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A senior lawyer at the Financial Services Royal Commission has slammed some of Australia's banks for their "less comprehensive approach" to requests for information about misconduct from Commissioner Kenneth Hayne.
Key points:
- The commission hit out at banks for failing to disclose misconduct around consumer lending
- The commission heard from customers who said banks and brokers falsified home loan documents
- People also complained banks and brokers intentionally failed to verify their income for home loans
The problems faced by Australian consumers with home loans, car finance, credit cards and overdrafts were outlined by Rowena Orr QC, the senior counsel assisting Commissioner Hayne, as the first round of public hearings kicked off this morning.
Ms Orr said Aussie Home Loans, which is now owned by the Commonwealth Bank, submitted a brief response of just eight paragraphs in relation to its fraudulent brokers and broker arrangements.
In addition, Ms Orr said Aussie submitted its response as part of the CBA response, instead of providing its own answers to Commissioner Hayne's questions about misconduct.
"Aussie Home Loans acknowledged no misconduct in the last 10 years," Ms Orr told the hearing.
She also said that the CBA failed to provide enough information about the misconduct it had been involved in.
"CBA's first submission adopted a high-level and general approach, which meant that it did not disclose the totality of the conduct that it has engaged in in relation to consumer lending over the last 10 years that constitutes misconduct or conduct that falls below community standards or expectations," she said.
"Much of the information provided by CBA in its second submission was not in a form which made it possible to easily understand the type and the scale of CBA's misconduct events over the past five years."
$250 million in customer compensation paid out
In her opening address, Ms Orr said data from the Australian Securities and Investments Commission showed Australian banks had paid nearly $250 million in compensation to almost 540,000 home loan customers since July 2010.
The refunds were made because of issues relating to fraudulent documents, administrative errors or breaches of responsible lending laws.
Ms Orr said so far the commission had received 1,894 public submissions, with more than two-thirds of submissions concerning the banking industry.
She said home loans were a particular focus of complaints, with more than half of all new home loans now organised by a mortgage broker.
"Some Australians have expressed concerns about both financial services entities and brokers falsifying documents to obscure the true circumstances of consumers in order to obtain larger loans for the consumer," she said.
"Their submissions relay concerns that the consumer is then left in a precarious position of paying off a loan that should not have been approved for the consumer in the first place."
Ms Orr said people also complained about banks or mortgage brokers intentionally failing to verify their income when they applied for a home loan.
"Some Australians have expressed concerns about financial services entities unilaterally changing the terms of home loan contracts without consulting the consumer," she added.
"Concerns have been expressed that at times the consumer may be expected to make increased repayments at short notice as a result of these changes."
Home loans are the largest asset held by Australian banks and financial institutions, with around $1.6 trillion in housing finance provided by local banks.
NAB, Westpac in the spotlight
The Royal Commission is today focusing on fraudulent home loan lending and is hearing from consumer advocate Karen Cox, from the Financial Rights Legal Centre in Sydney, and National Australia Bank executives Anthony Waldron and Angus Gilfillan.
The commission is investigating NAB's Introducer Program, where third parties including accountants and solicitors got commission for referring loan customers to the bank.
The bank sacked 20 staff last year and disciplined more than 30 others over the Introducer Program.
In a letter to customers released just before the hearing began today, National Australia Bank boss Andrew Thorburn said the bank acknowledged it had not done the right thing by customers in the past and that conduct was regrettable and unacceptable.
"It is important to note that since the issue was identified in 2015 via NAB's whistleblower program, we have made extensive changes to our Introducer Program, worked closely with ASIC, fully reviewed the cause of the issue including engaging KPMG to carry out an investigation, and commenced a remediation program for customers," Mr Thorburn said.
"Twenty bankers in NSW and Victoria have had their employment terminated, or are no longer with NAB as a result of our investigation."
Ms Orr said the commission was closely watching the outcome of ASIC's legal action against Westpac for allegedly breaching responsible lending laws by using benchmarks to assess the spending of potential borrowers.
"This proceeding is important to the commission's work because it will consider whether the use of a benchmark called the household expenditure measure, instead of the actual living expenses declared by a potential borrower, is permissible under the National Credit Act," she told the Commission.
"Use of this benchmark will be considered in some of these case studies in these hearings and requires careful consideration."
Topics: business-economics-and-finance, royal-commissions, law-crime-and-justice, banking, australia
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