From irresponsible lending and fraudulent financial advice to charging excessive fees and interest, the major banks have been in the spotlight over the past couple of years for their disgraceful conduct. These issues came to light in the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in 2019, explains Commercial Litigation Associate Georgia Taylor.
The Royal Commission into Banking Misconduct really exposed just how bad Australia’s banking system was and how consumers were being ripped off by the conduct of the banks. From accounts of deceased persons being charged fees, to worthless products being sold to unsuspecting customers, the report was damning, to say the least.
There were 76 recommendations made by Commissioner Hayne in his closing, and as of February 2021, it was reported that barely one-third of those recommendations had passed through Parliament to become law. It seems the federal Coalition government’s reluctance to call a Royal Commission has flowed through to implementing the recommendations. The COVID-19 outbreak has also allowed a relaxation of many changes to lending practices. Some industry commentators say that it is ‘business as usual’ and as if the Royal Commission is a distant unpleasant memory.
There’s been plenty of reports stating that despite the Royal Commission scrutinising the financial services industry in 2019, the banks are still behaving badly, and customers are still the ones being left worse off. Every day, Attwood Marshall Lawyers clients having to deal with banks in consumer disputes. Unfortunately, our experience is that in many cases, bad habits die hard.
Responsible lending – then and now
Responsible lending has been an ongoing focal point for regulatory bodies when determining what banks should and shouldn’t be doing when lending their customers money. Responsible lending laws were introduced in 2009, long before the Royal Commission into Banking Misconduct came about. The introduction of responsible lending laws, which were introduced after the Global Financial Crisis, meant that lenders had greater obligations to undertake a series of checks before handing out credit or a loan. This was designed to prevent people borrowing money that they simply could not afford to pay back. These laws put the onus on the bank to ensure the money they were lending to both consumers and businesses; was within their financial means.
Fast forward to today, we have seen reforms to Consumer Credit Laws as a result of COVID-19 and the impact the pandemic has had on the economy. In 2020, the Government decided to simplify Australia’s credit framework to ensure consumers and small businesses could get timely access to credit as the economy recovers from the pandemic.
What this now means is the principles which underpinned the responsible lending obligations previously in place have been relaxed and lenders now have greater flexibility when determining loan suitability.
There is a real concern around what may happen down the track with plenty of people taking advantage of the relaxed lending criteria and accessing loans to support their businesses or buy property during this time. This also coming as a result of record low interest rates, improving consumer accessibility to loans which were once (because of interest) out of reach.
In 2020, the government also issued a plea to banks to support consumers and businesses with their loan repayment obligations. Most of the big banks did provide repayment reprieves and other solutions to give their customers the time they needed to get back on their feet after being impacted by government directives such as lockdowns and border closures. The deferred payment options offered by banks and financial institutions were in place for a six-month period, with an extension available for some customers under special circumstances.
Although many people were able to begin repaying their home loans and business loans after the deferred period, there were still instances where lenders where threatening legal action and behaving unreasonably, failing to provide alternative solutions to help guide their customers through financial hardship despite government pleas.
We have seen a spike in enquiries from homeowners and business owners who continue to face mortgage stress and have the banks chasing debts. It can be difficult for consumers to resolve their dispute if their lender is not responding or communicating effectively and failing to negotiate a suitable solution for everyone involved.
It is a big concern with still so much uncertainty around COVID-19 and so many businesses struggling to stay afloat, what the ongoing financial impact will be. With the responsibility put back on the borrower, and relaxed lending criteria for the banks, there is a risk to some consumers in the future that they will no longer be protected by the same “one size fits all” responsible lending principles if the time comes and their loans are no longer suitable.
Other disputes that commonly arise over banking misconduct
We see many cases where banks do not comply with their own terms and conditions. This can include breaching confidentiality with joint account owners or mutual account owners, irresponsible lending and providing too much credit, allowing customers access to accounts without authority from all account holders, changing their offers or products without clearly communicating with their customers, and offering credit cards that people can’t afford, just to name a few. Sudden changes in the terms of credit and the security required also causes havoc with bank business customers, who rely on those facilities to earn their livelihood.
Another area of concern is if banks fail to update their systems and the information, they store on their customers financial positions.
Banks should be making sure that the financial information they hold about their customers when relying on data to update their credit file, is up to date so that if they are providing financial advice or offering financial products, these are suitable based on the customer’s current financial situation.
In most cases, banking disputes should flow through a bank’s internal dispute resolution system at the first instance, until it needs to escalate further if the issue is unable to be resolved with the bank directly.
What should people do if they feel they have been impacted by the misconduct of their bank or if they have suffered significant financial loss as a result of receiving bad financial advice?
There are two parts to this, banks can provide financial advice but there are also many instances where they do not provide financial advice but simply offer financial products. Unfortunately, there is a fine line in determining if and when financial advice has been received, as is shown in the recent case regulatory body the Australian Securities and Investment Commission (ASIC) commenced against Westpac.
In this case, ASIC found that Westpac’s financial advisers had withheld important market-sensitive information on corporate actions by ASX-listed companies over a fourteen-year period, which saw approximately 32,000 Westpac customers financially impacted by the deceitful conduct.
The failure to communicate this information to their customers meant that they missed out on potentially lucrative opportunities. Westpac will now need to pay $87 million in compensation to those impacted.
Determining whether or not you have received financial advice, is vital when commencing your dispute.
If you think you have received a bad financial product and that was irresponsibly lent to you and it has resulted in financial hardship, it is important to seek independent financial and legal advice.
When these disputes arise, the team at Attwood Marshall Lawyers will often obtain expert forensic accounting and financial advice to determine what advice should have been given and to quantify the losses that have flowed from the negligent or fraudulent advice. In many cases the losses are hundreds of thousands of dollars.
When we can identify an amount of financial loss that was directly related to the financial advice or product given to the consumer, and we have exhausted resolution avenues with the lender, we can take that complaint to the Australian Financial Complaints Authority (AFCA) who handle banking and insurance disputes.
Banks alone are not the only ones who provide financial advice, you also have financial advisers who should be holding an Australian Credit Licence (ACL). Whether you have received bad financial advice from a bank, or financial advice, if you believe the advice that was given to you was poor and resulted in financial loss, you may have a negligence claim against the professional who gave you that advice.
It is very important to seek legal advice from lawyers experienced in this area of law at the earliest opportunity if you are involved in a dispute with a bank or financial advisor and you have suffered significant financial loss as a result of negligent advice. Strict time limitations apply to these types of disputes and it is important to have your matter assessed as quickly as possible to ensure you do not miss the opportunity to claim for compensation and recover your losses. Our Commercial Litigation lawyers are experienced in handling lending institution disputes and use reputable forensic accountants to assess the conduct of the banks and calculate the losses you have suffered.
Attwood Marshall Lawyers can help you resolve your dispute
If you are involved in a dispute with your bank over loan repayments, irresponsible lending, excessive fees, unsuitable products, or poor financial advice, our team can help you understand your rights and the best path to take to resolve your matter.
Our experienced Commercial Litigation lawyers can help determine if you may be eligible for compensation for any financial loss you have suffered, and in some cases, we can accept your case on a “No Win, No Fee” basis* (approved cases only where genuine financial hardship and claims have a good prospect of success).
To find out your prospects of successfully claiming compensation for your losses, contact Commercial Litigation Department Manager, Amanda Heather, on direct line 07 5506 8245, email firstname.lastname@example.org or free call 1800 621 071 at any time.
Was the Royal Commission into misconduct in the banking, superannuation and financial services industry a billion-dollar waste of time?