A mortgage broker has been found guilty of unconscionable conduct for writing loans a borrower was unable to repay, in a landmark decision expected to have far-reaching implications for the broking industry.
Federal Court judge Roger Gyles found Canberra mortgage broker Kelvin Skeers had engaged in "misleading and deceptive conduct" in writing a $360,000 low-documentation home loan for a 20-year-old man who was unemployed, dyslexic and homeless.
It is the first time a mortgage broker has been found guilty of unconscionable conduct for writing unjust loans, and the precedent could leave thousands of mortgage brokers open to action by the corporate regulator and state fair trading bodies.
According to a study by Fujitsu Home Loans released last month, 40,000 Australian households had been stung by "predatory lending" practices.
Those practices ranged from brokers lending to borrowers who were unable to repay loans, to brokers charging excessively high loan financing costs.
Yesterday's ruling follows a decision last week where Mr Skeers' employer Tonadale - trading as ACT Mortgages - was forced to pay $31,000 in compensation to the borrower.
The Australian Securities and Investments Commission is understood to be now pursuing criminal action against Mr Skeers. In yesterday's case, ASIC alleged Mr Skeers had misrepresented the borrower's financial position and misrepresented to the borrower what would be included in those loan application forms.
"This case highlights that unscrupulous conduct in the mortgage industry is not acceptable and that mortgage brokers can be held responsible," ASIC executive director of enforcement Jan Redfern said.
The unemployed borrower had inherited $240,000 and approached ACT Mortgages twice to borrow additional money to buy a home.
Mr Skeers arranged an initial loan for $360,000 and later a second refinancing loan for $400,000. Justice Gyles said the borrower was unable to repay either loan at the time.
Source: AAP
