Financial literacy research released

ANZ Bank has released two major research studies into adult financial literacy and the causes of financial difficulty in Australia. These studies highlighted that 80% of Australians feel “in control” of their financial situation.

For the first time the research explores the issues which cause a small group of Australians (around 2% of people), who have borrowings, to feel out of control most or all of the time.

Key findings include:

• 84% of people surveyed felt 'well informed' when making financial decisions, up from 80% in 2003.
• Substantially more people knew how to use, and used, newer payment methods in 2005 than in 2002. Usage of electronic channels rose markedly, with the strongest rises in internet banking (from 28% to 40%), BPay (from 50% to 60%) and direct debit (from 50% to 60%).
• While the overall results confirm that Australian society is mostly financially literate, there are certain groups that have particular challenges. The lowest levels of financial literacy were associated with: those having lower education (Year 10 or less); those not working, for a range of reasons, or in unskilled work; those with lower incomes (household incomes under $20,000); those with lower savings levels (under $5,000); single people and people at both extremes of the age profile (aged 18–24 years and 70 years and over).

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New rules for mortgagees of Queensland land

The Natural Resources and Other Legislation Amendment Bill 2005 Queensland was introduced into Queensland Parliament on 8 November 2005. When passed, it will amend the Land Title Act 1994 with the aim of improving the operation of this Act in relation to the conduct of inquiries into fraud and errors in the freehold land register by requiring mortgagess to adopt procedures to identify mortgagors.

It will reduce the State’s exposure to claims for payment of compensation for land title related frauds in circumstances where reasonable due diligence measures were not taken by a mortgagee.

Under the Bill there is an obligation on a mortgagee (whether it becomes a mortgagee by the transfer of an existing mortgage or by the registration of a new mortgage) to take reasonable steps to ensure that the person signing as mortgagor is in fact the mortgagor. The Registrar of Titles will specify steps that are deemed to be reasonable. A mortgagee is required to keep written records (in the approved form) of all steps taken to verify the mortgagor's identity, and to keep for 7 years copies of all documents and other evidence used for this verification.

If a mortgagee does not comply with the investigative and record-keeping requirements, and the mortgage or transfer of mortgage is fraudulently executed, the mortgagee loses the 'indefeasible' title it would usually enjoy by having its interest registered. The Registrar would also be able to remove the mortgage from the title. The practical effect of this is that all registered interests (including subsequent mortgages) would prevail over the mortgage.

The mortgagee also commits an offence if it does not keep the records required.

The Bill also restricts a mortgagee's power of sale where the mortgage involved (or was associated with) fraud against a landowner or crown lessee (for example, where the landowner's signature was forged) even if the mortgagee has complied with the procedures. The Bill caps the amount of interest that is recoverable, and limits the recoverability of other costs associated with exercising power of sale.

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Reverse mortgages: ASIC comments

ASIC has released a report into equity release products following increasing interest in 3 types: reverse mortgages, home reversion schemes, and shared appreciation mortgages (SAMs).

The Equity Release Products Report includes tips for consumers who may be considering equity release products.

ASIC warned that all equity release products are complex and, if used inappropriately or with poor advice, there are significant risks for consumers.

From the regulatory viewpoint, ASIC commented:

The existing regulatory system was not designed to address the issues raised by equity release products, which take the form of a credit arrangement but nevertheless have some of the attributes of an investment product.

At the product level, the principal vehicle for regulation of credit, the Uniform Consumer Credit Code (UCCC), does not provide for disclosure of risk, nor provide a mechanism for disclosing elements of the cost of the product, such as the forgoing of equity, that are not translatable into an interest rate. Finally it will not apply at all where the funds obtained are to be used for investment purposes.

The principal vehicle for the regulation of investment products, the Corporations Act 2001 (Corporations Act), has limited application to some home reversion and shared appreciation products, depending on their terms, but generally does not apply to reverse mortgage products.

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Network Law is working again

Errors were reported on the site on Wednesday and Thursday following some maintenance on Tuesday night. The problems have now been fixed. We apologize for any inconvenience.

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