Banking misconduct remains a pervasive issue in Australia despite the efforts of the Hayne Royal Commission which highlighted a dire need for reform and accountability in our financial services sector, writes Attwood Marshall Lawyers Commercial Litigation Senior Associate Georgia Taylor.
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry stands as one of the most significant inquiries for Australians this past decade.
From its announcement on 30 November 2017, the “Hayne Royal Commission,” as it became known, received over 10,000 public submissions and testimonies from victims, key stake holders and managers of our largest financial institutions.
Witnesses who came forward shone a light on the systemic issues plaguing the industries and as a result, on 1 February 2019, Commissioner Hayne delivered 76 recommendations, including 24 referrals for potential criminal prosecution.
Despite the carefully crafted submissions of CEOs and board members of the financial institutions subjected to front the Commission, and their commitments to resolving historical complaints of irresponsible and fraudulent lending, the resolution process remains fraught with delays, bureaucratic hurdles, costs and stress to the most vulnerable in our community.
It is a rhetorical and practical question often raised, which is “how much of the banks’ record profits are being put towards resolving consumer hardships?”
The management and accessibility of financial services for both individuals and businesses are crucial for sustained economic growth and stability. Yet, our clients’ stories of extraordinary hardship due to the malpractices of the financial industry have underscored the need for systemic reform.
One would assume that following the condemnation of the industry through the Commission, and subsequent legislative reforms – including increased civil and criminal penalties through the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019 – governing boards would prioritize managing and preventing future breaches of the Banking Code of Conduct and their common law duties to consumers.
Unfortunately, our experience suggests otherwise.
The most prominent issues that we have observed since the Royal Commission include:
- Unexplained and unreasonable delays in accessing lending despite meeting all criteria, resulting in financial loss;
- Mismanagement of accounts for protected or vulnerable persons, such as the elderly and disabled;
- Irresponsible lending practices, leading to financial hardship by approving loans beyond the consumer’s means;
- Unsolicited, undocumented, and unqualified financial advice.
These complaints and breaches are avoidable. The core of the complaints is centered around the handling of customers’ accounts. Therefore, one practical solution lies in the banks reinvesting their record profits into proper training of and hiring of qualified personnel.
This is not a criticism of bank employees but a necessary focus on the institutional failure to provide the necessary training, support, and education on customer duties. Internal incentives for lending, including branch KPI’s, has created a recipe for misconduct that leaves consumers as the ultimate victims.
Unfortunately, this is not a centralised issue. The failures are not only prominent in front line customer interactions but also embedded in dispute resolution channels and the management of existing accounts. ASIC chair Joe Longo recently commented that when dealing with requests for hardship, “lenders ignored hardship notices, effectively abandoning customers who needed their support.”
To us, this beggars belief.
As the revelations of widespread banking misconduct dominated the media throughout the Commission in late 2017s, my career at Attwood Marshall Lawyers was just beginning. Our industry was flooded with the need for professionals to advocate for consumers rights particularly regarding historical misconduct, which inherently caused unquantifiable damage to those consumers lives and families.
Unsurprisingly, no two complaints are the same. Efficient management of high value complaints requires specialized staff and internal departments who understand industry intricacies to handle complaints and loss assessments appropriately.
For example, a construction business who has been left with an overdraft after a customer hasn’t paid an invoice requires different interim financial relief than a farmer whose crop was damaged by unexpected weather and expecting a business interruption insurance relief or in the case of a natural disaster, government intervention.
Similarly, a client struggling to afford their mortgage due to irresponsible lending requires different support than one who has already lost their home and wants to pursue a claim for damages.
The common law (which, simply described, is the law developed by judges through written decisions in individual Court cases) and the legislature provide tools to achieve a resolution for our clients, but banks should not wait until legal action is necessary. They need to look back at the root causes of their failings and invest their profits to make sure their operations are responsible and responsive to the needs of both new and existing customers.
Ultimately, to restore and maintain public trust, Australia’s financial institutions must demonstrate a genuine commitment to ethical practices and consumer protection.
This commitment should manifest through tangible investments in staff training, customer service, and proactive complaint resolution mechanisms. Only then can we hope for a banking system that serves the community with integrity and accountability. It remains to be seen whether our federal government and the agencies appointed to protect consumers rights can continue to hold the banks accountable for their actions. So far, we have not seen any tangible difference.
