In her opening address to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry on Monday (25 June), counsel assisting the commission Rowena Orr QC outlined instances of wrongdoing acknowledged by Commonwealth Bank (CBA) and its wholly-owned subsidiary Bankwest, ANZ, NAB, Bendigo Bank and its subsidiary Rural Bank, and Rabobank, in relation to their dealings with customers in regional and remote communities.
In its submission to the Hayne royal commission, CBA disclosed four instances of agricultural finance-related misconduct.
The misconduct acknowledged by CBA included:
- A failure to apply fee waivers and ongoing package benefits to eligible customers who had purchased an Agri-Advantage Plus product. CBA claimed that it reported the incident to ASIC, and had completed a mediation program in 2015, by which it reimbursed approximately 8,400 customers a total of approximately $7.6 million.
- An instance of overdraft line fee overcharging of an Agri-Advantage. CBA identified the issue in September 2012 and a total of 265 accounts were affected. CBA conducted a remediation program in April 2013, which resulted in refunds totalling approximately $72,000.
- Failing to provide Agri-Advantage Plus customers with concessions offered as part of the package. The issue was identified in July 2014 and was reported to ASIC in the same month.
- An overcharging of fees in relation to CBA’s Agri-Options package, which was identified in September 2012 and reported to ASIC. A total of 726 accounts were impacted, and a remediation program was completed in October 2012 and resulted in fee refunds to affected customers of approximately $330,000.
In addition to the four instances of misconduct identified by the major bank, CBA also disclosed one instance of “potentially inappropriate advice”, which may have related to its agribusiness products. The issue was identified and reported to ASIC in March 2015.
ANZ has also disclosed several instances of misconduct and conduct “falling below community standards and expectations”.
Wrongdoing acknowledged by the big four bank included:
- Conduct that fell below community standards and expectations in relation to its management of former customers of Landmark Financial Services following its acquisition of the group’s loan book. ANZ noted that in some cases, it may have breached the Code of Banking Practice.
- Breaches of the Code of Banking Practice and ASIC’s Debt Collection Guidelines, in relation to dealing between its commercial and collections team, and its agribusiness team. ANZ noted that between December 2013 and June 2014, the Financial Ombudsman Service (FOS) identified an instance of improper collections activity by the bank in relation to a particular agribusiness customer.
- System and process errors that affected agribusiness customers.
- Instances whereby its frontline staff engaged in inappropriate sales practices in an effort to increase incentive payments, which may have involved agribusiness lending.
In NAB’s submission to the commission, the bank acknowledged:
- Failures to advise or communicate with its agribusiness customers with regards to who is responsible for stamping and registration fees.
- Misunderstandings and disagreements between NAB and its customers regarding key aspects or functions of customer products and accounts.
The major bank did not identify any other misconduct, or conduct falling below community standards and expectations, in relation to its dealings with customers from regional and remote communities.
Bendigo and Adelaide Bank/Rural Bank
The regional bank disclosed five instances of misconduct and conduct falling below community standards and expectations involving the lender and its subsidiary Rural Bank.
Instances of wrongdoing identified by the regional bank include:
- Rural Bank’s response to a notification by a customer that her signature had been forged by her husband on documents to increase the limit of their agricultural loan facilities, and that her signature had been improperly witnessed by an agent of the bank. Rural Bank had advised the customer to report the matter to police but did not investigate the matter itself, relying on the police investigation which is yet to be concluded some years later.
- An incident in 2016 when Rural Bank charged fees on Season Overdraft and Agri Manager. The error affected 2,164 customers and the overall financial impact was $163,461. All customers were remediated.
- The underpayment of interest on term deposit accounts for a period of up to five years. A total of 81 customers were affected with the total financial impact being $10,166. All customers were remediated.
- An incident in 2015 where a relationship manager had verbally approved a loan above the manager’s designated lending authority. In reliance on this approval, the customer successfully bid on a property. Their loan application was subsequently declined on the basis that it did not meet lending criteria. Rural Bank settled their complaint by paying them the deposit amount as compensation after it was threatened with legal action.
- Failures to make appropriate inquiries and verifications prior to the approval of loans taken out by a number of customers in the Queensland cattle industry, which became non-performing loans. The submission noted that Rural Bank staff did not appropriately establish loan serviceability, over-relied on security values and did not adequately manage the loans. (This matter will be the subject of one of the case studies in these hearings.)
In its submission, the Dutch lender acknowledged seven instances of misconduct or conduct falling below community standards and expectations.
Three of the instances identified involved the incorrect application of interest rates across a number of different types of accounts, and over a number of different time periods.
One incident identified by Rabobank involved the overcharging of fees to 126 clients in 2011 with a total financial impact of $372,000.
The remaining three incidents noted by the Dutch bank involved the conduct of three employees, which included instances in which:
- An employee amended documents after they had been executed by a customer on more than one occasion.
- An employee failed to disclose a conflict of interest through involvement with a customer, and by executing a bank document on behalf of that customer.
- An employee entered into personal commercial arrangements with customers that were not disclosed to the bank.
The fourth round of hearings of the financial services royal commission will focus on issues affecting Australians living in remote and regional communities, which relate to farming finance, natural disaster insurance and Aboriginal and Torres Strait Islander Australians' interactions with financial services entities.
The hearings will be held in Brisbane from Monday, 25 June, to Friday, 29 June, and in Darwin from 2 July to 6 July.
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