Should banks and other lenders be obliged by law to give their valuations to borrowing customers
BY TIM O’DWYER
Below is part of a note sent recently to my local Federal Member suggesting that, while banking reform is currently under government consideration, the Treasurer might look at legally requiring banks and other lenders to give copies of their valuations to their borrowing customers.
A colleague at the same time sent the same note to the Senate Committee, which is also considering banking reform:
“You will probably not remember, but after you were first elected, I came to lobby you about consumer protection.
“One issue I raised then was the need for property lenders to be obliged by law to provide copies of their valuations to borrowers.
“Would you please raise this with the Treasurer, if he’s amenable to some tweaking of his proposed reform package.”
Below is part of a proposal put to Honorable Lindsay Tanner (as Finance Minister) in October 2008 where I gave some background to my concern:
“Over the past 10 years part of my legal practice has included rescuing people from overpriced property deals entered into as a result of the tactics of ‘property spruikers’. Most of these rescues have been successful. They involved getting people out of purchase contracts before they had settled and taken out large mortgages. None of the matters I was involved in ever went to court. All involved Queensland properties sold not only to Queenslanders but also (and more often) to people from interstate and overseas. Over this same time I have played (and continue to play) a prominent media role in warning property buyers and investors about ‘property spruikers’ and their tactics.
“It would appear that these tactics have changed little over this period. Property spruikers invariably work in collaboration with in-the-know real estate agents, finance brokers, financial advisers, lenders, valuers, conveyancers, solicitors and others. While Queensland is one of the few jurisdictions which has tried to legislate against the practices of spruikers, this state’s Property Agents and Motor Dealers Act 2000 – despite some 20 amendments over the past eight years or so – has neither properly protected consumers nor effectively prevented the perpetuation of overpriced property scams.”
The first thing that must be done legislatively is to remedy the mischief caused by lenders not needing to disclose valuations to customers. In many instances lenders have been aware from low valuations that properties being purchased were overpriced but, because of high valuations on collateral properties, their lending deals stacked up. Lenders were comfortable with the total equity they had security over. However, few folk would want to proceed with purchases if they knew that their lender’s valuation of the investment property was significantly less than the price being paid.
Do you think lenders should be made to disclose their valuations to customers? Have you had a bad experience with a property spruiker?
Tim O’Dwyer is a Queensland solicitor, email@example.com