NCCP Act 2009: Lenders not permitted to 'call in' loans unless borrower is in default

[Terryw]

For me, it's not about being right or wrong, it's about getting to the truth.

This thread has demonstrated that...

1. It is not legally possible on normal P&I residential home loans, including investment property loans (i.e. the vast majority of mortgages)
2. Nobody can provide an actual regulated mortgage contract that includes such T&Cs
3. There is no evidence of it ever happening, apart from anecdotes from the nineties (probably unregulated loans), or commercial property anecdotes
4. It would rarely be in the banks interest to do it anyway

This threat hasn't demonstrated that
1. Not been demonstrated
2. See the ING document above
3. maybe
4. I agree

Now, if you want to continue your research you should seach for caselaw of 'unjust contracts' and on that section of the NCCP which covers this - cl 81??

Schedule 1 of the NCCP is actually the old UCCC so it has been around for ages, so you should be able to find to actual cases.

 

[Shadow]

Now, if you want to continue your research you should seach for caselaw of 'unjust contracts' and on that section of the NCCP which covers this - cl 81?

As mentioned previously, there wouldn't be any case law, because as far as anyone is aware, the situation has never arisen.

We'll just have to agree to disagree on the other points.

 

[Terryw]

As mentioned previously, there wouldn't be any case law, because as far as anyone is aware, the situation has never arisen.

We'll just have to agree to disagree on the other points.

Are you saying there has never been any cases on 'unfair contracts' or 'unjust contracts' or that section of the UCCC?

 

[Shadow]

Are you saying there has never been any cases on 'unfair contracts' or 'unjust contracts' or that section of the UCCC?

I'm saying there is no evidence that any lender has attempted to take action against a borrower under a regulated mortgage contract, simply because house prices fell. If they ever tried it, ACA and Today Tonight would be all over it, there would be media reports, people would have heard about it, it would have been discussed on the various property forums.

Are you saying a lender has done this?

 

[willair]

(they can 'ask' you to do anything), but they can't enforce it.

(and the ING doc wasn't a contract anyway)

You don't know that,if you have a property that is,over valued-over-priced-over rented ,and with borrowings that cannot possibly justify the risk from high pressure tactics from dropkick spruikers with multicoloured graphs and fast buck ideas ,it always ends the same way just the timeframe is different..

 

[Terryw]

I'm saying there is no evidence that any lender has attempted to take action against a borrower under a regulated mortgage contract, simply because house prices fell.

Are you saying a lender has done this?

I don't know if any lender has done this.

Part of your argument is that such a clause would be 'unjust'. So I was assuming you would like to know what is consider unjust by looking at established cases.

 

[Shadow]

I don't know if any lender has done this.

Part of your argument is that such a clause would be 'unjust'. So I was assuming you would like to know what is consider unjust by looking at established cases.

Treasury have already told me what might be considered unjust...

'a provision of this type, if included, could infringe the unfair contracts terms legislation in the Australian Consumer Law'

Beyond that, there wouldn't be any case law specific to the scenario being discussed here.

As mentioned by Treasury, they're not even aware of any regular loan contracts that includes such T&Cs, so it's a moot point.

 

[Terryw]

Treasury have already told me what might be considered unjust...

'a provision of this type, if included, could infringe the unfair contracts terms legislation in the Australian Consumer Law'

Beyond that, there wouldn't be any case law specific to the scenario being discussed here.

so you don't want to do any research?

 

[Shadow]

so you don't want to do any research?

Treasury have said they're not even aware of any regular loan contracts that includes such T&Cs, so it seems pointless for me to go searching for something that Treasury believes probably doesn't exist. I have provided research and links to the following sources...

NCCP Act 2009
ASIC documents
Email from Treasury

I think I have performed more research than anyone else here.

All I've had in response from those on the other side of the argument are links to information booklets and general hand-waving.

 

[hobo-jo]

I have provided research and links to the following sources...

NCCP Act 2009
Which accepts that an acceleration clause is possible provided the borrower is in default under conditions of the contract.

ASIC documents
Was an information sheet (unlike the actual terms and conditions provided from two lenders).

Email from Treasury
Which confirmed there are loan types, some of which might be regulated, that can be asked for a top up.

 

[Shadow]

there are loan types...

Yes, it may be technically possible (though rarely if ever enforced) for a small minority of loans (I didn't claim otherwise).

BTW - you should update your blog to mention that Treasury are unaware of the existence of such T&Cs in any regular P&I residential loan contract.

 

[Token Funder]

I went through the consumer lending terms and conditions several times and the terms and conditions for the package I am using and found nothing remotely like what you keep making out is in existence.

Differnet lenders have different terms.

What we have established is that CBA and ING have these terms in their contracts.

As Aaron C alluded to earlier, the reason we build multi-part documents is for administraive efficiency. Rather than re-issuing contracts in their entirety when you make a change, you can simply re-isse the addendum

As an example, the loan docs in my business are actually athree-parter (a) the schedule which contains the customer/security/product type details. (b) the Ts and Cs which hold all the product wordings and legalese and (c) a fees and charges booklet. Colllectively, along with the mortgage terms themselves, they make up the contract.

We don't have a clause as broadly worded as ING/CBA for term loans but have others which provide signficant rights if the security property is messed with, including if it is not well maintained.

 

[MrCrumbpacker]

And if you say 'sorry no I can't stump up'... then what would they do?

Nothing - they have no ability to enforce the clause. They can't sell the property if you refuse to stump up.

Sure, they can ask you to stump up (they can 'ask' you to do anything), but they can't enforce it.

(and the ING doc wasn't a contract anyway)

Its an interesting point, and to be fair to Shadow, well worth drilling down on, particularly in the light of the recent decisions against the lenders in the American courts regarding illegal repossessions.

In truth I can't see it being an issue, or in the banks interest, in the normal scenario. The banks will try to keep people put, and paying for as long as they can, the last thing the banks want is a load of negative equity property on their books.

Negative equity is only an issue to very recent buyers, and would have to be severe for any of them considering posting the keys and walking, as happened in the UK early 90's.

 

[Shadow]

We don't have a clause as broadly worded as ING/CBA for term loans but have others which provide signficant rights if the security property is messed with, including if it is not well maintained.

But not if house prices just happen to fall through no fault of the borrower...

 

[Terryw]

Treasury have said they're not even aware of any regular loan contracts that includes such T&Cs, so it seems pointless for me to go searching for something that Treasury believes probably doesn't exist. I have provided research and links to the following sources...

NCCP Act 2009
ASIC documents
Email from Treasury

I think I have performed more research than anyone else here.

All I've had in response from those on the other side of the argument are links to information booklets and general hand-waving.

Keep in mind the 'research' you have done into the NCCP (mostly via secondary sources without actually reading the Act) doesn't prove your point.

The ASIC documents didn't prove your point.

The email from Treasury was jsut an email from an individual who may, or may not, know anything. It wasn't an official position paper, and it used indefinite language.

Now imagine you have legal proceedings commenced against you by a bank because your loan LVR has increased due to a drop in price in the value of your house. What and how do you argue in court? Would you give a letter from your mum, an ASIC brochure, an email from Treasury?

BTW just because Treasury (or the person writing the email) isn't aware of something doesn't mean it doesn't exist.

You haven't proven your agument yet.

 

[Token Funder]

I saw the ING document. It wasn't actually a contract - so I didn't pay much attention to it past the first page where it describes itself as T&C 'booklet', and where it notes that... 'These Terms and Conditions do not contain all of the information that we are required to give you before you enter into the contract.'

Anyway, regardless of what clauses ING decide to put in their actual contract, the question is whether those clauses are enforceable in the manner being discussed here. The response from Treasury proves they would generally not enforceable in the manner being discussed...

'We are not aware of any normal ‘principal and interest’ home loans where the lender has the right to sell a property simply because property values fall. However, a provision of this type, if included, could infringe the unfair contracts terms legislation in the Australian Consumer Law.'

You're being willfully ignorant.

The Ts and Cs are part of the contract as...you know.... the people who have to know this stuff for a living keep telling you.

If you were keen to find something out as distinct from defend the obviously indefensible, it seems to we you would have sent either the CBA or ING terms to Treasury.

Then they would be aware. wouldn't they?

And it's funny that their response seems to imply a question about "property values" rather than the actual drop in a particular property.

What did you ask, exactly.

Care to post the other part of the conversation?
,

 

[Aaron_C]

Maybe the Treasury document is from Godwin Grech

 

[Token Funder]

But not if house prices just happen to fall through no fault of the borrower...

Fault is irrelevant.

Under the CBA and ING terms, if the value of your security drops to a point they are not comfortable, they have the right to have you tip in more cash or add more security. Inability to do this would lead to a default An unremedied default gives rise to a right of repossession.

Whether they would enforce those rights is a different question.

The rights unquestionably exist.

 

[Shadow]

willfully ignorant

Your straw clutching, ad hominem abuse, and pedantic petty nitpicking are of no interest to me.

If you dislike the response from Treasury, email them yourself and word your question however you like.

 

[Token Funder]

Its an interesting point, and to be fair to Shadow, well worth drilling down on, particularly in the light of the recent decisions against the lenders in the American courts regarding illegal repossessions.

In truth I can't see it being an issue, or in the banks interest, in the normal scenario. The banks will try to keep people put, and paying for as long as they can, the last thing the banks want is a load of negative equity property on their books.

Negative equity is only an issue to very recent buyers, and would have to be severe for any of them considering posting the keys and walking, as happened in the UK early 90's.

Indeed.

But Shadow's argument is not that we wouldn't...it's that we can't because:

(a) no such terms exist
(b) or, if they exist, only in unregulated mortgages for some reason
(c) or, if in mortgages other than unregulated mortgages, they are illegal.
(d) or if not illegal, maybe breaching something
(e) squirrel!