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One-fifth of Australians have admitted to not telling the whole truth on their credit applications, with a researcher warning of consequences for lenders and their responsible lending obligations.
The survey from information services provider Experian has shown the most common white lies that consumers confess to when lodging credit applications, including understating living costs (41 per cent) and existing debts (30 per cent) or overstating their income (21 per cent).
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More than a quarter chose not to disclose an upcoming change of job (28 per cent) and one in 10 failed to declare they were expecting a child.
Consumers were more likely to stretch the truth when applying for a credit card (44 per cent) or a personal loan (38 per cent), but a quarter of home loan and buy now, pay later applications could also hold inaccurate information.
Looking at home loan applications specifically, almost half (43 per cent) had understated living costs, while 29 per cent of people had lied about an upcoming change of job.
Around 28 per cent of home loan applicants had understated existing debts, while 21 per cent overstated their income and 19 per cent skipped over declaring pregnancy.
Matthew Demetriou, general manager of decision analytics at Experian, commented that the fact that borrowers could withhold information “presents challenges for lenders within responsible lending practices”.
“Without an accurate picture of a customer’s finances, lenders cannot be sure they are providing credit that is appropriate for that individual,” Mr Demetriou said.
However, credit providers need to assess their origination process and consider how they can improve data accuracy, he added.
Currently, the government’s planned repeals to the responsible lending obligations in the National Consumer Credit Protection Bill are before the Senate, but Greens senator Nick McKim has signalled he will be pushing a motion to discharge the bill, unless it is voted on this week.
The motion, which was intended to be moved on Monday (21 June), has been postponed to Wednesday.
If successful, the bill would be scrapped from the Senate’s notice paper and force the government to either make amendments and try its luck again, or potentially abandon it.
A number of crossbenchers, in addition to the Greens and Labor senators, have already signalled they would oppose the bill.
Notably, Experian found mixed results between whether consumers believe the lender has more responsibility in determining that an applicant can afford a loan, than the applicants themselves.
Around a third (35 per cent) said it is both parties’ responsibility, but there is more onus on the credit provider.
A further 29 per cent said it is the consumer’s sole responsibility, while 17 per cent said it is on the lender. Around the same proportion (18 per cent) responded it is mixed but the consumer is more responsible.
75% of consumers expect home loan approvals within 3 days
Three-quarters (75 per cent) of consumers believe a home loan application should be processed within three days. Of that crowd, 13 per cent said approval should be instant, 15 per cent think approval should be given within a few hours, and 22 per cent think it should happen within 24 hours.
A quarter (25 per cent) said approval should be granted within two to three days.
The majority (72 per cent), however, are in the dark or only partly understand how providers assess home loan applications. A third (33 per cent) do not understand how lenders assess creditworthiness, 39 per cent responded with “sort of”.
A smaller percentage (29 per cent) said they understood the assessment process for home loans.
A third (32 per cent) of consumers assumed traditional lenders would use mostly manual processes, with some automation, while 30 per cent thought it would be mostly automated, and 23 per cent believed it was all automated.
For neo-lenders, the majority (55 per cent) assumed their processes are all automated, while 20 per cent said it would be mostly automated.
But for a home loan, in-person applications from start to finish were the most favoured option, winning 34 per cent of consumers’ preference. Digital application and all online communication with the lender, including identification, was picked by 29 per cent of respondents.
A hybrid version or an equal combination of both in-person and paper processes with online was picked by a quarter (24 per cent).
The findings have come after recent criticisms from the broker industry of turnaround times between different channels.
Mr Demetriou added that digital decisioning processes could give lenders the upper hand over their competitors.
“Our research proves that people want the comfort and convenience of applying for credit when and where it suits them, with most people choosing lenders that offer them an entirely digital process online, including a digital identification check,” he said.
“Then applying automation, data and analytics within decisions can improve speed of approval and due diligence.”
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