The Royal Commission into Misconduct in the Banking, Superannuation and Finance Services Industry was established in December last year to investigate malpractice in the financial services sector.
The Commission is a formal public inquiry that has the power to look into the conduct of the banks but is limited to the terms of reference, which create boundaries surrounding what they can make findings on. The announcement followed years of scandals and misconduct by Australian banks that left members of the community with consumer credit problems.
Redfern Legal Centre’s Credit and Debt solicitor Laura Bianchi said community legal centres across Australia, including RLC, have a strong history of helping those with these matters.
“The core of this work is representing people who have found themselves in overwhelming debt when the bank doesn’t comply with the responsible laws,” Ms Bianchi said.
“RLC regularly see people who are living in poverty because their credit card repayments decimate their low income or in the worst cases, their Centrelink money.”
The announcement to hold a Royal Commission by the Federal Government came after the big four banks, ANZ, Commonwealth Bank, NAB and Westpac, all signed a letter to the Treasurer that called for the commission as it was “in the national interest.”
The first round of hearings, which began in March 2018 focused on consumer lending practices, while conduct surrounding financial advice was examined from 16 April. The third round of submissions commenced on 21 May, and heard cases regarding loans to small and medium enterprises.
“The specialist community legal centres in most states have contributed thorough submissions to the Commission which have helped to shape the public inquiries,” Ms Bianchi said.
“Of most relevance to RLC is the excellent submission made by Financial Rights Legal Centre, who have directed the Commission to issues such as irresponsible lending, problematic insurance sales and marketing practices, exacerbating financial hardship, poor customer services and practices and poor value financial products.”
The Financial Rights Legal Centre submitted several case studies indicating the industry had moved from helping customers to focusing on profit-based outcomes, and this had been occurring for years. They demonstrated common experiences of their clients being advised to purchase products they were not covered under, and situations where they were faced with high-pressure sales approaches that were often misleading and aggressive.
The Consumer Action Legal Centre, in their submissions, also identified similar experiences of consumers and particularly focused on the impact of the misconduct on the lives of the vulnerable and disadvantaged. Excessive banking fees, including late and ATM fees, were shown to be often hidden and harsh, having a huge impact on lower income consumers. The submissions point to both the poor advice and behaviour of Australian banks, which were unlawful and had fallen below community standards.
“I hope the Commission will make recommendations to improve policies and legislation to better protect consumers and raise the standards of banking conduct in Australia,” Ms Bianchi said.
“RLC is keen to review the findings and work toward ensuring that the recommendations are implemented.”
The Royal Commission will run through to the end of the year with a interim report due in September and final report due in February next year.
See also
- Financial Rights Legal Centre submission (5 February 2018)
- Consumer Action Law Centre submission (3 April 2018)
- Banking royal commission: all you need to know – so far (The Guardian, 20 April 2018)
Case Study
Thomas* first got a $1000 credit card when he was at University as part of a student promotion. He was on the Centrelink student allowance at the time. Shortly after, Thomas became very unwell and was unable to continue his studies or gain employment.
Over the next 10 years, the bank regularly made unsolicited offers to increase Thomas’ credit limit until it reached almost $45,000. As a young man in his early thirties, Thomas was struggling to afford the minimum monthly credit card repayments which were absorbing most of his disability support pension. The crippling debt prevented Thomas from being able to live independently, despite medical advice recommending this would improve his mental health.
At this stage, Thomas sought advice from RLC. We investigated the credit limit increases and found that the bank had not complied with their responsible lending obligations when they approved each of the credit limit increases. The bank should not have given Thomas that amount of money when they could clearly see that his fortnightly Centrelink income payments were being deposited into his savings account held by that same bank.
RLC assisted Thomas to make a complaint to the bank. After lengthy negotiations and a number of escalations of the complaint through their various internal dispute resolution teams, the bank agreed to waive the outstanding debt and close the credit card account.
This is just one example of egregious, irresponsible lending and the devastating consequences these practices have on people’s lives. Fortunately, Thomas can now move forward.
* Name has been changed
