Lenders face jail for giving loans that can't be paid

MORTGAGE brokers and lenders face jail or hefty fines if they place borrowers in unsuitable loans they cannot repay, and for the first time they will be forced to obtain a credit licence, under a planned government crackdown.
The changes are part of a credit industry overhaul that will establish a single national law to regulate mortgages, credit cards, pay-day lending and consumer credit products.
The proposed laws, which were largely welcomed by consumer groups, sparked immediate concern from the banks, which warned they would increase costs, slow down loan applications and make lenders overly cautious in issuing credit.
Corporate Law Minister Nick Sherry said yesterday tough measures on responsible lending were necessary to protect consumers and ensure they were not saddled with unmanageable debts. "The Rudd Labor Government intends to crack down on irresponsible lending, and we intend to weed out dodgy providers of credit finance and dodgy advisers from this industry," Senator Sherry said.
Due to start on November 1, the laws include fines of up to $220,000 for individuals and $1.1million for corporations and five-year jail terms for brokers and lenders who suggest products unsuitable for a consumer's needs and financial capacity.