Greg Wignall’s life descended into a maelstrom of debt repayments in the past ten years and he now despairs of selling the family home just to meet his obligations.
Like many Australians, this small businessman from the NSW south coast was encouraged to borrow too much by his banks. And like the swelling ranks of disaffected and desperate borrowers, Wignall has discovered that somebody has tampered with his loan documents, enabling him to borrow too much.
In 2004, Mr Wignall took up a CBA business loan on the back of the advice of his bank manager. Again, in 2010, he took up a separate ANZ home loan through his broker, Aussie Home Loans.
He could not afford either loan.
The Banking and Financial Ombudsman ruled in 2005 that there was “maladministration” in Mr Wignall’s CBA loan and that the bank did not comply with its “own standard procedures and good banking practice” when it issued the loan to Mr Wignall.
Mr Wignall said Aussie Home Loans and ANZ did not examine that information when they approved his 2010 home loan.
On the face of it, Greg Wignall’s situation appears to be the archetypal case of “buyer beware” but there were irregularities in his loan documents. Had this documentation been correct and had the bankers followed their own credit policies, the loans should never have been made in the first place.
When Mr Wignall ran into repayment problems, he wrote to ASIC who said they cannot investigate the matter.
“After careful consideration we will not take any further action because the specific low-doc product is no longer offered by ANZ and there is insufficient evidence available to pursue regulatory action,” an ASIC letter to Mr Wignall said.
ASIC advised Mr Wignall to use the Financial Ombudsman, who is currently reviewing his home loan for maladministration.
“We understand Mr Wignall’s matter is before FOS and that is the most appropriate venue for borrowers seeking individual redress against their lender. FOS is there to deal with individual claims,” an ASIC spokesperson said.
“Rather than pursue individual remedies ASIC’s role is to take on matters where there is evidence of systemic or widespread breaches of the law.”
Not only was Wignall offered loans he could not afford but he claims that he was also forced to accept loans he did not want. In 2004 while shopping for a home loan to buy his university-going children an apartment in Brisbane, Mr Wignall found a loan for $160,000 with CBA.
The bank manager at the branch he visited also offered him a $250,000 business loan to finance his boat business.
Mr Wignall declined the business loan but the manager coaxed him into it, telling Mr Wignall he would be “blacklisted” for future credit applications at the bank if he did not take up the loan.
“He was very polite about it, but the crux of the matter is he forced us into the loan. He keeps saying ‘We are not forcing you to take this loan but…’,”Mr Wignall said.
Five months into the loan, Mr Wignall ran into financial trouble.
“The $1800 a month repayments they forced me to make were for a 15-year period, even though they sold us the deal on 25-30 years. Even after I approached them to lower the repayments, it’s still on 15 years,” Mr Wignall said.
There are no documents to corroborate this information because on the advice of the CBA, Mr Wignall did not fill out a loan application form for the total loan of $410,000.
“The bank said they were issuing me the loans as a pure asset lend,” he said.
Mr Wignall already had a piece of land and a house in the south coast of NSW where he and his family lived, which the bank had used as equity for the loans.
In late 2005, the Banking and Financial Services Ombudsman ruled there had been a “loan maladministration”, that is, the bank did not comply with its procedures and should not have approved the loans to Mr Wignall.
But the Ombudsman ruled that Mr Wignall was not entitled to compensation as he was still able to make his repayments, which he did with great difficulty. He had to sell his boat inventory in his business in Narooma at cost as well as his business premises.
“When you borrow money, you’ve got to actually generate income to pay the loan, and you need stock to try and sell, but I need to borrow money to buy stock to sell, it’s a dog chasing its tail scenario,” Mr Wignall said.
Bank repayments and business expenses take up half his pension each month. To date, he still has $54,000 to pay off.
To make matters worse, in 2010 mortgage broker Aussie Home Loans advised Mr Wignall to take up a second loan, a low-doc loan, to buy a bigger home for his children in Brisbane.
“I was burnt once by CBA and told Aussie Home Loans I wanted to do things by the book. This time I went to Aussie Home Loans because they had a good reputation,” Mr Wignall said.
Low-doc or low-documentation loans are higher risk loans offered to people who are self-employed and do not have enough documentation such as tax returns or financial statements to support a traditional home loan application. These loans usually carry higher interest rates.
BusinessDay obtained a copy of the Aussie Home Loans/ANZ “serviceability calculation” for Mr Wignall and confirmed the broker had calculated his loan on an income of $100,000, with no other loan repayments, liabilities, credit card balances or personal expenses – standard items considered in a loan assessment.
“I have never earned $100,000 in my life,” Mr Wignall said.
The broker had used $100,000 in his loan assessment without Mr Wignall’s consent.
Mr Wignall said he would never have purchased a new property in Queensland if the bank had not given him the loan.
“I may have a university degree in science but it doesn’t make me an expert in finance. I relied on these experts,” Mr Wignall said.
The 55 year-old is also still paying that loan but only with the help of his children.
“The law applicable at the time of these loans did not contain responsible lending requirements or any other provisions requiring a lender to assess a borrowers’ capacity to pay a proposed loan. This has been remedied in the new National Credit Laws,” an ASIC spokesperson said,
ANZ said they have investigated the claim internally and “were satisfied the lending was within policy and no error had occurred”.