Consumer groups have highlighted the terrible experience of a pensioner who was taken advantage of by the banks in calling for an improved code of conduct for the industry.
The Australian Banking Association (ABA) has called for submissions to improve its Banking Code of Practice, and a coalition of 15 consumer groups provided a submission detailing more than 100 improvements that could be made to improve bad banking behaviour.
One of the most important examples used in the submission, to highlight the fact that little had changed since the banking royal commission, was the story of pensioner Silvia (not her real name).
Silvia’s sole source of income was the Age Pension and she had done all of her banking for the past 20 years with the same big four bank.
“Earlier this year, Silvia went into her bank branch in the outer suburbs of Melbourne and took out a $25,000 loan, which was secured over her home (which she previously owned outright),” the submission explains.
“Silvia says that she had originally asked for $20,000 and told the bank representative that she wanted it to pay off $5000 she owed on her credit card, and to do some home improvements.”
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The banker then told her that she was going to receive a $25,000 loan ($5000 more than she asked for) and she felt that they didn’t really give her a choice about a loan for a lower amount.
The mortgage required Silvia to repay $133 a fortnight (around 14 per cent of her pension) and left her in a dire situation as she was already struggling to pay for her utilities, groceries, home and contents insurance and health insurance before she took out the loan.
The woman also owed money to her son, but she was not asked about that or her other liabilities.
Silvia managed the repayments on the loan, but it was causing her stress, so much so that she attempted suicide.
“Silvia complained to the bank, claiming the loan was provided in breach of responsible lending laws as it was larger than the loan she requested and the repayments were causing her financial hardship,” the submission explained.
“The bank acknowledged that it could have been more prudent in advancing the funds, and offered to waive all future interest on the loan.”
Gerard Brody, chief executive of the Consumer Action Law Centre (one of the 15 groups who provided the submission to the ABA), said banks needed to take more care with vulnerable customers.
“Australia’s banks need to continue to evolve and improve their culture, moving away from a focus on the short term to enhancing people’s financial wellbeing,” Mr Brody said.
“The 100-plus recommendations are designed to help make the (banking) code a more valuable document, especially for customers experiencing vulnerability.
“The code has an important role to play in improving banking culture, processes, systems and ultimately customer outcomes. The code must have teeth and should not just be a box-ticking compliance exercise.”
Some of the recommendations contained in the submission cover improving the enforcement provisions within the banking code, providing greater protection to customers from scams and a call to treat buy-now-pay-later products and wage pay apps as if they were subject to national credit laws.
Mr Brody said that despite the lessons of the banking royal commission, continued breaches of the banking code suggested there were still systemic and cultural problems within the sector.
“There remain areas where we see bank conduct not meeting community expectations, often resulting in significant harm, most commonly felt by those who are doing it tough,” Mr Brody said.
“Banks still too often report ‘human error’ as the main cause of code breaches, without properly identifying the root cause.
“The ABA needs to use this review to improve the protections in the code, but also to increase the focus within banks on achieving genuinely good consumer outcomes and increasing code compliance.”
Have you ever been offered a loan for more then you needed? Were you aware that you had other choices? What bad banking behaviour have you witnessed? Why not share your experience in the comments section below?
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