Review - 17 May 2016

Key issues: 


Unjustness | Lo-doc loan | Loan application | Change in interest rate | Fees | Broker | Lender | Agency (whether broker was agent of lender)







A consumer used a broker to obtain a “lo-doc” loan to refinance her existing home loan in 2007. The loan was secured by a mortgage over her property. In 2008, the consumer had two children and could no longer work. She began to have difficulty making her loan repayments, and stopped making repayments entirely in December 2014. In April 2015, the consumer made a complaint to CIO against the lender. 

She claimed:

  • the broker was the agent of the lender,
  • the broker completed the loan application with false information,
  • the broker told her the loan repayments were for principal and interest, 
  • the lender should not have provided her with the loan as it was unaffordable, and the loan contract was therefore unjust,
  • the property was over-valued,
  • the lender wrongly increased the interest rate on her loan, and
  • the lender wrongly charged an account keeping fee to the loan.

The consumer asked for $150,00 in compensation. 

We found that:

(a) the broker was not the lender’s agent, so the lender is not responsible for the broker’s conduct,

(b) the loan was not unjust, and the lender was entitled to rely on the information provided by the consumer in the application process,

(c) the lender was entitled to rely on the valuation, and there is no evidence to suggest the valuation should have been questioned,

(c) we cannot deal with the complaint relating to the interest rate, and

(d) the account keeping fee was applied in accordance with the terms of the loan agreement.

Accordingly, the consumer’s claims were not established.




Follow this link for a full copy in PDF  >> Review | 17 May 2016

This Decision was referred to the Ombudsman for a Determination.