Borrower Blames Lender for Overlooking Hidden Gambling Problem
A borrower who did not disclose his gambling problem has had his complaint about "unaffordable" loans turned down, raising important questions for mortgage advisers and lenders about their responsibilities when approving loans.
Gambling borrower’s complaint over unaffordable loan rejected.
LISTEN TO THIS ARTICLE:Loan Dispute Highlights Problem Gambling Detection Challenges
The individual in question took out an $11,000 loan in 2015 to clear an overdraft. Over the next eight years, he topped up this loan ten times, with the most recent top-up occurring in May 2022, allegedly for home renovations. However, his financial situation took a downturn when he was made redundant in November. By February 2023, he requested hardship relief from his lender due to difficulties in meeting his payments. The lender then deferred his loan payments until June.
As part of his financial recovery efforts, he sought help from a financial mentor and revealed his gambling problem. The mentor, upon reviewing the May loan top-up, requested more information from the lender. During this process, it was discovered that the borrower had made 85 transactions totaling $2,500 through Google Pay on his credit card, along with similar payments into his credit card account. The mentor argued that these transactions indicated problem gambling and claimed the lender had failed to fulfill responsible lending obligations.
Despite these claims, the lender contended it was unaware of the borrower’s gambling issues, noting that he had not missed any payments in the two years prior to 2023. At the time of the 2023 loan top-up, he had only one credit card and had fully repaid his home loan. The lender also emphasized that, without any evidence of gambling in his financial history, it had no grounds to suspect an issue.
Related: NSW Government Appeals to Parents to Prevent Underage Gambling
The dispute was taken to the Financial Services Complaints (FSCL) service, which sided with the lender. FSCL agreed that the borrower appeared to be in control of his finances at the time of the loan approval. "There was nothing in the information available to the lender in 2023 to indicate problem gambling," FSCL noted.
It further stated that individuals are entitled to make their own choices on how to spend their income and that the lender had acted appropriately based on the information provided. The FSCL highlighted that if borrowers hide or misrepresent their financial situation, it is not reasonable to blame the lender.
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Navigating the Fine Line in Loan Approvals
Mortgage adviser Karen Tatterson from Loan Market explained that, while advisers are required to flag signs of gambling during the application process, it is not always clear-cut. "If gambling is consistent and regular, we include it in debt servicing calculations," she said. However, many gamblers do not openly admit to their spending habits, often masking gambling activities as discretionary spending, making it difficult for lenders to identify the issue.
Jeremy Andrews of Key Mortgages echoed this concern. He noted that gambling is often concealed through cash withdrawals or credit card transactions, making it hard to detect unless it forms a pattern. He pointed out that not all gambling signals financial distress, stating, "It'd be unfair to deny an applicant who enjoys occasional gambling the chance to buy a home, just as it would be for someone with other expensive hobbies."
This case underscores the challenges lenders and advisers face in identifying gambling problems. It also highlights the importance of transparent communication between borrowers and financial institutions to ensure responsible lending and borrowing practices.
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