Wayne October 15, 2008

So much for being quaranteed by a AAA company. They obviously don’t want any new business.

Adam October 15, 2008

It may be that they don’t want their ‘old’ business either.

Great Southern Loans October 15, 2008

In reference to the 1.0% cut in interest rates and the 0.80% benefit being passed on to mortgages.

We note that GE Money (3rd Party solutions) are not passing on any of the interest rate cut benefit to mortgage customers through those channels. They are however passing on the interest rate of 0.80% to their own direct customers and customers of the wholly owned distribution group Wizard Mortgages.

This action is singling out customers and disadvantaging borrowers through these channels. This action is in breach of any undertaking to benefit mortgage borrowers made to the Department of Treasury. Also this matter should be bought to the attention of the ACCC.

Louis October 15, 2008

It appears they are no longer interested in their wholesale business and the many loyal clients that have supported them for many years. If they cannot pass any cut, why did they pass a 0.8% cut to their brand Wizard Home Loans.

LC Raider October 15, 2008

WHAT A BUCH OF IDIOTIC MORONS……….Surely they realise that no-one will send them any business now or ever again in the future. I guess they are simply going for a cash grab now (as 1% on a 20Billion book is alot of money) as they have had no luck selling the donkey that is GE Money.

Paul October 15, 2008

GE Money are not only going for a cash grab but are hoping that clients will refinance so they can cash in on their early repayment fees of 1.8% of the original loan amount. We have a client that is up for a $29,150 exit fee if he wants to change to CBA and save $1300 per month in interest savings.

Danny October 15, 2008

It’s a disaster!
Will GE Money put their hands up for a share of the Govt’s $8b injection into the non-bank lenders to keep competition alive? This is a good time for the Rudd Govt to shame this company.
Thomas Edison will roll in his grave!

Simon October 15, 2008

The media will tear this company apart.
Australia should boycott all GE products.

Adam October 15, 2008

Some of the brightest people work at GE so you would have to assume that the bean counters have used their ‘imagination at work’ to dream up ways to grab some cash for the loses they must be wearing stateside. Or perhaps they just consulted the genie…

Graeme October 15, 2008

Contact John Skilbeck’s at GE Money his email address is:XXXXXXXXXXXXX

NOTE: Comment edited by LC Team

John October 15, 2008

ASIC’s phone number is: 1300 300 630

Make a complaint!

Chris October 15, 2008

Contact ACCC and make a complaint.

Tom October 15, 2008

Better still contact Mark Rice, the Managing Director of GE Money Third Party Solutions. His email address is XXXXXXXXX or mobile: XXXXXXXXXX

You can also contact Andrew Moore the Deputy Chairman on email XXXXXXXXXX, Phone: XXXXXXXXXX or Fax: XXXXXXXXXXX

NOTE: Comment Edited by LC Team

Matt October 15, 2008

The issue that GE has not thought through clearly is that no broker in their right mind would now ever use them again. They can virtually shut down their mortgage management division now. If they are making a loss on the costs of funds, they needed to absorb the loss and reduce lending activity, this way they would only reduce the amount of loans being funded (which we would all understand)and not allienate brokers for eternity.

The credit crunch is causing a higher cost of funds, but they need to remember that it will not last forever, however brokers memories do and GE is now forever tainted.

In good faith, how could you ever recommend a GE loan again!

Ron October 15, 2008

The following message has been sent to the prime Minister, Today Tonight and A Current Affair:

GE Money one of the largest non bank wholesale lenders in Australia announced yesterday they cannot afford to pass on any of the RBA’s interest rate cut to their home loan clients. This is a company that boasts a AAA rating compared to the Australian Banks AA. This is absolutely disgraceful and the company should be put to shame. GE Money clients will now be paying a much higher rate than the competitors but clients can’t change because the exit fees are as high as 1.8% of the original loan amount. On a loan of $500,000 for a client whose property has reduced in price, the costs to change over are about $25,000. GE Money’s action not to pass the rate cut on their portfolio of approx $20B will earn them a fortune at the expense of the poor Australian consumer.

james October 15, 2008

Rob where did you learn to do maths? While I find it disgusting what GE has done, how do you work out that a 1.8% DEF is $25,000 on a $500,000 home loan? I thought brokers were supposed to be good with numbers. In future use your calculator before sending things off to Today Tonight, etc otherwise they might do an article on how brokers can’t use calculators.

Ron October 15, 2008

James,the $25,000 is the exit fees, LMI at 95% LVR plus new application fees. There wouldn’t be much change from $25,000.

Adam October 15, 2008

Ron may not be far off. If the client is seeking a 95% LVR dollar for dollar refi then there $9,000 exit fee (DEF) on a $500k loan plus new application costs and LMI which could be more than $14,000. Rob did state that the costs where to ‘change over’, so my money’s on Ron

Ron October 15, 2008

Thanks Adam. James obviously misunderstood.

Dan October 15, 2008

Does nothing positive for the reputation of brokers - the public will mistakenly assume ‘predatory’ lending from the introducer, when a deal was cut at the time with the clients best interests at heart. Brokers who sold GE loans can expect a few irate phone calls - unfairly. GE will cop it too, but the long term collatoral damage will be to the broker/mortgage managers.

Ali Taha October 15, 2008

Recently, we have had a few clients sell up their properties in the last couple of months as a result of ‘tough times’. As all loans happen to have been funded in the last 12 months we have been penalised and had to pay back 100% commissions (at the rate of 0.7%) and therefore our cash flow has been heavily affected… to the point I’ve had to use my personal ‘line of credit’ just to survive. At the moment, we get paid… we spend the money running our companies and then we have it taken away from future commission payments with any WARNING.

Some BDM’s receive a bonus depending on loan volumes achieved by their brokers… do they have to pay this back???

The only solution I can think of is if we put all our upfront commissions in a trust account and not access that commission until our client has passed the ‘test of time’ test. Actually, the banks could just hold off payment for the first 12 months.

Speaking to hundreds of brokers at recent broker events… every single one of us believes this is an abuse of power. We find this to be unfair and cruel.

Some other important issues, concerns and thoughts discussed were

The recent reduction in commissions… at a time when lending and property activity is less then ever before.
Australia is facing a possible recession… and we get 30-40% of our income was ‘taken away’ from us without consultation or reasonable thought. We also have kids and mortgages.

Banks have never been in such a comfortable position with their balance sheets and profit and loss statements. This is evident with a numbers of lenders together spending billions of dollars recently buying each other and continuing to do so. Did all bank employees and executives take a 30% cut??? I don’t think so!!!

TRAIL – this is the biggest asset Mortgage and Finance Professionals own. It has been chopped up and fried in ‘dirty used black oil’. Brokers can’t believe that some banks now refuse to pay it at all in the first year, such as the CBA… or that it’s been cut to 0.15% by most other banks.

Then there’s some lenders such as the NAB that require us to sell life insurance, financial advice and other products that we have no experience, or expertise in to keep earning higher commissions.

At the moment there are 3 mortgage managers that have stopped our trail payments. (Mr Homeloans alone have been stripped of over $100k in yearly trail payments as a result of this happening. Basically we had to start again. Thankfully we have an ‘expensive’ but fair legal process. One that we will begin in the near future… once we find a law firm that will act for us for less then 50%).

The only time brokers hear from member organisations such as MFAA, FBAA, COSL and professional indemnity insurers is when they send us their yearly invoices. We don’t have an independent voice. And these days aggregators and most successful ‘non bank’ lenders are either partly or fully owned by the banks anyway! All this has resulted in brokers being last in line… bottom of the food chain. (When we were seeking help regarding the sudden collapse of our trail book… we were told that there is nothing anyone could do. Even the lenders funding these loans (who are still paying trail to the mortgage managers) didn’t want to know about it).

Member Organisation mentioned above need to take a stand against lenders. They need to communicate with brokers and take on board what we are saying. They risk another ‘independent broker organisation’ being set up by brokers for brokers. Considering that over 50% of loans are obtained via brokers the banks should also listen to what we are saying.

It was outrageous that the Australian Government encouraged and justified to the banks that it was ok to take a share of the RBA cut. This caused confusion to me… how did the RBA justify a 1% cut.. not knowing how much of the pie the banks will eat? Surely there was no way that this cut had anything to do with inflation. It was more the government protecting their newly acquired lending stocks.

The Government has pledged 4 billions dollars to the non bank sector. We all know the majors will get their hands on the chunk of this money. (I also believe this figure will be increased in the near future).
The Australian Government has recently guaranteed all bank deposits for 3 years. Another form of protection against their banking stocks. Why was Mr Wayne Swan blasting the banks earlier in the year when they kept raising their rates? He even went as far as naming the banks at the time… and encouraged customers to shop around.

A spokesman for ANZ, Paul Edwards was quoted in January 2008 as saying “We are committed to passing on reductions in wholesale interest rates when market conditions ease and more normal conditions return,” This has NOT occurred. So much for commitment.

Brokers have had to release receptionists, office staff and down grade their premises just to survive as a result of commission claw backs and commission cuts.

Unless things change immediately, brokers don’t see a bright future, let alone a future at all.

Banks need to change their attitudes… as brokers are beginning to assess other options… such as ‘white label products’ and non bank lenders… although after GE’s immoral activity today watch out with white label too.

Banks need to eliminate ‘commission claw backs’. This is outdated and used in the wrong way. The only way I can see this happening fairly is if the same broker refinances that loan. If the client sells up or refinances in the first 12 months… we shouldn’t be punished.

These are clawback commission structures now with the majors..

Anz

100% clawback within 12 months
50% 12 to 18 months
25% 18 to 24 months

Bankwest

100% clawback within 18 months

CBA

100% within 12 months
50% 12 to 18 months

Homeside

100% upto 12 months
50% 13 to 24 months

Westpac

100% within 3 monts
90% 4 months
80% 5 months
70% 6 months
60% 7 months
50% 8 months and so on

Increase commissions NOW at least back to industry standard 0.75% upfront and 0.25% trail. There were many instances recently where the banks collectively raised interest rates, almost monthly in 2008. Surely, just surely our commission reductions weren’t necessary and if I’m crazy and I’m wrong, well the banks just recently raised their rates by another 0.20%. However… this was hidden. Everyone just thought of the 0.8% cut the banks passed on and therefore they were relieved. Why has all this occurred, why have most banks recorded record profits in recent times and we are still getting paid a poor 0.50%/0.15%???

The industry needs to be more regulated and monitored. The brokers doing the right thing should be rewarded. We have survived until now… We deserve a break!!!

Brokers want a written guarantee that lenders will continue to pay trails for any new loans in the future. Otherwise… we do not have enough security.

Brokers believe that banks think ‘the less brokers the better’.

Banks continue to offer cheaper products via their branches. Many brokers have had to compete against a branch of the same lender they intend to lodge a loan to. Branches are able to offer less fees and rates without too much fuss. Some banks have been blunt… such as Bankwest and are offering their best product only via their branches. Their excuse is they were overwhelmed with applications. If that’s the case… give us access to the product and pull it from your branches.

On a positive note:

Banks have come to the table with online lodgment software, BDM support, loan processing systems and great products.

The property market is looking good for brokers, who have stood the test of time. The banks need to continue supporting brokers… and should start including brokers in their million dollar marketing campaigns. Life insurance and Superannuation organisations are doing this all the time. This makes sense… considering that it costs the banks less to obtain a customer via the broker channel, as an alternative methods such as clients walking into the branches.

Tips from brokers for brokers:

Only deal with lenders who are accredited members with your aggregator.
Revise all commission and agreements you have with lenders and have them checked by a Lawyer.
Lobby with your Aggregator to take a cut with their commission and/or fees.
Brokers should always have the clients best interests at heart, however if two lenders offer the same rate, go with the lender who is still paying 07%/0.15%.
Stick to the lenders who don’t have a ‘commission claw back’ clause. (as you can see at the moment there are none).
Write to MFAA/FBAA demanding more support and representation.
Consider charging clients a small administration fee to help cover your costs. Most clients will not have a problem with this… as long as it’s structured and fair.
Keep in constant touch with all your clients.
Educate people as to the importance of acquiring the services of a Mortgage Broker and point out the benefits of using a broker. Such as… us having a range of products from all the banks, us having the ability to negotiate rates and fees etc.
Brokers should try to maintain a ‘lifelong’ relationship with their clients. This will help stop them going direct to the banks. Think about when you find a great Lawyer or Mechanic or Accountant or Doctor. You normally remain their client for life… if they are able to service your needs.
Educate yourselves more in terms of regulation, marketing, products and customer service.
Demand marketing material from your lenders to display and pass on to clients. This is to the lenders advantage as much as it is to brokers.
If we do not change our attitudes and get together to fight against the banks… we will be eaten alive. So take action now.

Dan October 15, 2008

Vote Ali Taha MFAA President! Today!

Navigator October 15, 2008

GE has sold us up the river and we now have clients on Prime product on Sub Prime rate. I for one will be doing everything I can to encourage my aggregator to suspend them from the panel. I believe we should all lobby our aggreagtors to suspend them. I am losing sleep over one client on a $300K loan at 95%. My sympathy goes out to those brokers who were fooled by GE Money and put multiple clients into the Prime product. GE Money have done imeasurable damage to our reputation and credibility.

ADAM October 15, 2008

Who is this Ali Taha he is spot on!!!

I think if we need someone to stand up for us and lead the fight against the banks then he is our man.

Im behind you all the way!

Ron October 15, 2008

Ali. Point taken but what has this to do with GE Money not passing interest rate cuts to borrowers?

Simon October 15, 2008

Ali is abviously talking about a range of issues concerning brokers… What GE have done today is no different than what the banks have done, except that they have not passed on anything at all this time.

Banks have reduced their fixed rates up to 155 points… as Ali is saying, there is definately room for them go give us our rightful commissions back.

And im glad he has pointed out the commission claw back issue. This might not have affected many brokers yet… but we are all exposed to it. Something like this could close down our business in any given month.

You go Ali… you have our support!!!

Adam October 15, 2008

If Fujitu Consulting’s comments at the recent broker conference on the GC prove to be correct - and they’ve backed it with research - the only way commissions are heading is down. We still earn more commission than any of our overseas colleagues. So commission ‘rightful’ or not won’t be coming our way I fear until competition returns.

If Ali’s comments demonstrate anything, it is that selling home loans is a whole new proposition. Brokers made good business out of non-bank lenders looking to innovate and lend to borrowers the banks snubbed - hence offering a real alternative and service. Now the banks own what used to the realm of the non-banks. If you as a broker have written a ton of RAMS, Macquarrie, Mobius, Seiza (etc) and now GE - how are your referrals coming along these days? With GE pulling a trick like this that is likely to hit the papers (go Ron), it is yet another blow for the non-banks and another degree of gradient in what is becoming an uphill climb to sell non-bank products.

So the only game in town is to run with the pack and sell the banks product on a reduced commission structure with draconian clawback requirements. Or bear the consequences of selling the alternatives of which surely the biggest (was) GE. Enter legislation and for many of us, it will all get to tricky. Fee for service anyone?

GE aren’t the first lender to not pass on cuts, but given the size and the schizophrenia with Wizard, it may prove to be the most contentious. Perhaps a safe political target for Wayne Swann’s break cost soap box?

Go Ali - I’m with you too. Seemingly off topic but a logical conclusion if you look at the door GE has just closed.

Allan October 15, 2008

Hmmmm, I just saw the news on channel 10 and Kevin Rudd is blaming corporate greed in part for the financial disaster the world is currently experiencing. This seems to be an outstanding example.

John October 16, 2008

There’s actually an article here about the whole “corporate greed” that Rudd was talking about and likened it to Gordon Gecko - was about a week ago I think. Link to the article is below.

There could however be something in that…

http://www.lendingcentral.com/2008/10/06/rudd-says-greed-is-good/

Stephen October 16, 2008

Another here who hasnt had ANY rate cut from the 1.25%. Our loan is through First Folio with GMAC-RFC. I cant get answers from anyone. Who can i complain too?

Ron October 16, 2008

Stephen. You have a non-conforming loan (sub prime). This is quite different to the GE prime loans which haven’t received the rate cut in October. Non-conforming loans are priced quite differently and it is unlikely you will receive a rate cut for sometime.Now that GMAC-RFC have exited the market, the only one you can complain to is the mortgage manager or broker but I can assure you nothing will happen. GMAC-RFC is another US company like GE. No loyalty whatsoever.

Simon October 16, 2008

I suggest that anyone who does not agree with the actions of GE Money make a complaint to ASIC online (lodging of a complaint):

https://www1.edge.asic.gov.au/cgi-bin/Lodgement/complaintV005?get/complainant/t=805519b563303b117eb43748a6057404d60a828

The basis of your complaint is:

1. You believe GE Money are in breach of ASIC Act - Section 12D (a) “Misleading and Deceptive Conduct”.

2. GE Money have represented to the public that they were passing on a 0.8% interest rate drop as a result of the reduction from the Reserve Bank on 8 October 2008. That the public expectation was that they could expect an interest rate reduction.

3. GE Money have now reneged on their offer by providing the rate reduction only to specfic distribution channels.

4. You want ASIC to investigate this in detail to see if GE Money have a case to answer.

We need many complaints so ASIC investigates these issues. It is ASIC’s obligation and responsibility as a representative for the Australian public to ensure that corporations such as GE Money conduct themselves properly.

The current actions of GE Money are going to hurt many Australian families and these actions do not represent those actions of a “responsible” corporate citizen. These actions may be acceptable in the unregulated market of the United States but are unacceptable in Australia, . . . and are illegal.

Ali Taha October 16, 2008

Good work Simon!!!

Simon October 16, 2008

Ali,

It is important that you and you friends pursue the same line of complaint with ASIC. The more complaints the more likely ASIC will conduct a proper investigation and require GE Money to explain their (outrageous) actions.

Tony Harris October 16, 2008

From the comments in the blog it is obvious that a lot of brokers and Mortgage Managers feel strongly about the actions of GE Money. I feel strongly enough towards GE clients that we owe them a responsibility to do everything we can to expose the actions of GE and make them accountable to all their clients not just their Wizard clients. Please if you feel strongly about this contact me because I am trying to convene a meeting with all Mortgage Managers,MFAA and GE to try and persuade them to reconsider their actions.GE have been happy to share the good times, now when times are tough we implore them to have consideration for their Australian mortgage holders.

Simon October 16, 2008

Tony,

Best of luck, however I believe you will need to some form of lever to move GE Money. Based on the unilateral actions they have taken against Yes and other mortgage managers the arrogance of the management cannot be underestimated.

A more purposeful action may be to bring together all the mortgage managers, which includes the Defense Credit Union. The mortgages have one single lender being Perpetual. We should unify all the mortgage managers and related loan books. We should then place the combined loan books as a package to another non bank lender, or a bank.

As a single deal it would be of significant size and provide economies of scale. In this manner they could mutually negotiate a proper conditions with another market player.

This would then release GE Money from any more dealings with ‘3rd parties’, which appears to be a space they are no longer comfortable.

Mark October 20, 2008

Very interesting reading about G E Money and how dissapointing their decision not to pass on the recent rate cut being a GE mortgage holder they were very quick to increase % when rates were on the rise in fact they repeatedly made the increase over and above the official RBA rate obviously they are not interested in any repeat business in this country I certainly wont deal with them again in the future

Danny October 22, 2008

If the Mortgage Managers selling products through Third Party Solutions aren’t happy with GE not passing the interest rate reduction on to the GE Money Home Lending loan book, then its simple - don’t sell GE products, or better yet, sign up to become a wizard branch and refinance all the customers over - you should receive another commission and as such can refund the costs of customers having to refinance. Claw backs shouldn’t be a problem as other lenders may pay higher commissions. Although in saying this, you have to be careful as you don’t want to be ‘churning’, there has to be a clear benefit to the customer.

Wizard is not wholly owned by GE, Mark Bouris still owns majority share - Maybe people should do their homework - or stop being brokers.

One of the reasons why lenders cut commissions to brokers is because a lot of brokers out there - bad ones - pretty much just sign the business up then say good buy to the customer, leaving the lender to do all the work, and this calculated over the life of the loan can be pretty high. So in saying that, be a more productive and pro-active broker and the lenders will pass the savings back to the people that give them business - the brokers.

Perpetual are no longer the funds manager for GE Money, GEL Custodians is - Only old loans are still with Perpetual trustees, who is not the lender but the funds manager. Funds are sourced from different stake holders, some in Australia, some in the US and wherever else. This is pooled together and given to the trustee – e.g. Permanent, Perpetual or GEL Custodians who manage the funds, as directed by the stake holders.

AFIG Wholesale - Trading as GE Money - is a totally separate company to Wizard Home Loans, action cannot be taken due to the fact that Wizard Home Loans Pty Ltd has passed on the reduction but GE Money has not. They are two totally separate companies.

Each and every broker has a separate contract with each lender and each lender can change the commission to whichever broker it wants, in light of the terms and conditions of selling that lenders product.

I doubt you will get anywhere with a broker or mortgage manager lodging a complaint against a lender in this regard.

Basically, if a customer is not happy with the interest rate they have the simple answer is, weigh up the costs and see if it’s better to refinance.

If a lenders fees are too high to refinance then negotiate the costs with the lender to see if some arrangement can be made – remember, it costs more to obtain new customers then to keep existing ones, so you just might get an interest rate cut anyway – ask to speak to a retention department.

If a customer feels the lenders fees are unreasonable, lodge a complaint with them and if that fails, lodge a complaint with the Credit Ombudsman (www.cosl.com.au) – they might be able to negotiate the fee to come to a reasonable solution if they feel the fee is too high.

If a lender has an influx of customer leaving, they will usually reduce the interest rates if it starts hurting the business.

Well that’s my piece said.

Cheers

Louis October 23, 2008

Danny,

You are all over the shop and mostly you don’t know what you are talking about. If you are going to add something to this critical issue make sure you put the effort of firstly being well informed because at this stage you are not.

Danny October 23, 2008

Louis

The critical issue? What is the critical issue here? High Interest Rates? or GE money not passing the rate cut on? or GE money not passing the cut on to cretain mortgage managers and brokers?

Well informed, HAHAHAHA… if you only knew, which obviously by the sounds of it, you clearly dont know much.

Louis October 23, 2008

Danny

Do you know what the role of a Mortgage Manager is? Do you know the difference between a broker and a Mortgage Manager?

danny October 23, 2008

It really all depends on if they are selling white lable products or just broking the loan, like Aussie. Either way a commission is paid. Ge have different tiers of mortgage managers, depending on the tier will depend on the interest rate and the commission paid. So yeah, I do.

Louis October 23, 2008

Very good. Now tell me how much of Wizard Mark Bouris owns?

Danny October 23, 2008

He and James Packer retain an estimated 20 per cent stake in Wizard… He is the Chariman, so if things happen to Wizard he has majority share in the decision making… What are you trying to get at? You must be one of those dodgy brokers or mortgage managers… sorry for offending you…

Simon-G October 23, 2008

Danny - Thanks for the update as to the position and ownership of GE Money. Mark Bouris may have a shareholding in AFIG, however the sole source of funding to Wizard is via GE Money. Also the terms of purchase by GE Money make Wizard a controlled entity.

GE Money have advised the public that it was passing on a rate reduction via Wizard on 8 October 2008. Then GE Money announced its funding costs have increased and therefore cannot pass on a rate reduction to a specific funding channel. These are inconsistent actions.

Also the rate reduction letters being sent out by Wizard are technically incorrect and can be argued that these letters make them GE Money.

It would also appear to the public that GE Money is Wizard, by its own representations, and that Wizard is an exclusive funding channel of GE Money.

We conclude that GE Money is:

1. conducting anti competitive behavior by excluding some of its customers.

2. GE Money is causing damage to those channels by its conduct as a result of its anti competitive behavior.

As a result we have instigated an investigation by the ‘relevant authorities’ for GE Money to answer for its actions. We believe that GE Money has offered a rate reduction to the market and should pass on a rate reduction to all borrowers, not just its Wizard customers. GE Money has an obligation to conduct itself as a ‘responsible’ entity, and cannot hide behind transparent corporate structures to disadvantage 3rd parties.

The Supreme Court of NSW is a strange place for a contest, but on the basis that all parties come to the Court with ‘clean hands’, then GE Money have already failed this first test.

I also understand the YES Home loans have already applied for an injunction through the Supreme Court. Does anyone know what happened and if any orders have been issued in regards to rate reductions by GE Money?

Danny October 23, 2008

A ruling by the NSW Supreme Court has allowed Yes Home Loans to continue its legal battle with GE Money.

GE Money said it would not contest an order to pay the mortgage manager a trail payment of $40,000 a month.

The payment relates to a $228m GE Money loan portfolio originated by Yes Home Loans and its wholesale subsidiary.

The dispute kicked off on 6 June 2008 when GE Money told Yes Home Loans that it proposed withholding 75% of its trail “pending actual PI claim payments”.

When the income was withheld, Yes Home Loans instigated legal action.

Beside the dispute over money, Yes Home Loans is also seeking a declaration from GE Money that it breached the ASIC Act by engaging in unconscionable conduct when providing a financial service and breached the Trade Practices Act by engaging in unconscionable conduct in business transactions.

A full hearing of the case is expected to take place early next year.

Simon-G October 23, 2008

Danny,

Did Yes apply to the Court for any specific performance by GE Money to pass on the rate reduction enjoyed by Wizard?

Danny October 23, 2008

Simon,

I do know for a fact though that Yes Home Loans aren’t happy with that fact, but i’m not sure what action, if any they are taking.

Simon-G October 23, 2008

Danny

We are also very unhappy and are pursuing this matter which may conclude in a damages claim against GE Money!

RS October 24, 2008

A friend of mine works (or I should say “worked” at GE) in mortgages - All staff basically let go last night / this morning in an emergency meeting (as details had been linked to crikey.com) GE Auto is also going too.

RS October 24, 2008

sorry, “leaked” to crikey.com

Adam October 24, 2008

confirmed. GE are out. Just got the call.

Louis October 24, 2008

This is the article appearing in Crickey.com.au on 23/10/08:

GE Money, one of the biggest funders of Australia’s non-bank housing loans and car loans, is on the verge of quitting both businesses in Australia completely as its US parent seeks to lower is risk profile by selling of unwanted and marginal business around the world, according to a tip received by Crikey.

It is rumoured that GE Capital Australia will announce next week that it is ceasing all activity in mortgages, including the impending Wizard sale to the National Australia Bank.

Asked if there was any truth to the rumour, GE told Crikey this morning that it was scaling back certain aspects of its Australian operations:

Due to the rising cost of finance bought on by the turmoil in world finance markets, we’ve been implementing ways to reduce our exposure for a while across the business - including motor. As a result we have been terminating agreements with some retail and wholesale motor partners over the last few weeks.

A few other examples across the business have been reassessing our loan to value mortgages, cutting our fixed rate mortgage options and flexible options prime mortgages since August and also tightening up on cash limits for financially stressed card customers and reducing eligibility for credit limit increases.

GE’s car financing business is huge as it runs a so-called “white label” business for many car importers, including extensive floor plan volumes which underpin dealer inventory across Australia.

It’s size can be seen from this page from its website details the extensive list of NSW dealers. There are over 80 new/used and used car groups financed by GE in NSW alone, with Holden, Ford, Mazda, Audi and Toyota among the brands financed.

Much of this floor plan financing won’t be able to be refinanced as GMAC, Ford Credit and Esanda (part of the ANZ) are pulling back from new business while reducing current relationships markedly since July as car sales have fallen (down 8.5% last month by some estimates). GMAC and Ford credit have their own problems in the US with plummetting sales, rising losses, especially on souring leases, and a shortage of credit for their own businesses.

Esanda’s decision is linked to the de-risking/leveraging of its business by new CEO, Mike Smith, in the wake of the adventures with dud margin loans and US deals that cost it $A1.9 billion in write-offs and cut 2008 earnings to $A3.02 billion, a drop of 23%.

If it happens, the company’s departure from the car financing business will leave a huge hole in the motor industry and could damage retail sales and employment, if the dealer’s can’t refinance.

GE’s action is part of a global strategy to protect its ratings by reducing leverage and retail exposure. The elimination of these activities will result in the redundancy of approximately 80% of related staff. (About 15 to 20% may be relocated to other departments.)

GE’s car plan financing is similar to the way that it and financial groups financed so-called white label home mortgages for a string of groups, most of whom have gone out of business or contracted.

GE’s US parent has already sold financial businesses in Germany, Japan is trying to unload high risk consumer and other financial services in the US. It also trying to sell some of its oldest industrial business in white goods and lighting products.

US investor, Warren Buffett recently invested $US3 billion in GE in a move designed to lift confidence in the huge industrial and finance group. Buffett’s investment helped the company raise a total of $US12 billion in new capital late last month.

It had looked at selling its private label credit card (that’s another white label business) in the US but has decided to shrink the business by allowing other companies bid for expiring contracts with card issuers.

GE CEO, Jeff Immelt has said his plan is to cut the finance units known collectively as GE Capital to 40% of total group earnings 2010, from more than 50% last year.

GE Capital first got into trouble with subprime mortgages which have cost it billions of dollars in losses, write-offs and other costs.

GE decided in may to sell, or reduce its interest in Wizard and media reports this week suggested that the NAB would pay around $100 million for the distribution business and offices, but more if it took on the $12 billion loan book built up by Wizard. GE Australia was rumoured to have paid more than $400 million for Wizard (a figure of of $425 million was mentioned in some reports).

GE Money is struggling in Australia with the group unable to on-pass the 1% cut from the Reserve Bank on October 7 to its white label mortgages.

In a statement released a week later, GE said

GE Money has announced it is not able to pass on any of the Reserve Bank of Australia’s October cash rate reduction to mortgages sold through third party mortgage managers and brokers.

Managing Director Home Lending, Lisa Davis, said the decision was necessary as a direct result of the recent extraordinary rise in the cost of funds that has taken place in the financial markets.

Regrettably, GE Money is not immune to the global increase in the cost of funds,” Ms Davis said. “We source our funds on the international market and do not have access to a deposit base to draw on. The volatility in the market is unprecedented and our cost of funds has not come down since the cash rate was reduced last week.

We will continue to review this position as funding costs change.

GE has sold Japanese consumer loans and other assets to Shinsei Bank in July and in March agreed to sell finance companies in Germany and the UK to Spain’s Banco Santander in an asset swap valued at 1 billion euros.

david October 24, 2008

Good ridence - GE makes me sick.
Skillbeck, Rice and all of the other clowns working there should be ashamed of themselves.

Lorenzo October 24, 2008

Resi Mortgages have no claw backs what so ever.

I suggest contacting them for commissions you are guaranteed to keep.

Troy October 24, 2008

One lesson to be learned - do not believe the hyperbole of any lender or insurer (especially foreign ones) without consideration and reflection. At least if you deal with a major banking institution in Australia, it is unlikely that they are going anywhere.

Sam October 24, 2008

Don’t be too harsh with GE
They are merely ploughing the money feilds that they sewed.

Gary G October 25, 2008

I have been dealing with Vault Mortgage for 2 years and they too don’t claw back. They always pay on time and their service is the best I’ve experienced in my 6 years as a broker. Better than Resi.

Kon October 25, 2008

Gary G - I’ll second that.

Hak October 25, 2008

So who is actually doing anything about this? all these comments here, I dont see a collective effort to form a power…

Lorenzo October 25, 2008

I don’t agree with you Gary G I have always been paid week after settlement with Resi and found the service exceptional

Gary G October 27, 2008

Lorenzo

I didn’t say the service from Resi is bad. I just said the service from Vault Mortgage is better than what I experienced with Resi 5 years ago.

Hak November 4, 2008

what will they do with todays 0.75 bpts cut?

Louis November 4, 2008

They will do nothing because it’s about making the most of a dead horse.

Hak November 4, 2008

I dont understand how they can get away with this… its pathetic

Hak November 6, 2008

when will we know what these guys are doing???

sgboy November 27, 2008

they just increased their rate by 1.95%

sgboy November 27, 2008

well mine anyway

Cristina December 6, 2008

Please go to “” Today Tonight ” website and look for ” GE Complaints ” and then lodge a complaint under your “State “.
Also watch Today Tonight Monday 8 December 2008.
It is no use to act as an individuals , we have to unite to force them to put the rates down and to force the government to protect us , by having a legislation that regulates the industry .
If you serch the Internet you will be amazed of how many court cases GE Money have around the word . In Australia the last “law enforcement ” decission was on the 8 june 2008 .

Louis December 8, 2008

Cristina

There was nothing about GE Money on Today Tonight on Monday 8/12.

Hak December 8, 2008

I also watched but there was nothing, I did notice the advertisment mention GE Money insider words etc.. must of been a last minute pay off not to air..