MORTGAGE BROKING
Consumer Lending Issues
BY PETER ANDREWS I MBA, CPA, B. Economics, B. Arts
Former lecturer at Macquarie University
Peter Andrews is a specialist trainer in
Financial Planning.
After an early career in corporate finance
and banking, Peter became a lecturer at
Macquarie University.
He has also taught in the Graduate
School of Management at the University
of Sydney and the School of Banking and
Finance at the University of New South
Wales.
Peter has a Bachelor of Arts and a
Bachelor of Economics from the
University of Sydney and a Master of
Business Administration from the
University of Florida. He is also a
Certified Practicing Accountant.
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C onsumer lending can be enjoyable because of the constant contact
with people. However, one thing you learn in time is that they are
vulnerable. They may make too much use of consumer credit or,
while using it they may suffer from one of life’s adversities that can throw
them into financial hardship. You may be able to give them useful tips, and
you will become aware of useful websites to refer them to.
At the same time you should be ready to refer people to financial
counsellors when they are experiencing financial stress. Just talking
matters over with a counsellor can put matters into perspective and make
the options clearer when people are having financial difficulties or going
through major lifestyle changes.
Another matter people need to be protected from is credit card fraud. The
basic rule is not to give account details to anyone, and certainly not over
the net. The next precaution is to protect the PIN, for instance by keeping
your other hand over the terminal when entering it into an ATM.
Another issue is credit reporting. It may be in the interest of personal
borrowers to know what is on their credit reports, particularly to guard
against misinformation.
Contents
RESP0NSIBLE USE OF CONSUMER CREDIT ................................................................. 2
ADVANTAGES OF CONSUMER CREDIT............................................................................... 2
DISADVANTAGES OF CONSUMER CREDIT .......................................................................... 2
MAIN FORMS OF CONSUMER CREDIT .............................................................................. 3
STEPS TOWARDS A RESPONSIBLE USE OF CREDIT ..................................................... 5
TIP NO. 1: SET SOME GOALS ........................................................................................ 5
TIP NO. 2: KEEP A BUDGET ........................................................................................... 6
TIP NO. 3: REDUCE MORE EXPENSIVE DEBT FIRST.............................................................. 6
TIP NO.4: USE A DEBIT CARD ........................................................................................ 6
TIP NO.5: USE INTERNET BANKING ................................................................................. 7
TIP NO.6: TAKE OUT INCOME PROTECTION INSURANCE...................................................... 7
DEALING WITH FINANCIAL HARDSHIP ....................................................................... 7
CAUSES OF FINANCIAL HARDSHIP.................................................................................... 7
SEEKING ADVICE AND COUNSELLING ................................................................................ 7
USING INTERNAL DISPUTES RESOLUTION PROCEDURES ........................................................ 8
AVOIDING CREDIT CARD SCAMS ................................................................................ 8
REQUESTS FOR ACCOUNT INFORMATION (‘PHISHING’) SCAMS .............................................. 9
PHONEY FRAUD ALERTS ............................................................................................. 10
CARD SKIMMING ...................................................................................................... 11
OTHER PRECAUTIONS ................................................................................................ 12
CREDIT REPORTING AGENCIES ................................................................................. 12
 2 9. MORTGAGE BROKING
RESP0NSIBLE USE OF CONSUMER
CREDIT
2 The National Credit Code defines the term ‘consumer
credit’ widely. For example, it includes housing loans
and even residential property investment loans in its
definition.
2 purchases would not be possible for many people. Not
This chapter uses a narrower definition because it is
concerned with the responsible use of consumer credit.
It will therefore look at credit cards, personal loans and
lines of credit. These are the loans which, used unwisely,
can lead to excessive levels of debt that can cause
stress and financial hardship.
Consumer credit in these forms has grown rapidly since
the early 1990s, but it may be comforting to know that
on a world scale Australians are only slightly more than
average in their use of credit facilities.
For example, a Nielsen survey of credit care usage in 56
countries looked at payment methods for dining,
shopping and entertainment activities. It found that
Australians were only slightly above the world average
in their credit card usage, with 54% of payments being
by credit card against a world average of 52%. 1
ADVANTAGES OF CONSUMER CREDIT
Convenient
One advantage of consumer credit is the convenience it
provides. With lightweight credit cards, it is not always
necessary to carry around a large wallet or purse filled
with cash. The need to visit a bank or an ATM to
withdraw cash is also reduced. It is also provides an
easy way to make purchases on the internet.
The transaction convenience is even greater with ‘tap
and wave’ transaction processing. With proper use of
credit (and debit) cards we are moving more towards a
cashless society.
Emergencies
Many people live payday to payday. If the car breaks
down or a child becomes ill, these families could quickly
find themselves in a financial crisis. One small
emergency could ruin a family's finances. With
consumer credit, they can have the purchasing power
1
‘Nielsen Identifies Investment Strategies and Financial Habits of
Australian Consumers’ (July 2012), available at:
http://www.nielsen.com/au/en/news-insights/press-
room/2012/nielsen-identiifies-investment-strategies-and-
financial-habits-o.html
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that can see them through these emergencies. Handled
responsibly, credit cards can keep consumers from
stress and worry about how their family's financial
needs will be met.
Large Purchases
Without other forms of consumer credit, large
everyone can pay cash for a car or other big-ticket items.
Consumer credit allows a family to afford the
necessities and use the purchased item while paying for
it. If the family car becomes too expensive to repair,
consumer credit allows it to be replaced immediately so
your much needed and relied upon transportation is
still available.
If the repayments can be met comfortably, borrowing
money for these purposes can be regarded as ‘good’
debt.
Builds Credit
For young people, using a small amount of consumer
credit helps to establish a good credit rating. A good
credit rating becomes important if they need to borrow
money for a financial emergency or large purchase.
DISADVANTAGES OF CONSUMER
CREDIT
While borrowing money for large ticket items may be
regarded as good ‘debt’, some forms of consumer
credit – particularly credit cards – take on the form of
‘bad’ debt, because it builds up too quickly.
Temptation
A major disadvantage of consumer credit is the false
sense of empowerment it provides. Users of credit
cards, for example, are more likely to be tempted to
make purchases that they cannot afford. A large line of
credit, such as the limit many credit cards provide, can
also lead to them deferring needed family decisions,
such as downsizing the family home when there has
been a reduction in income.
More Expensive
When cash is paid for an item, the item's cost is obvious.
When the item is purchased with a credit card, however,
interest may continue to be paid on the purchase for
months or years to come. The interest rate is also likely
to be unstable, which can lead to further difficulties
repaying debt.
 3 9. MORTGAGE BROKING
Effect of Default
When a consumer loan is taken out, there is always the
risk of default. The most common events of default are:
3  failure to pay the loan or an instalment on time;
 failure to observe of perform any undertakings,
obligations of agreements; and
3  false, untrue or misleading representations.
The applicable conditions of default are always set out
in the loan offer letter.
A default may happen accidentally, in which case a
reasonable credit provider should be understanding.
Alternatively, it may happen due to financial hardship,
in which case a default notice may be issued.
It is likely that credit rating agencies will be advised if a
default notice has been issued, with a consequence
being a negative effect on the borrower’s credit rating.
Also, if the loan is secured, the collateral is likely to be
repossessed when a default notice has been issued.
Repossession is usually handled by repossession agents.
MAIN FORMS OF CONSUMER CREDIT
Different types of credit are better suited to some
situations than others, and choosing the appropriate
form of credit can help the borrower to minimise
interest payments and manage money better. A
personal loan, for example, with fixed repayments and
a set term is better suited to large purchases than, say,
a credit card.
Credit Cards
Credit cards are an ongoing ‘line of credit’ that can be
used for purchases and cash advances. The full amount
borrowed can be paid each month or, after a part
payment that can be a small fraction of the amount
owing, be carried over to the next month, with interest
charged on the amount outstanding.
Credit cards tend to come in two varieties: ‘No frills’
cards and those offering reward programs. Basic, ‘no
frills’ cards often have a low rate of interest, making
them ideal for card users who continually carry an
outstanding debt.
The convenience of credit cards comes at a price. In
addition to paying interest of up to 20% or more on any
outstanding balance, the following charges may apply:
 Annual card fees – these may be waived if annual
card spending exceeds a certain limit. On cards
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with a low credit limit, a high annual fee can really
boost the overall cost. For example, on a credit
card with a limit of $1,000, an annual fee of $30 is
the equivalent of an extra 3% in interest.
 Reward program fees.
 Late payments fees.
 Cash advance fees – cash advances involve a one-
off fee, e.g. 1.75% of the amount, as well as
interest on the outstanding balance.
 Some merchants may impose a surcharge for
accepting payment with a credit card. The
merchant should advise, but it is always wise to
enquire before making a purchase, especially on
larger-ticket items.
Some credit cards offer a zero interest rate on balances
transferred over from an existing card. These offers can
sound tempting, but the ongoing interest rate applied
to new purchases should be looked at. If it is far higher
than the rate being paid on the consumer’s current
card, a zero rate card may not be such a good deal.
The clue to managing credit card debt is to pay off the
outstanding balance at the end of each month. That
way, the comparatively high interest rates can be
avoided. The Nielsen survey referred to earlier found
that almost two-thirds (63%) of Australian consumers
repay their credit card bill in full each month. However,
one-quarter (24%) of Australians repay less than that.
With some only paying the minimum repayment each
month.
Personal Loans
These loans are useful for buying one-off big-ticket
items such as a computer, a car or even a holiday as
well as for consolidating multiple debts into one regular
repayment. They are for amounts ranging from just a
few thousand dollars up to $50,000 or more. They are
repayable over one to seven years, usually with fixed
monthly repayments, which make them easy to budget
for.
The interest rates, fees and charges on personal loans
can vary considerably between lenders. Loans with a
lower rate may come at the cost of higher fees.
When comparisons are made between loans, they
should be based on the ‘comparison’ rate. 2 A
comparison rate is a tool to help consumers identify the
true cost of a loan. It is a rate that includes both the
2 This is a National Credit Code requirement.
 4 9. MORTGAGE BROKING

interest rate and fees and charges relating to a loan, The first lesson on the responsible use of credit is
reduced to a single percentage figure. therefore to choose a suitable form of credit for the
purpose, with credit card debt being the least suitable
For example, a loan with an interest rate of 8.75% and for any term that goes beyond the end-of-month
4 an initial application fee of $65 might have a balance.
comparison rate of 8.93%. A loan with a higher interest
rate but no fees and charges may turn out to be
cheaper. Consumer Leases
4 Leasing is an option that can be a useful alternative to a
Line of Credit personal loan, and the financing costs can be roughly
equivalent. With a lease, the finance provider owns the
A new type of personal loan - a line of credit, combines
equipment, with the consumer paying a regular lease
flexibility with the potential to save on interest.
payment – for instance monthly – for use of the
equipment.
Instead of drawing all the funds on day one, just the
amount needed can be drawdown - usually via ATM or
ASIC has warned that this can be an expensive form of
cheque book.
finance for smaller consumer items such as TV sets and
home computers, with other alternatives such as a no
They have been available in the past in the form of
interest loan being a better alternative.
housing loan redraw facilities, but some banks are now
offering unsecured lines of credit. The main advantage
However, with large ticket items such as motor vehicles,
is a lower rate of interest, and the loan may be made
a lease may be obtained for a financing cost equivalent
without account keeping charges. However, there may
to a personal loan, with many advantages.
be an ‘establishment fee’, but it may be less than $100.
Also to be considered is that the term is much longer
The main advantage for many consumers is that, unlike
than the term of a personal loan. That may seem like an
personal loans, the consumer does not have to make an
advantage, but it may lead to much slower debt
up-front payment such as a deposit. A lease is therefore
reduction unless strong discipline is exercised.
a ‘100%’ from of finance. The lease payments, which
are constant for the period of the lease, take into
Example – Different forms of consumer credit account the finance cost and the depreciation of the
compared3 equipment. At the end of the lease period there is a
residual value, which is roughly equivalent to – although
Let’s say for example that you want to buy new usually slightly more than – the value of the vehicle.
furniture costing $3,000. What it will cost you using
three different types of credit is shown below. The Because the lease payments do not provide for full
personal loan is the cheapest option for this type of recovery of the purchase cost of the equipment, they
purchase because it combines a relatively low rate are usually lower than the equivalent payments on a
with a short term. personal loan.
Type of Interest Monthly repayments Time Total
credit rate taken to interest At the end of the lease period, the consumer has three
repay charge options:
credit
i. acquire ownership by paying the residual value;
Credit 15% Minimum repayment 26 years $4,456
card of 2% of outstanding ii. hand the item back to the finance provider; or
balance
iii. begin a new lease with an upgraded model of
Personal 10% $63 monthly 5 years $824 the equipment.
loan
The lack of ownership that goes may not be a problem
Home 7.25% An extra $23 a 20 years $2,691
loan month when $3,000
if payments are made on time, but it can certainly be a
redraw is added to an problem if there is a default on lease payments. That is
existing mortgage of because the finance provider, as owner of the
$200,000 payable equipment, can retake possession immediately.
over 20 years.

COMPARISON INTEREST RATES

3 The example is from CitiBank

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 5 9. MORTGAGE BROKING
When a comparison is made between finance offered
by different providers, the comparison should be
between all the features if the finance, including
interest rates and charges. Even a small difference in
5 the interest rate can make a big difference to your
payments over time.
It is difficult to compare loans that have different
5 interest rates and fees. To overcome this, lenders are
required to give a comparison rate when they advertise
a rate or a weekly payment for loans. The comparison
rate includes the interest rate, plus most fees and
charges.
A comparison rate is made up of the following:
 the amount of the loan;
 the term of the loan;
 the repayment frequency;
 the interest rate; and
 the fees and charges connected with the loan.
Example – Comparison interest rates
Interest rate Fees & Comparison rate
charges4
Home loan 8% 0.5%
A
Home loan 8.25% 0.1%
B suggestion about referring clients to professional help
In this example, home loan A has a lower interest rate
but it has higher fees and charges. When a comparison
is made between the comparison rates, which lenders
are required to provide, home loan B will cost less than
home loan A because it has lower fees and charges.
STEPS TOWARDS A RESPONSIBLE
USE OF CREDIT
With credit cards only taking up slightly over 50% of
transactions in the Nielson survey, and nearly two-
thirds of credit card users paying their balances in full
each month, Australia does not have a major credit card
problem. However, it is evident that some people do
build up growing balances. Sometimes this is due to
overspending. At other times major changes affecting
income, such as a change in employment or reversion
to a single income, need to be taken into account with
lifestyle changes – something that economists have
long recognised as not being an easy process.
4 Fees and charges are usually expressed in dollar terms.
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There are some tips that can be followed for using
credit responsibly. Their usefulness, however, goes
beyond the 10% or so of the population that are having
trouble with credit card debt. Most of us, at some stage,
have a need to save money. Also, most of us at some
stage have large amounts of debt – usually in the form
of housing finance – that we may want to reduce. The
same tips that lead to a responsible use of credit can
also be used for saving and faster debt reduction.
In offering any advice of this kind you cannot seem to
be judgmental. It is not your role as a credit manager to
be judgmental at all. But you can certainly pass on tips
that may help people manage their financial affairs and
reach their financial goals more easily.
The Neilson survey referred to earlier found that ‘there
is a distinct lack of trust in personal financial planners
and advisors in Australia’, with only 16% of Australians
currently relying on a financial planner or advisor.
Financial planners could give advice to people on how
best to manage their financial affairs if only Australians
were prepared to see them. In their absence there is a
void that needs filling. Encouraging and helping clients
with a responsible attitude towards credit is consistent
with professional responsibility of a credit
representative. Carried out properly, it can increase the
8.5% rapport you should already have with your clients.
Some suggestions follow. Note ahead of time the
8.35%
because there are limits to the advice you are able to
provide without being qualified separately as either a
financial planner or a financial counsellor.
TIP NO. 1: SET SOME GOALS
It is always good to have goals to aim for – they chart a
course for the future as well as provide a benchmark of
what we have achieved. There is also research evidence,
referred to later in the chapter on time management,
that suggests that people who set goals for themselves
are happier. So, advice that it helps to set goals is good
advice for anyone, not just people in financial difficulty.
Unfortunately, reaching goals is not always easy. There
are ways, however, of making them more achievable.
A good starting point is to make goals measurable.
Setting general goals like ‘I want to save more’, is
unlikely to work because there is nothing concrete to
aim for. Instead, each goal should be given a benchmark.
For example, by aiming to save $50 each week, and
arranging for that money to be transferred to a savings
account, is concrete and measurable.
 6 9. MORTGAGE BROKING
Writing goals down is also useful as it helps in
remembering them.
It is also good to get the whole family involved in
6 setting financial goals. That makes everyone more
committed. Also, goal setting may involve changing
outlook and intentions. If that is the case, everyone
should be involved. That way, also, the goals the family
6 might have can be reduced to a realistic number. That
sort of sorting out is part of a financial planner’s job.
But if people aren’t seeing a financial planner it helps if
they learn to do it themselves.
People should also try to set a framework for their goals.
That means dividing them into short, medium, and
long-term objectives, but only with a few goals set for
each stage.
Short-term Goals
These are goals that are expected to be reached in the
next one or two years. They may include goals like
saving part of each week’s income for a holiday, or
paying $1,000 off the credit card.
Medium-term Goals
These are goals you can achieve over three to five years,
and they may include things like saving a deposit for
home or buying new furniture.
Long-term Goals
These are goals that will take more than five years to
achieve. Saving for children's education, paying off the
mortgage early or building a retirement fund are
common examples.
TIP NO. 2: KEEP A BUDGET
Budgeting plays a key role in responsible use of credit.
The best way to prevent – and manage credit card
problems, is to develop good money habits. Budgeting
encourages us to do just that. It is the only way for
people to know where their money goes each pay
period, and where they can cut back if they are
overspending.
Creating a budget that works requires allowing for all of
your household income and expenses. This may mean
carrying a notebook around to record all expenses, with
a further check of bank and credit card statements. The
banks now have excellent software to help you do this,
for instance, look at the NAB’s Money Tracker on:
http://learn.nab.com.au/money-tracker/
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Also, look at ASIC’s TrackMySpend app on:
https://www.moneysmart.gov.au/tools-and-
resources/calculators-and-apps/mobile-
apps/trackmyspend
ASIC also has a very good budget planner on:
https://www.moneysmart.gov.au/tools-and-
resources/calculators-and-apps/budget-planner
Once a budget is in place, it can be used to find ways to
reduce expenditure. For instance:
 Trimming spending on a different expense category
each month. Just cutting back by about 5% to 10%
can make a real difference over time.
 Put some money away on a regular basis to cover
large or infrequent expenses, so that the bills don’t
come as such a shock.
 Think about selling something no longer needed,
especially luxuries like a second car, which are
costly to own and run.
TIP NO. 3: REDUCE MORE EXPENSIVE
DEBT FIRST
If debt is being reduced, it helps to reduce credit card
debt first because that is invariably the most expensive.
Example – Reducing credit card debt
Assume you have an outstanding credit card debt of
$1,000 at an annual interest rate of 16%. If you stick to
the minimum repayment set at 2.5% of the card
balance, it will take more than 15 years to repay the
debt, at a total cost of $1,186. On the other hand, if you
devoted $100 to repaying the debt every month, it
would be paid off in eleven months, costing just $81 in
interest.5
TIP NO.4: USE A DEBIT CARD
Another useful tip for avoiding credit card temptations
in an increasingly cashless society is to use a debit card.
These are available through both Visa and Mastercard
and operate in the same as way a credit card, except
that use of them reduces a bank account balance rather
than creating a build-up of credit debt. They therefore
have all the advantages of a credit card, such as ‘wave-
and-go’ and availability for Internet transactions
without the temptation of easy credit. They can also be
5 Example from CitiBank
 7 9. MORTGAGE BROKING
a very good way of keeping track of expenditure for
budgeting purposes because all usage is recorded.
TIP NO.5: USE INTERNET BANKING
7 ABA include:
Modern devices such as credit cards can cause
temptations, but modern technology also allows us to
have greater control. Some people only receive bank
7 account statements every six months. They may check
their balance and transactions through an ATM
occasionally, but they can do this daily with internet
banking. A weekly check may be enough in most cases,
but checking bank account and credit card balances and
transactions on a regular basis is a good way of keeping
in control.
TIP NO.6: TAKE OUT INCOME
PROTECTION INSURANCE
This advice is not usually included on tips on how to
manage consumer finance, but it is still a step that
should be considered imperative. In return for regular
tax-deductible premiums, the insured is entitled to
regular payments of up to 75% of income if unable to
work because of illness or disablement – which may be
either temporary or permanent. The term of the
insurance cover can be for either a relatively short
period of a year up to a maximum of age 65.
Income protection insurance should be regarded as
mandatory by borrowers with finance involving large,
regular loan repayments such as housing loans.
It may be either taken out on its own or – perhaps with
less pain (although no real cost saving) – taken out
through superannuation.
DEALING WITH FINANCIAL
HARDSHIP
CAUSES OF FINANCIAL HARDSHIP
People can, of course, make mistakes, but they can also
be hit by hard times. ‘Financial hardship’ therefore
covers more than excessive consumption and lack of
budgeting. The Australian Bankers’ Association (ABA)
defines financial hardship as:
‘…when a customer is willing and has the intention to
pay, but is unable to meet their repayments or existing
financial obligations, and with formal hardship
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assistance, a customer’s financial situation can be
restored.’6
Examples of causes of financial hardship given by the
 unexpected changes in income and/or expenditure;
 changes in employment status (such as losing a job
or having their income reduced);
 significant life events (such as a relationship
breakdown or a death in the family);
 injury or illness; and
 emergency event or natural disaster.
Financial hardship usually shows itself in missed loan
and credit card payments. In its 2012-13 Review the
Financial Ombudsman Service reported that 48% of the
financial hardship cases it had considered cases in the
year under review involved housing loans while another
27% involved credit cards.
SEEKING ADVICE AND COUNSELLING
Economists have known for many years that people can
take a long time to change their lifestyle to adjust to
changes in financial circumstances. This is
understandable, because sometimes the decisions that
have to be made are big ones, such as downsizing the
family home or changing education plans for the
children. It can help to discuss these matters with a
professional such as a financial planner – that is one
reason why it is a pity that such a small percentage of
Australians see a financial planner. Other professionals
with financial knowledge such as accountants can also
help. Credit representatives may also help in pointing
people in the right direction, although they have to take
care not to take on an advisory role because that is
something they are not licensed to do.
Financial counsellors can also assist. Financial
counselling in Australia is community-based and
supported by government funding.
The Financial Counselling Australia (FCA) describes the
role of financial counselling in the following manner:
‘People from all walks of life can find themselves with
money problems. Financial counsellors are non-
judgmental, trained professionals that can help. They
provide information, support and advocacy to people in
financial difficulty. Working in community
6 Australian Bankers’ Association, ‘Promoting understanding about
banks’ financial hardship programs’ (May 2013)
 8 9. MORTGAGE BROKING
organisations, their services are free, independent and
confidential.’
The obtain contact details for a financial counsellor, go
8 to:
https://www.financialcounsellingaustralia.org.au/
corporate/find-a-counsellor
8
and then enter a postcode as instructed.
Otherwise go to the financial counselling hotline
provided by the Australian government:
1800 007 007
This is a free hotline that is open from 9:30am to 4pm,
Monday to Friday. When the number is called the caller
is automatically transferred to the phone service in
their state. Calls from mobile phones may incur a fee
from the mobile phone carrier.
An alternative to seeing a professional counsellor,
which may work well in some cases, is to use the
free http://www.debtselfhelp.org.au from Financial
Counselling Australia to obtain a tailored assessment
based on information input. It includes over 50 fact
sheets and letters that can be used for writing to
creditors.
USING INTERNAL DISPUTES
RESOLUTION PROCEDURES
Banks may offer a sympathetic ear when there are
missed loan and credit card payments, but the
experience of financial counsellors is that this is still
often not the case. Inevitably, their failure to offer a
ready solution leads to a dispute that is considered by
their IDR scheme. Disputes are required to be resolved
within 45 days. The banks themselves set 21 days as a
standard, but this is not necessarily achieved. Extended
IDR procedures are themselves a further stress in a
situation of financial distress, with the outcome often
not being in favour of the bank customer.
The EDR services of the Financial Ombudsman Service
and the Credit Ombudsman Service have a reputation
for achieving better and fairer outcomes, but
unfortunately a bank’s IDR scheme needs to be endured
first.
For instance, Care In., a Canberra-based financial
counselling service has this to say:
‘A significant number of our clients have mental health
conditions with multiple life stressors and they are often
highly stressed. Despite this information being conveyed
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to FSPs the client may not have been offered payment
arrangements that are realistic for their income or
circumstances. On occasion such clients have been
ignored or threatened with legal action by FSPs. We
have generally found that FOS is more open to
considering the difficulties clients face when making
decisions about financial hardship and the client’s
capacity to pay’.7
The way to go for someone in a situation of financial
hardship therefore appears to be to approach a
financial counsellor first. At least there will be a
sympathetic ear. Financial counsellors tend to see
around 60 clients a week, so there can be no doubt
about the experience they build up. They also have the
contact details of community organisations that can
provide assistance. They may also be prepared to
negotiate changes in repayment terms on behalf of a
client.
Another matter to consider is that financial counsellors
are required to have a formal qualification in financial
counselling before they can practice.
It is therefore suggested that someone suffering
financial hardship should approach a financial
counsellor first of all. If possible, this step should be
taken before the situation has developed into a dispute
with the bank or other credit provider. This leaves
financial counselling in the hands of people who are
trained to handle it. It may also reduce some of the
present load of the bank’s internal disputes resolution
schemes.
AVOIDING CREDIT CARD SCAMS
How safe do you think your credit card transaction is?
When you buy something online, are you sure your
credit card details are destroyed immediately? Certainly
you can trust the reputable merchants such as
Amazon.com and major department stores, but how
about the unknown overseas merchants you are buying
computer parts from? When you are asked for the
sixteen-digit code (from the front of the card) by what
appears to be a legitimate business activity, how do you
know that the same person won’t use it for personal
items? What about the pop-up store at your local
shopping centre? When it asks you to complete a
purchase document that includes your credit card
details, how do you know that the same information
won’t be used for personal use?
7
A letter from Care Inc. to Cameronralph Navigator Pty Ltd, 21
October 2013.
 9 9. MORTGAGE BROKING

The Australian banks are attempting to make credit
card transactions more secure by encouraging PIN
verification and (soon to come) introducing PIN
verification of internet transactions. So the first
9 precaution is to keep your credit card secure and never
let anyone know your PIN. It also helps to be aware of
the most common fraudulent schemes.
for a security and maintenance upgrade, to ‘verify’
your account or to protect you from a fraud threat.
The email might even state that you are due to
receive a refund for a bill or other fee that it claims
you have been charged.

9 They can be quite dangerous because they can provide

criminals with access to your full account details, not
just your credit card limit.

REQUESTS FOR ACCOUNT

INFORMATION (‘PHISHING’) SCAMS
‘Phishing’ refers to emails that trick people into giving
out their personal and banking information; they can
also be sent by SMS. These messages seem to come
from legitimate businesses, normally banks or other
financial institutions or telecommunications providers.
The scammers are generally trying to get information
such as bank account numbers, passwords and credit
card numbers, which they will then use to steal the
cardholder’s money.

Phishing emails often look genuine and use what look

to be genuine internet addresses—in fact, they often
copy an institution's logo and message format, which is
very easy to do. It is also common for phishing
messages to contain links to websites that are
convincing fakes of real companies' home pages.

The website that the scammer’s email links to will have

an address (URL) that is similar to but not the same as a
real bank's or financial institution’s site. For example, if
the genuine site is at ‘www.realbank.com.au’, the
scammer may use an address like
‘www.realbank.com.au.log107.biz’ or
‘www.phoneybank.com/realbank.com.au/login’.

Warning Signs
 You receive an email or SMS claiming to be from a
financial institution or telecommunication provider.
This message may seem to be from your bank,
service provider or a business you have an account
with. The email contains a link that leads you to a
website where you are prompted to enter your
bank account details.
 The email does not address you by your proper
name.
 The email might contain typing errors and
grammatical mistakes.
 The email might claim that your details are needed

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 10 9. MORTGAGE BROKING
Example - A phishing scam
Here is an example of a phishing scam email sent on 13
November 2013:
10
Your Attention is Required - Platform Upgrade - A0931
CSZLCRUXCP
Dear Westpac Customer,
10 Your Credit Card from your profile has been temporarily
deactivated
CLICK HERE to activate your services
Please do not reply to this email as your reply will not
be received. This is an automatic notification from
security center.
Sincerely,
1999-2013 Westpac First Australia Financial
Corporation
YQIWUFRKTTXKKXXNPWECQGEBDUMTZXIKQJRJQO
Precautions
 Never send money or give your personal, credit or
banking details to anyone unless you made the
phone call and know that the phone number is the
right one.
 Never send your personal or banking details to
anyone via text message or email.
 Don't open any email that you think could be from
a scammer - delete it.
 Don't click on any links in a suspicious email or
open any files attached to it.
 Don't call a phone number that you see in a spam
email or text message.
 Don't enter your personal, credit or banking details
into a website if you are not absolutely sure the
website is genuine.
If you do want to check on an email such as the one in
the example, phone your bank. Alternatively, key a
sentence or two into a search engine. There is nothing
original about most phishing scams. The one that is
trying to obtain money from you is likely to have been
tried already somewhere else in the world.
Another check, of course, is to try accessing the credit
card either at an ATM or via internet banking. That may
be the fastest way of finding out if the card really has
been deactivated.
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PHONEY FRAUD ALERTS
A phoney fraud alert is similar to a phishing scam. It
can come in the form of an email or a phone call
claiming to be from your bank or financial institution.
The scammer will usually tell you that your credit card
or account has been cancelled because it was involved
in criminal activity, or because they suspect your card or
details have been stolen.
This is a trick to get you to give them your account
details.
The scammer will ask you to confirm your credit card or
account details so the ‘bank’ can ‘investigate’. If you
receive an email, it may ask you to visit a website to
confirm your credit card details or to find out more
information on the supposed ‘fraud’ to your account.
In some variations of this scam, the scammer may
already have your credit card number (that they have
stolen previously), and may even quote this to you.
They will then ask you to confirm that you are the
cardholder by telling them the 3 or 4 digit security
number printed on the card. If the scammers have this
number, they can use your card to buy things over the
internet or by phone.
These phoney fraud investigations are used to steal
your banking details so the scammers can use your
account. They work by lowering your guard with the
phoney fraud alert. They hope that you panic and do
what they suggest to fix the ‘problem’. They are
particularly tricky to spot because real banks and credit
unions often do contact people if there has been
suspicious activity on their account.
Warning Signs
 You receive an email or a phone call from
somebody saying they are from your bank, asking
you about recent activity on your credit card or
account.
 You are asked to confirm your credit card and bank
account details by return email, visiting a website
or over the phone.
 The caller or the email claims that there has been
fraudulent activity found on your bank account, or
that your card has been cancelled.
 You may be advised to contact a fake fraud
investigations body, and discouraged from
contacting your bank or credit union.
Precautions
 11 9. MORTGAGE BROKING

Same as for phishing scams. In particular, never send

your personal or banking details to anyone via text
message or email.

11 At the same time, don’t overlook the possibility that

you may receive a phone call that is genuine because
there actually has been some fraud with your bank
account or credit card. In that case, ask the caller for
11 details, then hang up and call your bank or credit union
to tell them what has happened. Make sure the phone
number you use is genuine – use a number that appears
on your statement or card, or in the White Pages.

CARD SKIMMING
‘Card skimming’ is the illegal copying of information
from the magnetic strip of a credit or ATM card. It is a
more direct version of a phishing scam, with the risk
that all of your bank account details can be obtained.
However, it is more dangerous because it is much
harder to detect.
The most common approach is to attach a small device
to an ATM that skims a card while a small camera
records its PIN. Once scammers have skimmed the card,
they can create a fake or ‘cloned’ card with the
cardholder’s details on it. It is, however, not limited to
ATM’s. For example, Taxi passengers have been warned
to protect themselves against credit card skimming, 8
The devices used are sophisticated and difficult to
detect. The police report that the most common time
for them to be put in place is in the early morning or
early evening when there is less activity, and that they
are rarely in place for more than 24 hours.
Example – Card skimming
Look at the image of a card skimming device set out
over the page. It is easily detected from the side.
Warning Signs
 You notice something suspicious about the card
slot on an ATM (e.g. an attached device, card slot
appears loose, glue residue, exposed wires).
 You notice unusual or unauthorised transactions on
your account or credit card statement.
 There is an increasing trend of numerous small
amounts under $100 being taken.
Precautions
The devices being used are becoming smaller and more
sophisticated. The offences appear to be committed in
waves, as if they are gangs of international criminals
visiting a city from time to time.
Statements should be checked carefully, although that
may not be timely enough. Internet banking is very
useful for more regular checking.
Police have urged users of ATMs to cover the keypad
whenever they are entering a PIN because card
skimming devices always have a hidden camera
somewhere:
‘The gangs may still gain the data but that is virtually
useless to them without the PIN.’ 9
This is a useful habit to adopt.

Example - Use of tap & go cards

The banks claim that the increasing use of tap and go

cards is a protection against fraud – not at ATMs,

9 Simon Black, ‘Police believe Romanian gangs have returned to

Sydney and skimmed around $100,000 from ATMs’, The Daily
8 The Age, 29 March, 2014. Telegraph, 16 August 2013.

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 12 9. MORTGAGE BROKING
perhaps, but there are card skimming machines that
can be used in shops by fraudulent shop assistants.
With the tap & go technology, card details cannot be
taken down. However, a pin number is not required and
12 this may prevent a risk if a card is stolen.
OTHER PRECAUTIONS
12 The fraudulent credit card schemes that have been
listed are organised criminal activities, but someone
having unauthorised access to your card can do just as
much damage. The numbers from the front of the card
can be used quite freely once stolen by asking some
merchants to key them in on the pretext that the card
has been lost. The 16-digit number from the front of the
card and the three or four digit number from the back
can do quite a heavy amount of damage with payments
through the internet with some of them, such as the
top-up payments for road toll, being hard to distinguish
from one’s own transactions.
How can this be done? People leave handbags, jackets
etc. lying around. Moral of the story? Always keep
credit cards secure, and when out keep them about
your person.
CREDIT REPORTING AGENCIES
Credit reporting involves provide information about an
individual’s credit worthiness to banks, finance
companies and other credit providers, such as retail
businesses that issue credit cards or allow individuals to
have goods or services on credit. Credit reporting is
generally conducted by specialised credit reporting
agencies that collect and disclose information about
potential borrowers, usually in order to assist credit
providers to assess applications for credit.
Credit reporting agencies collect information about
individuals from credit providers and publicly available
information (such as bankruptcy information obtained
from the Insolvency and Trustee Service Australia—a
federal government agency). This information is stored
in central databases for use in generating credit
reporting information for credit providers.
This is the type of information contained in a credit
report:
Personal Name, date of birth, current and past
details
addresses, employment and driver's
licence number.
Joint A joint applicant's name will appear if the
applicant credit was applied for with another
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person and both names appear on the
credit card contract.
Credit Information about the cards held.
cards
Arrears Any debts that were unpaid and overdue
brought up and have since been paid or settled.
to date
Defaults Defaults and any other credit
infringements are also listed. These could
be utility bills or loan payments that are
60 days or more overdue and where debt
collection activity has started.
Credit Any credit applied for.
applications
Debt Any bankruptcies, court judgements,
agreements debt agreements or personal insolvency
agreements in your name.
As well as recording defaults, the information recorded
covers how consumers manage their credit accounts
(since 1 March 2014) – for instance, whether they repay
on time. (Information on ‘phone and utility bills is not
included in this requirement).
While the major purpose of credit reporting is to
provide information to assist credit providers to assess
applications for credit, credit reporting also may be
seen as serving the associated purpose of facilitating
responsible lending. That is, the information provided
by credit reporting to credit providers may help to
prevent individuals becoming financially overcommitted.
The main credit record/rating agencies in Australia are
private companies – Veda Advantage (owned by Meryl
Lynch) and Dun and Bradstreet.
Anyone is able to obtain a free copy of their credit
report from Veda Advantage within 2 weeks by writing
to them at:
Veda Advantage
PO Box 964
North Sydney NSW 2059
Applicants need to include the following information in
their letter: full name, date of birth, driver’s licence
number, current address and previous address (if they
have moved in the last 5 years), employment details,
the name of the organisation to which they last applied
for credit and identification documents.
 13 9. MORTGAGE BROKING

If they are willing to pay a fee (over $50) to obtain the

report within 24 hours, they can apply and pay online a
www.mycreditfile.com.au/.

13 To obtain a free copy of a credit report from Dun and

Bradstreet in 10 business days, they may go
to www.dnb.com.au or call Dun and Bradstreet on 132
333.
13
Anyone believing that information on their credit report
is not accurate or up-to-date can request that Veda
Advantage and/or Dun and Bradstreet amend the
report. If they want to add an explanation where the
report can’t be amended, they can send a 150 word
letter or statement and ask for this to be added to their
credit report.

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