The Loan Application With a Convenient Round Number
Tomas is a credit assessor at a regional credit union. A loan application for a $38,000 personal loan comes in from a member, Ms Barrett. Her declared income is $1,450 per fortnight. Her bank statements show irregular casual work income averaging about $1,100 per fortnight, with two fortnights at $1,450 in the last six months. The application form's income figure matches the two high fortnights exactly. Tomas's team leader, Renee, says: "She's a good member, never missed a payment in eight years. Use the declared figure - she'll get the loan through and she'll be fine." The credit union's lending policy requires income to be verified from statements and assessed on a sustainable basis. Ms Barrett has also listed a $420 per fortnight car loan that does not appear on the statements Tomas has.
1. What are the issues with using the declared income figure, and what should Tomas do about the missing car loan?
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Using the declared $1,450 per fortnight is not supportable. The statements show the figure was reached by selecting the two best fortnights out of roughly thirteen - that is cherry-picking, not verification. The average of about $1,100 is the sustainable figure on the evidence, and the policy requires assessment on a sustainable basis. Assessing on $1,450 would overstate capacity by roughly $350 per fortnight, which materially changes serviceability for a $38,000 loan.
The missing car loan is a separate red flag. Either the statements Tomas has are incomplete, or the debt is held elsewhere and has not been disclosed in full. Tomas should not assume it away. He should ask Ms Barrett for statements covering all accounts for the required period, and if the car loan is confirmed, include the $420 per fortnight as a committed expense. If she cannot or will not provide the statements, the application cannot be properly assessed and should be held, not approved.
Renee's "good member" argument is relevant context but not a substitute for verification. Loyalty does not change the policy requirement, and approving on unverified income exposes both the member and the credit union to harm if repayments become unaffordable.
2. How should Tomas respond to Renee, and what would a properly documented assessment look like?
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Tomas should respond respectfully but firmly, and in writing so the exchange is on file. He can acknowledge the member's history while separating it from the verification question: "I agree she's a strong member, but the declared income doesn't match the statements - it looks like it's taken from the two best fortnights. Policy requires sustainable verified income, and there's also a car loan not on the statements. I'm going to assess on the verified average and ask for the missing statements before we decide." If Renee insists, Tomas should escalate to the next level rather than approve on the declared figure.
A properly documented assessment would record: verified income of about $1,100 per fortnight (with the method stated - average over the period, excluding outliers only with a documented reason); the $420 per fortnight car loan included once statements confirm it; a serviceability calculation showing surplus or shortfall; the reasons the declared figure was not used; and the outstanding information request. The file should show why the decision was made, not just the decision. If the verified figures do not support the loan, the correct outcome is to decline or offer a reduced amount, and to explain that to Ms Barrett clearly so she can consider her options.