cycle, it might be no bad thing.

“Moreover if a period of modest growth in consumer spending helped to make room for the build-up in investment activity that seems likely, perhaps that would be no bad thing either.”

Jun 7

Every time you make a  loan application to a financial institution, they will look at your credit report to decide is they wish to offer you a loan.  According to a recent research more than 80 per cent of Australians have no idea what  their credit report says about them.

Credit reporting agency Dun & Bradstreet says people should check their credit report at least once a year – it’s free – and be aware of what actions can affect a credit report.

Credit reports in Australia only include identification details, credit applications and negative events such as defaults and bankruptcies. But from next year, extra details such as a person’s repayment history are set to be added.

Dun & Bradstreet chief executive Christine Christian (pictured) says regularly checking your credit report can help people secure credit.

“Consumers should place themselves in a position to understand exactly what a lender will see, and this means the first step to applying for credit should be ordering a copy of your credit report,” Christian says.

“This will allow consumers to find out whether recent credit applications will make it look like they have taken on too much debt, or if previous late payments are listed, potentially making it harder or more expensive to get credit.”

Dun & Bradstreet research shows that 86 per cent of Australians have no idea what their credit profile looks like.

Your credit profile is a combination of many factors.  Have you ever had a default recorded against your name? Is the default paid or unpaid?  How many times have you applied for a loan?  Many people do not realise that making too many loan applications will prevent lenders from approving their loan application.

National Australia Bank says it considers an applicant’s credit history every time approval for lending is required.

“A credit report is an assessment of the customer’s credit history and a key piece of data used in the lending decision,” a NAB spokeswoman says.  You will find that most lenders check your credit report each time you make a loan application .

Naturally it would be wise to know what is recorded on your credit report so that if the report contains any errors you are able to take action to remedy these.

Jun 2

The deposit requirement is one of the main stumbling blocks that our first home buyers need to manage.

Applicants with some history of bad credit need to have at least 20% deposit. The maximum mortgage that such applicants could qualify for is to 80% of the value of thir purchase property.

However most first home buyers simply have no chance of putting together such a substantial deposit as well as funds to cover purchasing costs such as stamp duties levied by the state government.

Some of the applicants we deal with are able to borrow funds from family and friends to apply towards deposit requirements.  Some choose to buy with another person to ease the deposit burden. Some simply wait to have their bad credit lifted before applying.  However given that credit blemished remain on your credit report for up to 7 years after the default is fully paid – it is a long wait.

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