Prove the alleged debt!  It isn’t a big ask of your bank or their lawyers and/or debt collectors… Until you actually demand the evidence. Notice how banks are quick to use threats and intimidation to extort monies. Yet very, very slow to substantiate their claims… Fear and mortgage stress cause many people to panic. Yet banks do make mistakes, and sometimes get caught… And face $25m fines, which are nothing more than a “slap on the wrist” for these banks with very deep pockets.

To formally request proof of any alleged debt or threats of foreclosure, here’s a template you can use. So, ask your lender or mortgage servicer for the relevant documentation to prove the alleged debt.
= = = = = = =

Subject: Request to Prove Alleged Debt and Foreclosure Action

Dear [Lender’s Name or Mortgage Servicer],

I am writing to formally request documentation to substantiate the claim of the alleged outstanding mortgage debt and threatened foreclosure action associated with my mortgage account, which is identified by the following:

Borrower Name(s): [Your Full Name(s)]
Mortgage Loan Number: [Your Loan Number]
Property Address: [Your Property Address]

I have received notice of the impending foreclosure on my property, and I would like to request the following information:

  1. Proof of the amount owed, including a breakdown of the alleged outstanding balance, fees, and any other charges.
  2. A complete payment history, showing all payments made, including any alleged missed or late payments, and any applied charges.
  3. Verification of the chain of ownership of the mortgage loan, including any assignments or transfers of the mortgage.
  4. A copy of the original loan agreement and any subsequent modifications or amendments.
  5. Any documents or evidence that supports the foreclosure process, including notices, deadlines, and reasons for the foreclosure threat.

Please prove alleged debt by providing this documentation at your earliest convenience. If there are any errors or discrepancies in the account, I wish to resolve them as soon as possible.

If you are unable to prove alleged debt, with fully audited accounts showing how you arrive at the alleged outstanding balance, you have no claim. So I request you cease any further foreclosure action until the matter is fully clarified.

If you require any additional information from my side to process this request, please let me know. I appreciate your prompt attention to this matter.

Sincerely,

= = = = = = =

This could help clarify the status of your alleged mortgage arrears, and give you an opportunity to resolve any discrepancies before moving forward.

1. Prove Alleged Debt and Legal Expenses

In Australia, you are entitled to request evidence to substantiate the alleged debt and any associated fees, including legal expenses. Under the National Consumer Credit Protection Act 2009 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth), banks and other lenders must be transparent about the charges they impose.

If you ask the bank to provide evidence supporting the withdrawals for “legal expenses” and they failed to respond, this could be a significant issue.

Australian Financial Complaints Authority Limited (AFCA) replaces the Financial Ombudsman Service. AFCA claims to help resolve complaints if a financial institution is not responding to requests or failing to provide adequate information… Until the going gets tough, and they decide the matter falls outside their jurisdiction!

2. Legal Fees and Mortgage Agreements

Typically,  mortgage agreements for the recovery of reasonable legal fees in cases of default or foreclosure. However, for these fees to be valid:

They must be reasonable and adequately documented. You should receive an itemized statement showing exactly how the fees were incurred.

If the bank has drawn down funds from the loan to cover legal fees, they are required to substantiate the charges. This includes providing a detailed breakdown of the work that was done and how the fees were calculated. If they are not doing this, it raises a red flag.

3. Misleading or Deceptive Conduct

Under Australian Consumer Law (ACL), which is part of Competition and Consumer Act 2010, banks and other creditors are prohibited from misleading or deceptive conduct. If banks fail to substantiate legal fees and continues charging you without providing evidence, they may be breaching the law.

4. No Response To Prove Alleged Debt

Formal Complaint to the Bank: Without any evidence, how can the bank make a claim? Lodge a formal written complaint with the bank about their failure to provide evidence. Make it clear that you’re requesting a breakdown all legal fees and documentation supporting alleged debt, and any other relevant evidence, or back off!

Contact AFCA if the bank doesn’t respond to your complaint within a reasonable time. They’re an “independent” body that handles disputes between financial institutions and consumers. However, they rely on membership fees from these institutions. So why bite the hand that feeds you?

Like most people that contact AFCA, you’ll soon discover it’s a fruitless exercise, “smoke and mirrors” to give you a “warm and fuzzy feeling” that someone’s acting in your best interests. They are not. They will believe the bank before they believe you.

Make a Formal Request for Documentation: Send a formal request under the Privacy Act 1988 (Cth) for access to all information related to your loan. This will obligate the bank to provide you with any relevant documentation, including records of how legal fees were charged. This request is often referred to as a “Freedom of Information request“. However, they get to decide what information to provide!

Apparently AFCA has the power to resolve disputes and can help compel the bank to provide evidence of the debt and fees. But, in reality, they don’t… Instead they sit on the matter for months and then decide such matters are “outside their jurisdiction.”

5. Extortion or Debt Fraud?

While it may not be criminal extortion per se, it could be a form of unfair or deceptive conduct. If the bank’s adding legal fees without clear justification or refusing to provide documentation, they could be violating consumer protection laws. Specifically, the Australian Consumer Law (ACL) provides protections against businesses using misleading or deceptive practices to charge or collect money.

If there’s evidence of the bank or law firm engaging in fraudulent practices (e.g., inflating fees or charging for services they didn’t perform), this could fall under fraud or misrepresentation. If you suspect criminal behaviour, you could report this to Australian Consumer Law or the Australian Federal Police (AFP), although this would typically be a more complex legal issue.

6. What Are Your Next Steps?

Send a Formal Request: Send a formal written request that the bank prove the debt and detail all legal expenses. Be clear about the documentation you require and give a reasonable time frame (e.g., 14 days) for them to respond.

Legal Advice: You could seek advice from a lawyer who specializes in consumer law or mortgage law. They may help with the dispute, challenge the fees, or even assist in disputing the foreclosure action if the debt or legal fees are not substantiated.

It’s crucial to remain persistent in requesting proof, and don’t hesitate to escalate the matter if the bank remains silent or refuses to comply.