Sharri Markson: Banks go too far when dictating IVF decisions
Overzealous accounting practices are impinging on the rights of women, writes Sharri Markson.
Opinion
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It’s the revelation that shows how scrooge-like and miserly the banks have become when assessing whether to lend money to hardworking Australians in the wake of the Hayne Royal Commission.
One of the big four banks asked a young couple to commit to stopping their IVF treatments before they could get a modest home loan.
That’s right, an Australian bank has asked a young couple to either give up their dream of having a baby or give up their dream of owning their own home.
A home loan assessor for one of the big four advised the couple’s mortgage broker, in writing, that if they were to be eligible for a $600,000 mortgage, they had to confirm there would be no additional costly IVF treatments.
Undergoing IVF repeatedly is a heart-wrenching, anxious time, fraught with uncertainty, dashed hopes and distressing physical and emotional side-affects.
For a bank to put added pressure and force a couple to choose between a family or a home is simply despicable. It is overly scrupulous to the point of cruelty.
The documentation around this case is now in the hands of Treasurer Josh Frydenberg, who is concerned about the impact responsible lending measures are having on the flow of credit. “This is an unfortunate and extreme example of where bank customers are being asked to justify expenses of a truly personal nature,” Frydenberg said.
“Not only can this unnecessarily contain the flow of credit but it also appears to be highly inappropriate.”
Frydenberg said that after significant pushback from the couple’s mortgage broker, the bank eventually withdrew this unfair condition on getting a home loan.
He and Morrison have had conversations about the growing difficulty accessing credit, as banks work out if an applicant is unsuitable for a loan, whether it’s for a home, to start or grow a business or for renovations.
When I asked Frydenberg if the flow of credit is impacting our economy, his answer is immediate: “Absolutely.”
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As interest rates are expected to fall next week to new emergency lows, the problem remains that the banks just aren’t lending.
In the shadow of the Royal Commission, Frydenberg says the enquiries about a consumer’s ability to repay the credit should be “reasonable”.
He warned of the economic consequences if “responsible lending laws be applied too stringently.”
“Common sense dictates that a sensible balance needs to be struck because an unduly restrictive application of these obligations can do as much harm as an overly lax one,” he said.
“It is in everyone’s interest that the aspirations of hardworking families are not collateral damage in this regulatory process.”
At the American Australian Association reception in New York this week, Morrison sounded a similar warning.
“One thing we have to be careful of though is as important as all of that is (accountability regime in the wake of the Royal Commission), we need our banks to keep lending,” he said.
“Capitalism needs to be fuelled … And while it’s important to address those sort of conduct issues with the banks we must be very, very careful that we don’t lead our banks into a place where they’re being overly sheepish and that can really cute of the opportunities that we would otherwise have.”
Over the past year, the criteria to qualify for a loan has become significantly more stringent, as loan assessors pour over every transaction or withdrawal made over a 12 month period. Every Uber-eats delivery, every flight, every sneaky purchase of a dress a little on the pricey side that you may have been hiding from your other half is all considered by a bank before they decide to give you access to credit.
This has inadvertently paved the way for morally reprehensible and even discriminatory conduct on behalf of the banks.
Greg Bloom, a financial adviser and mortgage broker at 1st Street Financial, said banks’ fear of reprisal for irresponsible lending has seen an increase in loan applications being denied — even when it comes to refinancing existing loans.
“A few years ago, I would only have one or two loans declined a year. We definitely have seen our number of declines increase,” he said.
“People who want to borrow to grow their business or buy new machinery, they find it difficult to get finance. If you want to renovate a home, it’s not so easy.”
But it’s how these new measures are impacting on lending finance to women that has Bloom most concerned. A major bank declined to refinance a self-employed pregnant woman’s home loan when told them she was planning on taking six months maternity leave.
Disgracefully, the bank did not believe she would return to work and an income.
“I said the client is having a child soon and expects to get back to work in six months. It was declined,” Bloom said, incredulous.
“They don’t ask a man if he’s going to take time off. It wasn’t even new debt, we were just refinancing for better rates. It should be the client’s responsibility if they say they are to return to work full-time.”
It’s a point Frydenberg agrees with, concerned the onus for the ability to repay a loan has shifted too much from the applicant to the bank.
“The values of personal responsibility and personal accountability must remain central to our society and if the pendulum swings too far in the abrogation of these values, then it will inevitably reduce the availability of credit and increase its price,” he said.
Eight months on from the Royal Commission into the banking sector, we need to examine the unintended consequences it has had on our economy.
It is clear the banks’ overly-scrupulous conduct is becoming not only socially unacceptable and bordering on discrimination, but risks hurting our economy at a time when the Reserve Bank is on a stimulatory path and interest rates are at record lows.