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ASIC has warned that lenders may be engaging in “unconscionable conduct” by trying to recoup loans arranged fraudulently by brokers.
The warning comes as ASIC intervenes in a case involving FirstMac (as Tonto Home Loans), who is looking to recoup losses of $1.95 million by seizing property from clients of failed broking group Streetwise, The Daily Telegraph reported.
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ASIC announced that it would intervene in the case in March to test the legal and regulatory framework of enforcement action taken against borrowers by low doc lenders where “the conduct on an intermediary toward a borrower is, or may be, in question”.
The Daily Telegraph today revealed that in a submission lodged in March, ASIC's barrister Robertson Wright SC said the risk of fraud or irresponsible lending was increased when lenders accepted "low doc" loans, relied upon intermediaries such as brokers, and allowed loans to be "rebadged" with the broker's brand.
Mr Wright said the lenders failed to "eliminate, manage or even ensure that the borrowers were warned of these risks".
"The court should intervene to prevent the enforcement of the transactions, which can properly be characterised as 'unconscionable'," he said.
In response, lawyers for the lenders said ASIC's submission was "factually wrong" and "legally flawed".
"These borrowers were in the best position to manage the risk of fraud," Adam Bell SC and Alister Abadee said in a written submission.
"They were careless in allowing their broker to fill in inaccurate details as to their income and financial position," the lawyers said.
