Banks to pay for Customer Rip-Offs

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The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry is exposing the misdeeds, lies, corruption and outright stealing by Banks and other Financial institutions. Some of these we already knew- the CBA's Financial Planning fiasco, Comminsure, Austrac breaches, charging fees for no service and to dead customers. So far we also know that only a few planners have been fined or barred from practice and some Executives have taken a walk, like Ian Nerev of CBA, AMP chief executive Craig Meller and Chairman Catherine Brenner. But no one has yet been charged and they all seem to be able to keep their ill gotten gains.

The story on page 35 and 36 of AFR of 30 April 2018 tells us what has happened to many customers of CBA. The story highlights a typical example of the allegations against CBA by Bankwest SMEs. It has been alleged that CBA forced viable Bankwest small business customers into receivership. The alleged motive was that CBA could not raise the wholesale and capital funding required to meets its prudential capital obligations and thus it was more viable for CBA to remove performing SME customer loans from the loan book. They did this by using non-monetary technical defaults to reclassify performing loans as impaired and then transferred the customer files to CBA's turnaround division (Credit Asset Management - CAM) where the customers where allegedly price gouged with fees and charges for years. Most of the SME customers were left broke, bankrupt and destroyed. Mr Rory Obrien's story is similar to ours. My wife and I were small business owners in the motel industry. In 2009 we borrowed $920,000 from Bankwest to purchase a motel. The loan was for a term of 15 years with the first 2 years being interest only. We met all interest and repayments when due. In 2011 we were encouraged to borrow $1,360,000 for another motel on 15 year term with interest only for the first two years. Repayments to start at the expiry of the interest only period on 31 December 2013. When the loan documents arrived, it had an expiry date of 31 December 2013. We took that date as expiry date of the interest only period. It wasn't. Bankwest wrote to us the loans had expired and asked us to repay. All attempts to find a solution failed. Receivers were called. Why the term was reduced from 15 years to 2 was never explained. Nobody would take up a 2 year loan unless there was a firm clearance or refinance in place. Why take a loan if it has to be refinanced in 2 years at additional costs? The AFR story goes some way to explain the reason. We were ripped-off.

So far there has been no confirmation from the Royal Commission as to whether the Bankwest takeover allegations will be investigated. The Hayne Royal Commission will need to decide whether CBA's systemic policy constitutes conduct below community expectations.

In the early days of the Royal Commission, Treasurer Scott Morrision is quoted in SMH "Banks to pay for Customer Rip-Offs". In a recent announcement by the Treasurer and Minister for Revenue and Financial Service, they stated that ASIC will be given powers to fine $1,000,000 or 10% turnover for each offense. But here's the sting, this will apply from 1 July 2018 to future crimes. But what about the present victims? One only has to look at what happened to the victims of Comminsure and fraudulent financial advice. They are still waiting or have been offered a pittance. On this basis, past victims will die before they get a cent. Over the next 10-12 months the Royal Commission will expose more misdeeds and fraud. The credibility of the finance sector has taken a battering with negative comments everyday. As a result, confidence in the Big Four Banks and other Finance behemoths continue to erode. Not only will customers slowly migrate to other institutions but shareholders will remove their funds from the Banks as the prospect of heavy penalties weigh down on them. This will become a death by a thousand cuts. The very thing the Government has been trying to avoid.

We know that the financial institutions have lied not only to their customers but to regulators and the people of Australia. They only confess to their misdeeds when confronted. CBA's losing customer records in 2016 is another example. They have to be forced.

The solution is simple. Give Financial institutions a 6 month amnesty. They are to fess up, contact all victims of their greed and negotiate a settlement. Meantime Government to pass the regulation or legislation that the new penalties will apply on all claims not settled during the amnesty period. The Government is to set up a court or extend the terms of this Royal Commission to get submissions from victims, decide the merit of the claim, issue orders for compensation and punitive damages where victims have suffered more than just financial loss. In addition the Court is to levy a fine not only on the institution but on individuals including criminal charges against every individual who knew or ought to have known of the malfeasance. The individuals include Bank staff, Receivers, Liquidators and Lawyers who were party to and knowledge of the malfeasance.

Banks and other institutions have lost their social licence. The past behaviour of a few has tainted all honest hard working people in the industry. Remember the St George advertisement, " I am a Banker....but I work for St George". That is a reality now. Every Bank staff, Financial Planner, insurance agent will be treated with suspicion or contempt. This will allow the Banks a clean slate to start afresh with confidence. The situation is akin to discovering cancer in the body, it has to be removed quickly before it spreads killing the patient. The finance industry is too important to our economy to be allowed to weaken let alone die. Decisive action is required.

The victims should not have to wait. If the Government was Fair Dinkum they would act immediately otherwise they will be seen as protecting the Banks instead of the victims.