Making deliberate misrepresentations to obtain credit is set to end: lying to obtain favourable credit terms has seen a rapid rise, according to Veda Advantage. Is a client’s financial situation really what it seems? Lying to a bank in order to obtain a loan or trying to negotiate a better offer by making a misrepresentation of your financial position is almost guaranteed to get you in trouble. With the introduction of the Comprehensive Positive Credit Reporting Regime will likely put a stop to these finance-related fibs. The Positive Credit Reporting regulations will now collect more information about individual borrowers.
The new credit reporting regimen set to be legislated this year is likely to have a great impact on borrowers. The regimen will capture a greater range of data, which can be used by lenders in assessing loan applications.
This includes identifying if any applications by the client have been accepted or declined and the type of loan applied for, together with the account limit, the date the account was opened and closed (this will impact those borrowers that keep chasing the lowest rate every year or two as lenders will try and steer away from these borrowers as they represent high risk to a loss in profit as a bank actually breaks even only after the first 18 to 24 months on a loan deal hence borrowers that have a predisposition to refinance frequently will be seen as a less than favourable risk and prime candidates for their loan applications to be declined), and a payment performance history, lenders will have access to a wider range of credit information.
This would include situations such as clients who were late paying a water bill, which although not recorded as a default on a credit file, would still appear as part of the credit information available to lenders.
Borrower Full Disclosure
A borrower must provide full disclosure of their current financial position. What do borrowers misrepresent? Their incomes (overinflate), their expenditure, number of dependents, number of assets, their assets value, superannuation, rental income, employment tenure, employment position, education attainment, loan defaults and arrears, late notice in utility bills, child maintenance payments, business partnerships, acting as guarantors, company directorships, private family treaty agreements (for money borrowed), personal loans, credit card limits, car leases and loans, commercial loans.
The reality is that if a lender becomes aware of such omissions they will be forced to decline or cancel the loan application due to a borrower misrepresentation whether innocent or intentional. Unfortunately, when a lender declines a loan application due to a borrower non-disclosure of existing liabilities/loans it will place the borrower under extreme financial pressure especially where some borrowers decide to exchange on a property contract of sale. Many borrowers lost their deposits under such circumstances as they were unable to complete the purchase.