LEIGH SALES, PRESENTER: Accusations of fraud and malpractice in the banking sector are growing.

Last month we exposed evidence of banks using deceptive practices with so-called low doc loans.

Now the bank known as "The Millionaires Factory", Macquarie Bank, is accused of encouraging the use of rubbery figures in loan applications.

Tonight an industry whistleblower tells 7.30 it's commonplace for bankers and brokers to fabricate income, assets and property valuations to get loans across the line, but when those loans fall through, it's the borrowers who lose everything.

Stephen Long takes a journey into the world of debt and deception.

STEPHEN LONG, REPORTER: The Gold Coast: paradise at times, hell at others.

They call it the "city of dreams", but it's full of broken dreams; now the mortgage arrears capital of Australia.

NOELINE LECOUILLIARD: It's been an emotional rollercoaster from shock, horror, fear, despair, disappointment and mostly guilt and shame that this has happened to us.

STEPHEN LONG: This used to be the home of Noeline Lecoulliard and her husband Phillip, a waterfront on the Isle of Capri at Surfers Paradise.

NOELINE LECOUILLIARD: Both my parents lived and died there. It wasn't a house, it was a home. It was my family home, it was my parents' home, it was my children's home. So, it was a big loss. It was a very big loss.

STEPHEN LONG: This couple's tale is emblematic of an era of dodgy financial advice and aggressive lending.

They're not sophisticated investors. Noeline's 75. Phil works part-time as a sales assistant for less than $17 an hour. But they had assets - a house and an investment property, together worth more than $2 million - and a financial advisor-cum-mortgage broker who convinced them that they could secure their retirement by unlocking the equity in their home.

Tell me about the financial advisor.

NOELINE LECOUILLIARD: Oh, the most personable person. Well he was extremely pleasant, very generous, always sending me birthday cards, gifts, dinners.

STEPHEN LONG: In the lead up to the GFC, the advisor had them borrow money against their home to buy shares. They were lucky to get away with it, but the luck didn't last.

PHIL LECOUILLIARD: Because of the stockmarkets being as flat as they were and not performing, the financial advisor suggested that perhaps we do some short-term money loans in the form of bridging finance for developers and the like.

STEPHEN LONG: The advisor organised a massive line of credit against the property to fund the lending. Inevitably, after a few successes, a developer went bust and their loan security - a second mortgage - was inadequate. As the debt mounted, their line of credit became a noose.

PHIL LECOULLIARD: The debt was over a million, about $1,050,000. The repayments were approaching $8,000 a month. And so the net effect was that we couldn't keep up the repayments because we were simply using our line of credit to make the repayments in the end.

STEPHEN LONG: They had to sell their home and the investment property and lost nearly everything.

So, after having assets worth more than $2 million, this folly you were encouraged to do by the financial advisor left you with a $150,000 to $200,000?

PHIL LECOULLIARD: That's correct, yes

NOELINE: I don't feel resentment. I just feel shame.

BRUCE FORD, DISPUTE ASSIST: It's just bewildering. It is mind blowing. It's a really terrible thing for them emotionally; it just destroys them, absolutely destroys them. It's not something that they really ever recover from.

STEPHEN LONG: Bruce Ford sees it all too often. He represents clients deceived and in debt and time and again finds bankers and brokers involved in imprudent lending, even outright fraud.

BRUCE FORD: Responsible lending is pretty much an oxymoron at the moment. We're seeing dodgy valuations, fabricated loan applications, fabricated incomes, fabricated asset and liability statements. It's across the board.

STEPHEN LONG: Australian Broker magazine surveyed more than 200 mortgage brokers in the wake of a 7.30 expose last month on fraudulent lending. 85 per cent said banks encourage fraud during credit booms.

Michael Wren was working as a financial advisor in the lead-up to the GFC. It was a wild ride.

In late 2007, he was arranging loans for clients with Macquarie Bank so they could invest in Macquarie products. He knew one of his clients might not have enough income and assets to get the loan approved.

MICHAEL WREN, FMR FINANCIAL ADVISOR: I got a phone call from a business development manager from Macquarie Bank. This guy rang me up and said the application was going to fail and asked if I had any extra information I could give him.

(Re-enactment)

ACTOR PLAYING MACQUARIE BANK BDM: Isn't there something extra you can tell me?

MICHAEL WREN: No, everything I said was included.

ACTOR PLAYING MACQUARIE BANK BDM: There must be something more you can tell me to get this loan across the line.

MICHAEL WREN: No, no; it's all in the application form. It was - all the details are there.

ACTOR PLAYING MACQUARIE BANK BDM: Well you know you're gonna miss out on your commission.

(End of re-enactment)

STEPHEN LONG: What do you think he was really asking you?

MICHAEL WREN: Stephen, I really - I really hate to, hate to, to guess what was in his mind, but it was fairly clear that he wanted me to say something about their assets and income that wasn't true that would enable him to then value their assets and income differently and to approve them as candidates or clients for this investment.

STEPHEN LONG: Michael Wren told his boss what happened.

MICHAEL WREN: He said I should tell them that they're holding $100,000 in antique furniture and that there was extra income that I had neglected to inform them of.

STEPHEN LONG: So he said you should just fudge it, give false information to Macquarie to get the loan across the line?

MICHAEL WREN: Absolutely. Absolutely. He gave me the figures himself.

STEPHEN LONG: He says he called an integrity officer at Macquarie and was rebuffed.

MICHAEL WREN: Eventually he said to me: why am I making such a - why am I making such a big deal of this? "It happens all the time." Clients will sign application forms with the assets and income statement blank and it'll be completed by the financial advisor, and in this case added to by people at - or tried to be added to by people at Macquarie.

STEPHEN LONG: According to Macquarie, it carried out a detailed investigation of Michael Wren's complaints and they were contradicted by evidence.

Wren himself is in arrears on a Macquarie loan for a managed investment. He says he fell behind after quitting the financial advice industry and struggling to find work.

Bruce Ford has concerns about some of Macquarie's innovations in lending.

BRUCE FORD: Stephen, this is an email from the broker saying, "Please do not insert any figures in the application."

STEPHEN LONG: Income figures?

BRUCE FORD: Income figures. You've got a blank Macquarie Bank application for finance.

STEPHEN LONG: So, no income filled in.

BRUCE FORD: No income at all. Now here you've got a declaration that Macquarie's prepared getting the customer to sign that it was at their request that no financial information be provided for the application by the borrower.

STEPHEN LONG: And what's the upshot of that?

BRUCE FORD: Well, Macquarie's just trying to contract out of their responsibility to make a prudent assessment of the loan application and shift the blame to the borrower if it all goes pear-shaped.

STEPHEN LONG: Back on the Gold Coast, Phillip and Noeline Lecoulliard had loans with Macquarie among others. Noeline's health collapsed after they lost their home.

NOELINE LECOUILLIARD: My self-confidence is shattered. I'm just going through the motions.

PHIL LECOUILLIARD: My wife suffers from depression. Emotionally I'm - I just try to keep a lid on it. I'm coping the best I can. I'm a bit forward thinking, that I know that I have to work until I'm 75 at least.

NOELINE LECOUILLIARD: I was thinking the other day I should make another will and Phillip said, to me, "What have we got to leave?" (Laughs). So, yeah.

LEIGH SALES: We asked Macquarie Bank for an interview, but it declined.