New lending laws

I read in the paper on the weekend that new laws are coming in on 1st July 2010? (I think) that gives the lenders the right to scrutinise your everyday tranaction accounts to see where and how you spend your money. For instance if you withdraw amounts regularly from a pub or have an online betting accounts or regularly spend $200 every saturday at your local Westfield shopping centre on clothes or computer games etc. This will then give them the ability to assess you as more of a risk because you are a regular gambler or drinker or a bit of a shopaholic etc.

The article also said that banks will then be able to charge the people they see as more of a risk (because of their spending habits) a higher intrest rate.
Obviously if you are a better prospect you will have a better rate. Apparently this is the norm in other countries.

Sooooooo............. a question ...............

As I rarely carry any more tha $20 on me and pay for everything either on a credit card or by eftpos (everything,bills, shopping, child care, petrol), how do I restructure my accounts and the way I pay my bills and day to day discretionary spending to limit how much a lender can peer into my private life?

Could I just get a seperate account to do all that in, transfer a certain amount per pay period to that account for that spending and then keep that account to myself, or maybe put it into my daughters account (she is 3.5) and use that for day to day stuff?

Some ideas please or comments on this new lending practices.
 
Hiya

many lenders are already 2 steps ahead of you : )

many lenders already demand statements of varius sorts, an the "value" judgements are already being made, but the legislation doesnt gove a lender any more access to data than they have now, but their "responseability" will increase.


The rest of the story as told here isnt quite right.

If lender x see u as a higher risk, they wont be able to lend to you period. Another lender may lend to you, and that lender may be at a higher rate, but in general if there is a sniff u will cause financial harm to yourself the impending regs say NO LOAN at all.

ta
rolf
 
I can see why some people like to deal in cash as much as possible. My Uncle gets right into this topic of everything being recorded.

In terms of freedom if you use your credit card all the time and bank card etc, the government/ATO/others know your whole life story. Your travels, your work, where you shop, where you get fuel.

But yes ofcoarse, if your not doing anything wrong there is nothing to worry about, I always use credit etc as an investor, but in a sense with all the technological ability these days, I can see his point of view of it being a freedom wrecker.

Of topic I know, sorry, because obviously you need financial history to get a loan.
 
good idea, gambaling and drienking is a desiese in australia, they say there are 200,000 problem gambalers in oz! i think its more like $500,000 how do i know i was one of them in a previous, life,
 
The banks are already doing this now its called credit scoring. One of my recent client's pay goes into a particular account, I got asked for the statement to boost credit scoring. Plenty of income, same government job 10 years 50% lend. Luckily no pokies or bottle shop withdrawals !
 
I got queried on my wage payments going into my savings account. Apparently big brother hadn't calculated in my HECS contributions and which bank wanted to know why their... I mean my wage was coming in short against what they had calculated from my group certificates/pay advices.
 
Ah non disclosure of "liabilities" they would have also picked this up on your payslip. Hope it still serviced for you?

Was a bit of a non issue, as my wife is the bread winner in our household at the moment, plus our LVR is "relatively" low and are servicing is in the comfy zone with both of us working. We might get pocked a bit for servicing if we drop a wage.
 
The article also said that banks will then be able to charge the people they see as more of a risk (because of their spending habits) a higher intrest rate.
Obviously if you are a better prospect you will have a better rate. Apparently this is the norm in other countries.

What you have is the paper extrapolating from what is happening now to what may happen in years down the road. In The States they have a more informative credit reporting system that allows banks to then price risk individually, whereas here we have a system that has less information, (and laws against individual risk pricing I think? Don't quote me...) and so doesn't allow that yet.

However legal changes suggest that maybe we are heading down that road, as the banks are required to know more of this information, as Rolf said, eventually they will know enough to be able to price risk. Then it's just a small step to change the law so that they can.

I don't really believe it's the right thing to do (even though in a pure free market it's quite fair) mainly because it punishes the poorest and rewards the richest, as a general rule. A first home buyer with a short history and high LVR would end up paying a lot more than an investor with a million $ in equity and a long history of paying loans. The rich get richer...
 
As I rarely carry any more tha $20 on me and pay for everything either on a credit card or by eftpos (everything,bills, shopping, child care, petrol)

There's your problem right there. All my bank would see is a $2000 cash withdrawal every few weeks from a random ATM. Pretty much no CC or eftpos records.
 
There's your problem right there. All my bank would see is a $2000 cash withdrawal every few weeks from a random ATM. Pretty much no CC or eftpos records.

does it say-$2000 sydney casino.
-$2000 canberra casino.
-$2000 adelaide casino.

if not you will be right then, but they might be supprised you can walk these distances in two weeks, :D
 
Though the NCCP Act will create a lot of work for lenders around some notification obligations, it is still to be seen if it will make a *huge* difference on the credit front given a Bank's obligations under the Banking Code of Practice are arguably already similarly onerous. Resi investment is now caught under the Act which will likely require some tweaks and there's a lot of concern about where Lo Doc fits in, but in my view it's no worse than the Code. The counter view is that handling issues under the Banking Code costs time and money but you don't put your lending licence at risk as you do with the Code, so adding a measure of conservatism is required.

Of course the Code of Practice only applies to banks so the new NCCP does potentially signficicantly change the world for non-bank lenders.

The big change is the formal obligations for credit advisers (i.e. brokers) who now have the make reasonable enquiries to establish a borrower won't be placed under financial duress as a result of the credit application. To be candid - and I'm sure this wouldn't be the case with my learned colleagues here - there are plenty of examples of brokers who have either had a degree of disregard for the sustainability of a borrower's appetite for debt, have ignored potential inconsistencies with a borrowers application or, in some cases, or have actively enabled borrowers to obtain loans they shouldn't get.

In the past, they have been able to argue, with varying degrees of success, that credit assessment is the lender's job. Though this will remain the case, the "reasonable enquiries" requirement means brokers who don't ask a few questions and follow up on obvious issues raised will be placing their licence, and therefore their livelihood, at risk.

Will be interesting to see how it pans out.
 
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