Been on a buck's night? If you want a mortgage, your bank might ask about it

Mortgage brokers are warning clients to prepare themselves for some highly intrusive questions from banks in the wake of the banking royal commission.

Brokers have reported far more personal questions being asked as banks have toughened their criteria for lending to Australians.

Pro Solution Private Clients associate director Jodi McKeown said she, and others in her business, had begun warning clients to expect banks to question spending, including those things that might leave people being upset.

“It’s definitely gotten worse over the past six months or so,” Ms McKeown said.

She had a number of clients who had successfully applied for mortgages in the past and were now being asked very personal questions about how they spend their money.

One client was questioned over her spending on medication for her child who had a severe disability. The bank demanded to see statements from the NDIS to prove she was being subsidised for her payments.

She had previously been approved for a loan, without such questioning.

“That was really awful,” Ms McKeown said. “She was very upset and it was just embarrassing.” 

Another client was questioned for his spending at a gentlemen’s club on a friend’s buck’s night and another for repaying his mother who bought him a $50 pair of shoes on ebay.

In July, Domain reported on Naomi Chatelier who had been questioned about her IVF treatment after she pointed out the payments, which appeared on her credit card, to ING.

Ms Chatelier was asked whether she would use her frozen embryos “in the next five to 10 months” and was told that the loan would be assessed only on her husband’s wage.

She was left in tears after the questioning and while the bank initially rejected her application for a loan, it overturned the decision after she complained and proved she would be able to pay the mortgage while on maternity leave (even though she wasn’t pregnant).

The experience made her question whether such practices would stop many women from applying for a mortgage when, like her, they would be able to make payments through maternity leave.

These stories come as banks look intensely into people’s spending habits. They have been cracking down on mortgage applicants whose discretionary spending includes UberEats, Netflix and even gambling apps. 

The corporate regulator on Tuesday lost a case against Westpac over the bank’s alleged breaches of responsible lending laws, related to the use of a modest benchmark known as the Household Expenditure Measure rather than reviewing borrower expenses individually to determine if they could service the loan.

Westpac also faces a class action, led by lawyers Maurice Blackburn, from borrowers who claim they were irresponsibly loaned money after being approved for mortgages they were unable to repay. 

Will Barsby, Shine Lawyers’ national special counsel – consumer disputes, said while the questioning was very personal, it was not against the law.

A bank would have to have a policy of not lending to pregnant women for it to be considered discrimination, Mr Barsby said.

While it wasn’t illegal to ask such questions, at times the banks could be seen to be taking it too far.

“I think it should stop at ‘do you have any children, or will you have any in the future?’ If the answer is no, that’s where it should end,” Mr Barsby said.

“[Asking about embryos] is perhaps taking it a bit too far and they could have dealt with it a little bit differently or better.”

The banks were often dealing with compliance to credit lending rules and were not thinking about how this would be interpreted by customers.

“I think banks are being overcautious at this time – it will take time to find what’s reasonable,” Mr Barsby said.