Lenders are preying on "impulsive teenagers" with online approval processes that make it as "easy as a Facebook like" to commit to unaffordable personal loans, a Sydney mum has warned.
Jane, who asked not to use her real name as her complaint had now been settled, has spoken out about the "disturbing" experience of battling the Commonwealth Bank to cancel a $15,000, 12.5 per cent interest personal loan issued to her 19-year-old son on a part-time wage, news.com.au reports.
"I know I couldn't get a loan to save my life years ago," she said.
"This was just shocking. It's been a bit traumatic. There's no way a kid [in the past] would get a $15,000 (NZ$16,500) loan approved without even having to enter a bank."
Her son made the application in September on an impulse with the intention of buying a car.
Three months earlier he had been earning just $150 (NZ$165) per week, and had been working part-time for less than a year.
But CommBank's online systems approved the loan based on his most recent 12 weeks of activity, during which time he had been earning $500 (NZ$552) per week due to overtime as a colleague had recently been forced to take time off due to injury.
The loan was initially approved "pending documentation", but was then changed to an unconditional approval without documentation.
Realising he was committing to a five-year loan with monthly repayments of $337 (NZ$372) before fees and total interest of more than $5200 (NZ$5742), he attempted to cancel the application several times during the process, without success.
"He tried to reverse his impulsive curiosity and hit an 'X' on the screen ... which he believed to be a cancel button, but [there is] no cancel button once you start on this slippery slope," she said.
The money hit his account within 48 hours.
Jane said when she found out what had happened, she made numerous phone calls and ultimately a desperate trip to the local branch with her son — where she was told she could not cancel the loan, only make a "complaint" which would be forwarded on to the loans department.
It was only in late November — after Jane threatened to go to the media — that the complaint was resolved and the loan plus $500 in fees reversed, with CommBank making a "goodwill payment" of $600 (NZ$663).
"On 29 September 2017, the income was verified automatically through our system, the contract was accepted online through NetBank and the loan was funded," the CommBank complaints officer wrote.
"I confirm the loan was approved within bank policy and regulatory guidelines.
"However I appreciate that it has been a very stressful time for you in trying to have this matter rectified.
"I am really sorry to hear of the service you have experienced and I am also disappointed that it has been less than satisfactory on this occasion.
"I would be pleased to make an offer to resolve your complaint ... [on] a without admission basis. [Under the agreement you will] agree to take no further action in any forum regarding matters arising out of, or in relation to the complaint."
News.com.au understands CommBank's online application processes are standard across the industry.
Customers applying for online personal loans can cancel their application at any point prior to accepting the contract.
If a customer wants to cancel the application after that point, they can do so via phone — but only before the money hits their bank account.
That time window depends on a number of factors, such as whether it takes place on a weekend.
A CommBank spokeswoman could not comment on individual customers due to privacy issues but said the bank "lends according to individual risk profiles which take into account a number of factors including a borrowers' ability to service that loan and their previous credit history".
"Customers can choose to make extra repayments and pay off their loan as quickly as possible," she said.
"We always want to hear from our customers who have concerns. They can contact us directly in our branches, online or over the phone."
Jane said online loan applications were fine for "people that need it and know what they're getting into", but warned that for the younger generation, "hitting a button is very simple".
"If he had defaulted, who's going to pay it? His parents will have to bail him out," Jane said.
"Since then his hours have reduced because they're giving someone else more hours, so he would have been in real trouble.
"I just think [there should be] a step in the process where a human rings you beforehand to explain [things like] the total interest.
"A lot of people don't understand, especially a teenager. They think they're bulletproof."
On Thursday, Prime Minister Malcolm Turnbull backflipped after months of pressure, announcing a Royal Commission into Australia's financial services sector.
In a joint letter to Treasurer Scott Morrison earlier that day, the heads of the big four asked for an inquiry to end the "political uncertainty".