Bank statements supplied to the lender showed "extensive" Google Pay purchases on the borrower's credit card. Photo: Unsplash / Blake Wheeler
A borrower who did not reveal he had a problem with gambling has had his complaint about "unaffordable" loans turned down - but mortgage advisers say it highlights a problem lenders face.
The man borrowed $11,000 in 2015 to repay an overdraft. Over the next eight years, he topped up his loan 10 times, most recently in May last year for house renovations.
In November, he was made redundant and in February this year he asked his lender for hardship relief because he was struggling to make his payments.
His loan payments were deferred until 3 June.
He went to a financial mentor for help and revealed his problem with gambling.
The mentor looked into the May loan top-up and asked the lender for more information. The mentor discovered that the bank statements supplied to the lender showed "extensive" Google Pay purchases on his credit card. He made 85 transactions totalling $2500 and paid about $2500 into his credit card account.
The mentor argued the loan was facilitating his gambling and the lender had not met responsible lending obligations. He had had 10 credit cards in 2021, although only had one at the time of the 2023 top-up.
When the lender disagreed, the mentor complained to dispute resolution service Financial Services Complaints on the man's behalf.
The lender said it was unaware of the gambling and the man had not missed a payment in the two years before 2023. In 2023, he had one credit card and a fully repaid home loan.
FSCL agreed the man presented as a borrower in control of his finances. "There was nothing in the information available to the lender in 2023 to indicate problem gambling. It was our view that Patrick was entitled to make his own choice about how he would spend his discretionary income and that his spending habits at the time the loan was approved did not indicate problem gambling."
It said it was when he was made redundant that his trouble started. It said if a borrower was sanitising information or not giving the full picture, it was not fair to say the lender had acted inappropriately.
Mortgage adviser Karen Tatterson, from Loan Market, said when advisers could see gambling, they were required to highlight it as part of the application.
"But in many cases this is not clearly evident. If it is consistent and regular then we can include in the debt servicing calculations to show that the client can afford to meet their commitments along with their regular gambling and we do tend to highlight recidivist gambling if it is evident in bank statements - regular withdrawals from Sky City as an example.
"The down side and I can certainly read this into the FSCL case is that often you cannot pick up the gambling due to cash withdrawals or cash transfers to credit cards etc - this is generally seen as discretionary spending. As I am sure you are aware most gamblers will not openly admit to this nor to the amount they are spending.
"We do ask the clients for the intended use of funds and we have to take their intention at face value - if the client states renovations or holidays as the use of funds then that is what we must assume the client is doing with the money. "
Another adviser, Jeremy Andrews, of Key Mortgages, said he had seen cases where regular withdrawals from ATMs near a casino had prompted a request for more information.
"If it looks like a downward spiral addiction, this will be a serious red flag.
"If they are living within financial means and able to pay down debts, or even better, grow their house deposit without any ongoing debts it paints a good picture.
"It'd be unfair to try and tell an applicant who enjoys some occasional gambling they can't buy a home, compared to another applicant who has expensive hobbies like visiting the pub, playing golf, or, one of my favourites, mountain biking."