Single mum granted $2 million loan

A SINGLE mother of three went into a "dreadful spiral of debt" after she was granted a $2 million loan despite having no "capacity to pay interest or capital", a court has heard.

Tracey Richards, 49, had spent years raising her children and had only begun working as a receptionist for a month - earning $24,000 a year - when Macquarie Bank approved the loan.

Barrister Douglas Campbell, representing a class action against Macquarie, told the Federal Court in Brisbane he found it "surprising" move.

He said class action members, who are seeking compensation from the bank, sought to prove the bank had acted unconscionably in approving Ms Richards' loan, and others, and that it breached loan contracts.

The class action is piggybacking on an Australian Securities and Investment Commission case against Storm Financial, Macquarie and Bank of Queensland.

Mr Campbell told the court Ms Richards bought a $400,000 Brisbane unit to live in with her children, aged nine to 16, and put the remaining $380,000 from her divorce settlement in the bank.

He said she got $30,000 child support, $4000 family payment and the interest from the money in the bank, which totalled about $54,000 a year.

Mr Campbell said Mrs Richards, having not worked, did not have any superannuation and wanted to invest her money wisely.

He showed the court a Storm Financial document revealing her goal through investment was "to be happy until the day (I) die".

Ms Richard decided to sell the unit, which fetched $450,000, and rent until she found a bigger house to accommodate her growing children.

When she found the perfect house, selling for $650,000, she approached Storm about selling her shares.

But Mr Campbell said a Storm Financial advisor convinced her she should not invest in real estate but stick with shares.

"She believed her financial future was now safe and secure," he said.

"He convinced her to splash out on more luxuries because he said she could afford them."

Mr Campbell said Mrs Richards then invested more money and agreed to a $2 million loan against what she had already invested.

But he said she had to repeatedly sell unit shares to pay for living expenses and supplement her income.

She lost everything when the stock market, and Storm Financial, crashed in 2008.

"Mrs Richards didn't have the capacity to service the interest component of the loan," he said.

"She did not have the capacity to pay without going into further debt.

"Mrs Richards was entering a dreadful spiral of debt which would be difficult if not impossible to extricate herself."

Mr Campbell alleged Macquarie showed "no consideration of how the interest or capital was to be repaid".

"It appears to be built with the belief that prices would continue to rise and if they didn't the borrower would immediately be in difficulty," he said.

"Macquarie was prepared and did stretch the bounds of its own risk credit protocols for the significant commercial opportunities presented by Storm."

The trial continues.