Real Estate Institute of Western Australia President Damian Collins has come out in support of the decision to dismiss legal action against Westpac from the corporate regulator, describing it as a "positive for lending".
Real Estate Institute of Western Australia President Damian Collins has praised the dismissal of legal action against Westpac from Asic as a "victory for common sense".
On Tuesday, the federal court dismissed legal action the corporate regulator brought against Westpac in which it accused the bank of lending irresponsibly more than 250,000 times by using the household expenditure method to make lending decisions.
Asic filed the legal action in 2017, saying that Westpac had failed to meet responsible lending standards between 2011 and 2014 by using the Hem instead of living expenses declared by customers.
But The Guardian reports that federal court judge Nye Perram said at the end of the trial that “it had become clear that the evidence concerning the Hem benchmark was relevant only to one minor issue”.
Mr Collins said the ruling was "very good" for lending going forward.
"We had a situation five or six years ago where lenders would assess your income, but when it came to expenses, they didn't get to a level that was intrusive," he said.
"What we have seen in the last two or three years is lenders wanting to know every single expense or subscription.
"Not only was it causing delays, but it was treating people almost as if they were idiots.
"Australia's mortgage arrears rate is very low and people are capable of making sacrifices to pay back a loan."
The Financial Rights Legal Centre (Financial Rights) and Consumer Action Law Centre (Consumer Action) have called for the Government to amend responsible lending laws in the wake of Tuesday's decision, with FRLC CEO Karen Cox saying it "suggests that banks do not have to have regard to people’s actual expenses when they lend – which in turn will allow lenders to continue to extend unsustainable loans which set people up to fail.”
But Mr Collins said it was important for people to make their own assessment of whether they can afford a loan.
"When you are applying for a loan, you need to take responsibility for that, and not blame the lender who gave you the money," he said.
"The lender needs to make reasonable enquiries into circumstances and income, but at the end of the day, if you take out the loan, it is your responsibility."
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