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Banks may face lawsuit Chris Vedelago

| 15.01,12. 11:40 AM |

 


Banks may face lawsuit Chris Vedelago


January 15, 2012
 
AUSTRALIA'S banks may face a class action over allegations their lending practices have put thousands of families at risk of losing their homes.

Organisers estimate up to 300,000 mortgage holders would be eligible to participate in the lawsuit, which is expected to focus on first home buyers and lower-income households who have received loans since the global financial crisis.

The proposed action has drawn qualified support from the law firm Maurice Blackburn, which is already engaged in the country's largest class action over alleged fee gouging by the big banks.

Advertisement: Story continues below The case is being orchestrated by the retired international insurance broker Roger Brown, who will launch the action through the website takingonbanks.com in April.

''The people we are talking about are experiencing severe financial hardship through no fault of their own because they shouldn't have been given a home loan in the first place or they have been lent way too much money,'' Mr Brown said. ''I think the banks have a case to answer for the irresponsible way they have been lending.''

The case is expected to be argued under provisions of the Competition and Consumer Act and the National Credit Code that prohibit unfair contract terms and reckless lending.

Maurice Blackburn's principal of major projects, Ben Slade, said there was a legal basis for challenging the lending practices of banks that had ''unlawfully'' and ''wantonly'' put consumers in home loans they were unlikely to be able to repay.

''There are thousands of families out there who are over-committed in circumstances where the institution knew or ought to have known at the date of making the loan that they would not be able to maintain the repayments over the life of that loan," he said.

Mr Slade said the strongest claims were likely to be from those who had lost their homes through distressed sales or foreclosures. However, Mr Brown believed a more liberal legal interpretation could see up to 300,000 potential claims from struggling home owners.

Of particular interest is the banks' lending practices around the period of the global financial crisis, when record low interest rates and the increased first home owners' grant led to hundreds of thousands of buyers entering the market.

SMH

Two independent QCs will be asked to render an opinion on the potential suit in April.

The banking industry declined to comment on speculation about a potential lawsuit.

 



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