Consumer watchdog Choice has hit out at banks for a surge in the number of people going bankrupt.
Choice said aggressive lending practices were to blame for a nine per cent rise in the number of people filing for bankruptcy, along with interest rate rises and spiralling household debt.
In the March quarter 6585 people filed for bankruptcy, according to figures released yesterday by the Insolvency and Trustee Service Australia. Individuals made up 82 per cent of applications.
Choice called upon all financial institutions to adopt responsible lending charters that would include generous hardship provisions for consumers struggling to repay mortgages and credit card debts.
“Some banks have implemented responsible lending charters on their own,” Choice senior finance policy officer Nick Coates said.
“We would like to see an industry standard adopted so that consumers have peace of mind no matter who they bank with.”
ANZ became the first bank in Australia to adopt a formal responsible lending code in 2005.
Choice also called on the NSW government to push through finance brokers legislation to protect consumers from mortgage brokers who offer unreasonably high loans.
The Iemma Government has drafted national legislation to regulate and license finance brokers to tackle problems with reverse mortgages.
“This legislation has been stalled for more than 12 months and Australian consumers simply cannot afford for it to continue to be bogged down in red tape at a time when interest rates could rise again,” Dr Coates said.
A recent Choice shadow shop of reverse mortgage brokers and lenders revealed wide default clauses, poor standards of information and salespeople that encouraged consumers to take out maximum possible loans.
