ASIC Obtains Orders Against Canberra Mortgage Broker Over ‘Low-Doc’ Loans

LAWFUEL – The Australia New Zealand Legal News Wire – The Federal Court of Australia today declared that a Canberra-based mortgage broker had engaged in unconscionable, misleading and deceptive conduct in relation to the arrangement of two low-documentation (low-doc) loans.

The Australian Securities and Investments Commission (ASIC) commenced proceedings against Mr Kelvin Skeers, of Queanbeyan, Australian Capital Territory, after investigating the conduct Mr Skeers, and his employer Tonadale Pty Limited (trading as ACT Mortgages), in arranging two low-doc loans for the same client in August 2004 and November 2005. At the time the loans were arranged, the client was 20 and 21 years of age respectively, unemployed and of no fixed address. After inheriting $240,000, the client approached a number of lenders who, prior to contacting ACT Mortgages and Mr Skeers, had refused him finance.

ASIC alleged that Mr Skeers acted in breach of the ASIC Act by:

• arranging two low-doc loans for $356,025 and $401,897 that the borrower could not afford to repay;
• misrepresenting the borrower’s financial position to the lender in the application forms; and
• misrepresenting to the borrower what would be included in the borrower’s loan application forms.
ASIC obtained orders against Mr Skeers, including:
• declarations that Mr Skeers engaged in misleading and deceptive conduct or conduct that was likely to mislead or deceive, and unconscionable conduct when the loans were arranged; and
• an order that Mr Skeers pay ASIC’s costs.
‘This case highlights that unscrupulous conduct in the mortgage industry is not acceptable and that mortgage brokers can be held responsible for arranging loans which the borrower has no capacity to repay’, ASIC’s Executive Director of Enforcement, Jan Redfern said.
ASIC obtained orders against Mr Skeers’ employer, Tonadale Pty Limited, on 3 October 2007.

Low-doc loans are where the lender determines eligibility by relying on statements by the borrower that they can meet the repayments, rather than requiring documents to prove income, assets and liabilities.
The regulation of consumer credit, including home mortgages, is administered at state level under the Uniform Consumer Credit Code. Credit is not subject to the disclosure and licensing regime established under the Corporations Act which is administered by ASIC.
ASIC does, however, have jurisdiction to take action in relation to misleading and deceptive or unconscionable conduct in relation to the provision of a credit product and lending practices under the ASIC Act.

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