The Hayne Royal Commission into the banking and finance industry has so far uncovered and brought about admissions of widespread unfair and dishonest practices by institutional lenders and financial services providers. It is being reported that prosecutions are expected to follow.
Unfair and dishonest lending practices have a long history. However, they are by no means confined to publicly listed and institutional lenders. Around the country, private money lenders too, have been found to have made deals with borrowers that fall so far below community standards of acceptable commercial practice that the courts have refused to enforce them.
A practice that has attracted the Courts' particular opprobrium is known as "asset lending". Asset lenders take out, and seek to foreclose on, mortgages against the homes of vulnerable people without regard for the borrower's ability to repay. A particularly immoral instance of such conduct that we have seen involves naming vulnerable homeowners, who are often frail and elderly or lacking in English language proficiency, as the borrowers where the loan monies are for the benefit of a third party who themselves lack capacity to repay. Instead of a traditional guarantor arrangement, the vulnerable person providing security over their home is named as a primary borrower usually because the private lender (or the broker) believes that a loan agreement secured by a mortgage is easier to enforce than a guarantee secured by a mortgage.
In these cases, there is often a good case for setting aside the loan and mortgage on the basis that the mortgage is not a genuine means to secure repayment of a loan. Rather, it is a means for an exploitative lender to take possession of the secured property on default, when that default was always inevitable and the lender knew it was inevitable.
In such cases, Courts around the country will often refuse to enforce the loan agreement and mortgage and instead, set them aside as the product of unconscionable conduct and therefore invalid.
If you believe that you or a loved one has been the victim of asset lending, our experienced team of commercial litigators will be pleased to advise you on your situation and options.
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