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The CEO’s of the Big Four Banks have now been grilled by the Royal Commission. They all huffed and puffed about what they are doing now to fix the problems within their organisations.

No one really explained though why the Boards of these banks permitted the CEO’s to pursue policies that were clearly designed to generate profit at the expense of their customers? No matter! Now is the time to make the bastards pay for what they did to you!

In 2013 (some 5 years ago) the Australian Bankers Association issued a new Code of Banking Practice (superseded now) which stated:

“We will generally apply this Code to: (a) new banking services we provide to you on or after that date; (b) new Guarantees we take from you on or after that date; and (c) things we do on or after that date in respect of some pre-existing banking services and Guarantees.”

In point 3, 4 and 5 of this Code it stated:

“3.2. We will act fairly and reasonably towards you in a consistent and ethical manner. In doing so we will consider your conduct, our conduct and the contract between us.

3.3. In meeting our key commitments to you, we will have regard to our prudential obligations.

4.1. We will comply with all relevant laws relating to banking services.

4.2. If this Code imposes an obligation on us, in addition to obligations applying under a relevant law, we will also comply with this Code except where doing so would lead to a breach of a law (for example, a privacy law).

5. Retention of your rights In addition to your rights under this Code, you retain any rights you may have under Federal, State and Territory laws.”

In point 12 of this Code it stated:

“12.3. Any written terms and conditions will include a statement to the effect that the relevant provisions of this Code apply to the banking service but need not set out those provisions.”

In point 27 of this Code it stated:

“27. Provision of credit

Before we offer, give you or increase an existing, credit facility, we will exercise the care and skill of a diligent and prudent banker in selecting and applying our credit assessment methods and in forming our opinion about your ability to repay the credit facility.”

What does this mean for anyone that has signed off on a house loan they couldn’t afford? A possible way out if this loan was extended by a bank without care or forethought; the proviso being that the bank in question has signed off on this Code of Banking.

Once a customer enters contractual arrangements with a bank that is covered by the code of banking that particular bank adopted, the conditions of the Code become part of its contractual agreements with its customers.

The banks violated their own Banking Codes numerous times when extending ‘imprudent loans’ and in so doing, breached their contracts with their borrowers. A prima facie case for “damages” is therefore clearly established.

There has been this hackneyed argument for a long time that the ‘Banking Codes’ are not a condition of contract and, therefore, cannot be enforced in Law. That has now proven to be a fallacy in various court cases that occurred from 2012 onwards.

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“…Precedent-setting court cases have recently found that, where borrowers were given loans they could never afford, lenders must extinguish part or all of those mortgages. Nine judges before six courts have to date found in favour of homeowners affected by improper loan applications, and in almost all cases courts have ordered lenders to fully extinguish mortgages within 30 days.

The most clear-cut cases have occurred in NSW because of the 1980 Contracts Review Act in that state. However, courts in Victoria and Western Australia have found in favour of borrowers under existing legislation. Major mortgage securitiser First Mac - which has issued $9.5bn in Australian mortgages since 2003 - lost a NSW Supreme Court bid to repossess the family homes of three borrowers on the grounds those borrowers were victims of loan application schemes.

The judges found lenders had acted inappropriately by engaging in "asset lending" - that is, lending money based solely on the fact that the loan is secured by an asset, usually a person's home, and paying little or no regard as to whether the borrower could afford the loan.

First Mac appealed against the decision and in December the judges again sided with borrowers, ordering that mortgages against two family homes be rescinded completely, and reduced by three-quarters in a third case. First Mac was ordered to pay court costs.

In light of those judgments, lenders such as Westpac are scrambling to settle with borrowers who claim to have been wronged. In many cases, hundreds of thousands of dollars are being wiped from mortgages.

In every court case heard, lenders had failed to make simple checks, such as calling prospective borrowers to verify their stated incomes or employment status.”

A High Court spokesman said between 8 per cent and 10 per cent of applications for such "special leave to appeal" applications were granted.

First Mac founder and managing director Kim Cannon did not respond to calls last week.

In most instances, the precedent-setting cases against the deep-pocketed financial institutions are being funded by consumer groups or lawyers working for little or no pay because the borrower victims are often close to bankruptcy. Lawyers said the vast majority of the thousands of homeowners affected by improper or unconscionable lending activities had no idea they could legally walk away from their mortgages.

"Lenders have been throwing everything they have at these cases because they know there are thousands, probably tens of thousands, of people who have been affected," said Geoff Roberson of Champion Legal, who has run the cases against First Mac. "The problem for many borrowers is they don't know they have been wronged and simply roll over when the banks come knocking."

Consumer advocates said borrowers who believed they had been affected should approach their lender for a copy of their loan application form, which they were entitled to by law, and check the income levels stated.

Award-winning consumer advocate Denise Brailey, who runs the Banking and Finance Consumers Support Association, said “not being provided with a copy of the loan application form was a key indicator borrowers may have been subject to loan application irregularities”.

"In every single case of the 100-plus I am dealing with, the person has not been provided with a copy of their loan application form by their mortgage broker or lender," she said.

She said borrowers were entitled to such information by law. However, banks and other lenders had "stonewalled" such requests.

"Every time the borrowers receive the forms they are blown away," Ms Brailey said. "Incomes have been grossly exaggerated, false employment job descriptions have been entered or they have been stated as being employed when they're not.

"In one case, a lowly-paid deckhand was described as a ship's captain and described as earning $150,000 a year."

Ms Brailey, who has been tracking low-doc loans and loan application issues with The Australian for several years, said she had uncovered examples of loan application irregularities in loans approved by 14 banks and other lenders.

She obtained emails illustrating imprudent lending practices by 36 banks and non-bank lenders, including all of the major banks.

"We're about to see a major train wreck," she said.

What peeves me personally about all this is that this type of behaviour by the CBA and the BOQ was prevalent in the Storm Financial case that boiled over in 2008. Yet, nothing was ever done by the Banks or ASIC to curb it. Indeed, the owner-managers of the BOQ North Ward, Townsville branch even admitted their duplicity in a subsequent court case.

“False witnessing admitted by DARYL PASSMORE, Townsville Bulletin - April 27, 2015

The co-owner of a controversial Townsville Bank of Queensland branch has admitted staff falsely witnessed loan applications regularly.

Declan Carnes, joint owner/manager of the North Ward franchise, told the Supreme Court one of his employees witnessed the signature of a disabled man who was being treated in hospital hundreds of kilometres away.

Justice Jean Dalton said the action was “probably dishonest”.

But Mr Carnes admitted he had never investigated the matter even though he was aware of allegations that the customer’s signature had also been forged.

Under cross-examination, Mr Carnes he said it was not unusual for staff to falsely witness customer documents in the past.

Bank of Queensland has launched an internal investigation.

A spokesman said: “We acknowledge that a number of comments were made during the trial that require further consideration, and the bank is currently undertaking this review.’’

It is the latest controversy for the North Ward branch, which was responsible for 267 of the 319 BOQ loans made to customers caught up in the disastrous Storm Financial collapse.

The Australian Securities and Investments Commission launched legal action against Senrac — the company owned by Mr Carnes and business partner Matthew Buchanan — after the Storm collapse, but dropped it last year when BOQ paid nearly $20 million to settle a class action with former customers.

In the latest case, BOQ sued Mervyn and Pamela Hills, both 70, for hundreds of thousands of dollars owed on a loan to buy the Seashells fish and chip shop, just behind the North Ward branch, in 2007.

Pensioner Mr Hills, who was left paraplegic after a car accident, was allowed to act as a guarantor and put up the couple’s home, which had been specially adapted for his disability, as security against the loan.

The Supreme Court hearing in Brisbane last month heard branch employee Darren Wall witnessed a document in Townsville while the customer was in hospital in Brisbane.

“When we were settling a lot of loans quickly, the loan documents would quite often turn up at the office or be dropped in and quite regularly they weren’t witnessed, and unfortunately we did witness signatures where people weren’t present to enable the deal to settle,’’ Mr Carnes said.

“Documents did turn up regularly in the mail where they weren’t witnessed and we witnessed them.”

Mr Hills gave evidence that the signature on one document was not his.

Mr Carnes said he was aware of the forgery allegation but had not questioned Mr Wall, who still works at the branch.

“I don’t believe Mr Wall would have done that,’’ he said.

Cross-examined, he agreed that the bank’s practices were “not consistent with the standards of a banker exercising ordinary skill and care”.

A settlement reached since the trial requires the couple to pay BOQ $369,012 plus $93,204 in interest. A counterclaim by the couple alleging unconscionable conduct was dismissed.

Lawyer Stewart Levitt, who brought the class action by former Storm clients against BOQ, said the bank itself should refer the evidence to the police.

The case again highlighted ASIC’s “wilful’’ failure to take action against banks and bankers, Mr Levitt said.

Mr Carnes did not return calls. Mr Wall, who was not called as a witness in court, declined to comment.”

For some (Helen and I for instance) it is all too late because our cases have been settled. However, for the many thousands out there that have taken out house loans with banks, now is the time to act. The banks have been fully exposed by the Royal Commission and many of your cases against them should now be a “shoo-in”.

You, like us before you, will probably have to join a class action. The downside is that litigation normally takes forever. Ours took eight years! However, the odds are that the banks will settle any genuine claims quickly because of the collective weight of evidence against them.

You will, of course, need to find a good lawyer if you decide to go down this path. Good luck on that one! They are as rapacious as the banks.

My next article will be on the pitfalls of class actions. If you are contemplating joining one, I suggest you learn from our mistakes by reading it rather than entrusting the legal profession to do the right thing by you.

Before I close, you might think on this. This government and ASIC have a moral obligation to pursue these banks for damages at no cost to the victims of these banks. In the case of Storm Financial, ASIC brought a case against the CBA on behalf of Storm’s CBA customers and forced the CBA to settle. The same happened where the BOQ was concerned. This creates a precedent in law.

ASIC and the Government, past and present, allowed this situation to occur. Therefore, they should be the ones to fix it because they have the money and the means to do so. They, not you, should be seeking compensation on your behalf. If it’s left to the banks to compensate you, you have Buckley’s or none of getting a square deal.

FRANK AINSLIE 6th December 2018
Last modified onWednesday, 05 December 2018 21:39


  • performArts
    performArts Wednesday, 29 May 2019 07:31 Comment Link

    Thank you for posting this awesome article. I'm a long time reader but
    I've never been compelled to leave a comment.
    I subscribed to your blog and shared this on my Twitter.
    Thanks again for a great post!

  • Diane and Max Lock
    Diane and Max Lock Thursday, 13 December 2018 01:03 Comment Link

    If these bankers escape jail time, and don’t pay back victims for their crimes, then this Banking Royal Commission is a complete farce, and it tells the people of Australia, that if you are a white collar criminal, you are a protected species, by the courts, Commissioner, and politicians. And it is like people already think all in a cosy bed together


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