A class action against banks for irresponsible borrowing – seems unlikely when considering how hard it is for so many to get a home loan in this country – particularly for those people with a bad credit history.

By GRAHAM DOESSEL CEO of MyCRA Credit Repairs and www.fixmybadcredit.com.au

As discussed with Kevin Turner of Brisbane’s 4BC Real Estate Talk.

Australian banks are being brought to answer under new NCCP legislation with a massive class action instigated by struggling borrowers, according to Broker News.

The lawyers of 300,000 struggling bank customers are putting together a case alleging bank lending has put borrowers at risk. The case will be built around first home buyers and lower income households who have received loans since the onset of the financial crisis.

It will allege that some of these borrowers are experiencing severe financial hardship through no fault of their own, through being allowed to enter a loan contract that they could not afford.

The case is being spearheaded by retired international insurance broker Roger Brown, according to Fairfax Newspapers, who has been quoted as saying the way banks have been lending has been “irresponsible”.

In my view, borrowers need to take responsibility for understanding the commitment they are entering. Anyone who signs a contract should not do that lightly – a loan is a serious commitment which stretches for longer than many first home buyers have been alive. Buyers need to be comfortable in it long term, allowing for future changes that no bank can calculate on.

If people only just qualify for the mortgage with the first home buyer’s grant, and then they go and add further and further credit commitments to the mix, of course they are going to run into trouble. But how can that be the bank’s fault? The First home buyer’s grant is intended as government assistance, not as help to prop up people who would otherwise fail to qualify.

In real terms our system makes it extremely difficult for people to get a home loan and heaven forbid them having a bad credit rating for not paying a bill on time.

We help more and more clients with a bad credit rating every day. These people have saved for a deposit for years, only to have their dream of home ownership ripped out from under them because of something like a small Telco default.

If the banks had in some way falsified information, then of course that would be irresponsible and deserving of a class action. But if these buyers have really just failed to fully understand their own responsibilities and the ramifications of late payments until it was too late, then I don’t believe that is grounds for suing the banks.

What is needed is more education in general from governments and the industry, and that would be a great outcome for Australian borrowers in general.

People need to understand credit from a young age, how it can work for them, what can go wrong and how much is too much. They need to be educated about their credit rating and how essential it is to keep a clear credit file.

For more information on how a bad credit rating affects people’s lives, to order a free credit report or to learn how to fix a bad credit rating, visit our main website www.mycra.com.au or call us tollfree on 1300 667 218.