The Banking Royal Commission - An Update.
“The Banking Royal Commission (formally, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry) commenced on 12 February 2018 in Melbourne. The initial public hearing took care of the formalities, with the terms of reference being read on to the record, and the objectives and requirement of the commission being outlined by the commissioner, the honourable Kenneth Hayne AC QC.
The next round of public hearings are due to commence next week on 13 March. Counsel assisting the Commission, Rowena Orr, in the opening address on day 1 reiterated a central focus for the Commission (as outlined in the terms of reference) being to examine why the rights of all Australians to be treated honestly and fairly in their dealings with banking and financial services providers, has failed.
To date a total of 1611 submissions have been received by the Commission. Of those 64% relate to banking, 12% to superannuation, and 6% to life insurance and general insurance. According to Ms Orr, one of the themes that has emerged from the public submissions is inappropriate or unsuitable lending. The focus for the round of hearings commencing next week will be on consumer lending practices.
The topic of consumer lending practices will be examined in the context of credit products such as home loans, car loans and credit cards. According to the data published in the Commission’s first research paper, home loans are the largest asset on the books of authorised deposit- taking institutions (ADIs), comprising around 42% of the assets of ADIs as at the September 2017 quarter. As at November 2017, there was a total of $1.07 trillion in finance for owner- occupied housing provided by ADIs and a further $560 billion in investment housing finance provided by ADIs. As at the September 2017 quarter, around 5.8 million households had a home loan with an ADI.
The mind boggles at the fact that despite home ownership being so important for the average Australian, they have been let down by their banks in such a fundamental way and have been denied the right to be treated with honesty and fairness by their banks.
A review of the transcript from day 1 of the hearing revealed that the Commission will hear evidence of events involving financial services entities in the context of home lending which point to consumers being let down by their banks and the failure to treat consumers fairly and honestly. Each of these events give rise to important questions for consideration by the Commission, not least of which are how and why were such events permitted to occur, and what steps, if any, were taken at the time or have since been taken in response to those events, including steps to ensure that they do not recur.
According to the official website the Commission will deal with consumer lending by reference to the following case studies:
1. Residential Mortgages
NAB introducer program and fraudulent loan applications;
Aussie home loans fraudulent brokers and broker arrangements;
CBA accreditation of brokers and broker arrangements.
Westpac/St George car finance practices;
ANZ/esanda car finance practices.
Westpac unsuitable credit card limit increases;
Citi imposition of international transaction fees.
4. Add-on Insurance Products
CBA credit insurance in connection with home loans, personal loans and credit cards.
5. Credit Offers
ANZ unsuitable pre-approved overdraft offers.
6. Account Administration
ANZ account administration errors;
CBA unsuitable overdraft facilities and failure of automated systems.
It will be fascinating to see what transpires next week, to see who the Commission has called to give evidence, and to learn what documents and written material has been produced following various requests issued by the Commission.
We shall watch with a keen eye. More to come... “
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Tracey Mylecharane - Solicitor
Tracey Mylecharane has more than 12 years experience in legal practice and has been involved in numerous matters with clients who have experienced hardship and difficulty with their banks - this has ranged from simple advice and guidance, to assistance lodging complaints through the ombudsman system, to representing clients in court against banks.