Banking Royal COmmission: 19/9/18

September 19, 2018


Mr BUTLER (Port Adelaide) (19:40): The banking royal commission has so far uncovered truly outrageous tales of corruption and appalling behaviour, including charging the dead, preying on the elderly and the disabled, and defrauding Indigenous Australians. This Prime Minister, as Treasurer, voted against establishing a royal commission into his mates at the big banks 26 times. He derided the notion as a populist whinge and as recklessness, and he tried to frame the calls for a royal commission as a mere political ploy from Labor. Indeed, when finally setting up the royal commission, the now Prime Minister said it was only because politics was doing damage to our banking system that he had done so. In reality, it has been our banking system which has been doing damage—damage to thousands of ordinary Australians, destroying lives, homes and families.

Di and Max Lock from my electorate used to run the Naracoorte Hotel in the south-east of South Australia. They're small business people who have always run small businesses and are justifiably proud of their record. In 2008 the Commonwealth Bank purchased Bankwest, which financed the Locks, and they were assured at the time that there would be no changes to the loan or their operations. Just a few weeks later, though, their accountant started receiving calls and emails saying that the bank did not want to refinance the Locks' successful business because the value of the Naracoorte Hotel wasn't high enough, all through an internal decision around revaluation by the bank. Once their loan facility expired, they would have to pay out the entire amount. They'd never missed a mortgage payment, yet the bank took their home and business. The bank wasn't interested in the consistent, reliable mortgage payments by the Locks; it just wanted to get rid of the old customers. The Locks lost everything. Their story was never heard by the royal commission, nor were the stories of thousands of others whose Bankwest loans were quickly disposed of despite no failings on the part of the borrower.

The Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, in her December 2016 report into the treatment of small business owners, found that the banks had used clauses that gave them extraordinary powers against borrowers, even where the borrower had acted within the terms of the loan at all times. These clauses allowed what happened to the Locks and thousands of others. They allowed the bank to revalue their properties and change the loan based on that unilateral revaluation. They allowed the banks to call in the entirety of the loan without cause. They allowed the banks to act to create non-monetary defaults. The banks claim they didn't do this, of course, but the ombudsman found that they did. She found not only that they did so but that they did so in almost 66 per cent of cases that she examined. In her view, one-third of claims against the banks had no fault on the banks' part, one-third involved fault on both the borrowers' and the banks' part, and in fully one-third of cases the fault was entirely due to the conduct of the banks and not at all due to the conduct of the borrowers. When this conduct came before the royal commission, non-monetary defaults were skimmed over because there was, in their words, 'no financial motive', yet that is not what the ombudsman found and it is not the experience of thousands of victims.

Even where borrowers have been able to secure loans with other banks, they were thwarted by the practices of the Commonwealth Bank, which had taken over Bankwest. The Prime Minister has encouraged people unhappy with their banks to switch, and that's exactly what some victims tried to do. In one case, a business owner, told that his loan facility would not be continued with Bankwest, sought refinancing through Westpac, and it was granted, but, two days before the finance went through, Bankwest placed his business into receivership. He had never missed a payment.

This banking royal commission has been too rushed. This government had to be dragged kicking and screaming to do it in the first place, and now it has pushed it to a time line that means that thousands of stories, thousands of victims, and thousands of wrongs are not being told. The royal commission must be extended so that it can hear all of the victims' voices. The Locks thought that they would have their day to tell their story, and instead they have been silenced again.