It would be nice to know when we are being lied to because it would save us all a lot of grief later. For one, Helen and I would be off enjoying the best of times instead of my sitting here now trying to work out how many lies we have been subjected to by those commenting on and giving evidence before the Royal Commission.
It’s a fact though that the more plausible someone sounds, the more likely we are to believe what they say. Take what Mr David Murray had to say for example.
I’ve recently read the article ‘Royal commission can't undermine caveat emptor’ published on this site, and I can understand why many would be convinced that he is right in what he said about ‘caveat emptor’ and ‘caveat vendor’. After all, he should know what he is talking about! Right!
“Six months ago, the head of the Financial System Inquiry, David Murray, warned that the main pitfall, facing the royal commission would be pressure to "drift from caveat emptor towards caveat vendor".
“Murray was the Chief Executive Officer of the Commonwealth Bank between 1992 and 2005. In Murray’s 13 years as Chief Executive, the Commonwealth Bank transformed from a partly privatised bank with a market capitalisation of $6 billion in 1992 to a $49 billion integrated financial services company, generating in the process total shareholder returns (including gross dividend reinvestment) at a compound annual growth rate of over 24 per cent, one of the highest total returns of any major bank in Australia.” [Wikipedia]
With his type of background, he’s a little biased where banks are concerned, don’t you think?
“This could have profound systemic consequences for the entire industry, he added. In other words, if the legal framework applying to banking became predicated on "seller beware", the cost of credit could rise, and lending more scarce. That would slow overall economic activity and make financial institutions much more risk averse.”
To be fair to Mr Murray, he’s not alone in his scaremongering. COSBOA (Council of Small Business Organisations Australia) has expressed concern that small business lending could become more difficult as a result of the reaction to the current Banking Royal Commission hearings. Peter Strong, CEO of COSBOA said today,
“We must be careful that we do not make business lending harder and unworkable. It is hard enough as is and indeed there are business operators who go overseas to get business loans for their Australian based business.”
Hannah Arendt in ‘The Origins of Totalitarianism’ wrote,
“Before mass leaders seize the power to fit reality to their lies, their propaganda is marked by its extreme contempt for facts as such, for in their opinion fact depends entirely on the power of man who can fabricate it.”
These people just don’t get it! If they had their way, they would continue to leave the banks’ customers unprotected and let the banks go on merrily ripping off their customers so that they can continue making huge profits by extending loans to people that cannot afford to service them? When those customers then default on these loans, the banks can move in and gobble up whatever is left.
No! It’s about time the bank took some responsibility for what they have done and pay the price for any wrongdoings on their part. They have been protected for far too long by this government and past governments. It’s no good having a country of rich bankers and poor citizens. What does that achieve? Injustice for one.
Incidentally, what Mr Murray conveniently forgot to mention along the way when talking about ‘caveat emptor’ is that ‘caveat venditor’ is now prevailing in contract law. ‘Caveat emptor’ is being phased out because it imposes terms on a contract agreement that can be one-sided and therefore acts as an impediment to the freedom of contract generally. It’s considered old hat!
‘Caveat venditor’ simply means “let the seller beware”. The person selling goods (or services) is accountable for providing relevant information about the goods or services to the seller. It is a counter to ‘caveat emptor’ and suggests that sellers can also be deceitful in a market transaction.
‘Caveat venditor’ puts the burden on the seller to investigate potential flaws in the goods or services to be sold and to meet all legal requirements related to such. Contracting parties are therefore no longer free to set what terms they wish. This means that sellers, can no longer abuse their freedom by selling sub-standard goods and relying on exclusion clauses - Australian Knitting Mills v. Grant and Kendall v. Lillico & Sons Ltd.
The rise of ‘caveat venditor’ is a threat to banking contracts in their current form because it overrides unfair conditions imposed by the seller of goods and services. Banking contracts are full of such conditions.
By the way, has anyone read ‘Backgound Paper 4’ which the Commission issued for the purposes of inviting comment? This paper is entitled, “Everyday Consumer Credit Overview of Australian Law Regulating Consumer Home Loans, Credit Cards and Car Loans”
Reading through it, one is struck by just how much protection we consumers are afforded in law these days where financial transactions are concerned. ‘Caveat venditor’ is alive and well even if it isn’t self-evident when dealing with banks.
Why does so much corruption exist in banking despite the overabundance of statutes that have been enacted to combat such? The reason is obvious. The laws are not being enforced which begs the question, “Why aren’t they being enforced?” Ask the government why not? So what’s the point of having these laws in the first place?
“So that trusting people will believe that they are safe when they are not!” springs to mind. “In this way, they are easy prey for the banks”.
I can think of no other reason why the banks have been allowed to operate this way for many years now, and this and past governments have stood idly by and have done nothing. Or, for that matter, why ASIC has been unable to exert any authority or control on these banks in all that time.
In this same article it also states:
“The royal commission has turned up victims of some very unethical bank behaviour, or even what appears to be outright fraud. But, as The Australian Financial Review warned in the lead-up to the inquiry, not every person or business foreclosed upon by a bank is a victim of bank bastardry. There were always going to be plenty of "victims" from the commission who really just lost out to circumstances, or poor judgment or the actions of others.”
Again, if ‘Caveat Emptor’ were strictly applied, there might be some substance in this sentiment. However, we have a body of laws that are there to protect banks’ customers backed up by the banks’ own codes of banking which counter such an argument.
What does puzzle me, however, is why the legal eagles acting for the Commissioner are not focussing more on the banks contractual responsibilities and less on the question of ‘Fairness’ which is a nebulous issue in law at the best of times.
The banks argued for many years that the code of banking is not contractual in nature, but that has now been disproven in recent court cases. The banking codes are indeed contractual and can be relied on by consumers. What the Commission has to focus on, if I might be so bold, are the conditions the banks lay down in their loan agreements that do not conform to the conditions laid down in the various statutory Acts, and are deemed unfair according to the tenets of contractual and statutory consumer laws. And, for that matter, where the conditions contained in such agreements are at odds with the banking codes under which these banks enter into any contractual arrangements.
Whilst discussing contractual obligations, one case that has aroused my interest in the past week is the one mentioned in an article by Rod Myer published on this site entitled, “Suncorp disputes bank watchdog’s order to drop interest on ‘irresponsible’ loan.” https://thenewdaily.com.au/
Reading through the Royal Commission transcript, some matters that I feel should have been mentioned by Ms Orr when questioning Mr. David Antony Carter, whose title is the chief executive officer (banking and wealth, at Suncorp Group) were not raised.
For one, Mr. Rien Peter Low in his testimony, when asked about a particular offer that was made to his mother, responded as follows,
“…And having made this offer, did your mother then receive a letter in – a letter in the mail which you have annexed as exhibit 20 to your statement?---That is correct.
45 So that’s a letter signed by David Carter, the chief executive officer, banking & wealth, at Suncorp?---That’s correct.
Did you think this letter was in response to the offer you had just made?---Yes, I did. So the letter is addressed to your mother and your father; is that right?---Yes.
5 And Mr Carter says:
‘We’re writing to let you know the minimum repayment for your loan has decreased and the minimum repayment amounts will now be $792.53.’
When Mr. Carter was questioned later about this offer, because that’s exactly what it was, “an offer", he said,
35 Yes. All right. Can we turn then to the letter that was received by the Lows with your name - - -?---Yes.
- - - on the bottom of it. That is exhibit 20 to Mr Low’s statement. It’s RCD. 0014.0006.0001.
40 You have seen this letter before, Mr Carter?---Yes.
What explanation can you give to the Commission about why Mrs Low received this letter?---Yes.
Upon the sale of the Healesville property, the surplus funds were applied to business loan B. That reduced the balance. The system automatically
45 triggers a letter when either interest rates or – sorry, when repayments necessary to clear the loan over the remaining term can change. And so with the reduction in the principal, with the 0.01 but the 0 per cent interest rate applying to the loan, the system has automatically calculated that in the loan term remaining – because we have not reached agreement on the revised debt so the loan is in situ – then that level of repayment would clear the loan over the remaining term. Now – so I heard Mr Low’s – in fact, in reading his statement yesterday when it came through, we did not
5 see – when we looked at this matter when it rose at the time, we just did not see how
– we did not realise the impact that had or the – did not see that someone would see this as being an offer to extend. It did not enter the mind of people at the time. I think as Mr Low expressed himself this morning, his initial reaction from us through the people he dealt with was, “We didn’t know what the letter was.” And so we were
10 – we – I understand the impact. I can see why it had that impact. But it was not something that we were awake to at the time.
And what do you think of the evidence Mr Low gave about the way the bank handled the conversations with him in the light of his receipt of this letter? Have you heard
15 that evidence earlier today?---I did. And if I – paraphrase - - -
Yes?---I think he was initially happy, and then disappointed and surprised that he was getting a call from someone to say we didn’t know what the letter was. And, if I may say, equally at Suncorp we were surprised we had received notification from Mr
20 Low that we had made an offer on this basis and he had received a letter from – essentially from me. This is a letter that issues from a system. I authorise my signature to be applied to the letter, but it was not a letter that any one person had seen go out.
25 But why was it not a letter that you could find on your systems then? So that when Mr Low said to Ms Calcott, “I’ve got this letter that I think is responsive to my offer”, why couldn’t someone find this letter on the system, because the evidence of Mr Low was that Ms Calcott expressed some disbelief - - -?---Yes.
30 - - - about his receipt of this letter?---Yes. Initially, we didn’t think it was a repayment change letter. It was described as a letter of offer. So we went looking where the letters of offer are stored. The team also approached me or my office and asked whether we had issued a letter specifically. No one thought of it as being this particular letter. We asked Mr Low to send the letter through. These letters are sent
35 out through a process. We store a record – this letter has a particular title, if you like. We store a record that – on a particular loan account that this letter has issued, so we know that it has gone out, but we don’t store copies of the letter per se, because it’s a
– for want of a better description, it’s a form letter.
It doesn’t matter whether it was a form letter or not, or whether Mr. Carter knew about it going out. It bore his signature and it was therefore an offer because he was authorized by the Suncorp Bank to make such offers. The offeree shouldn’t be penalized because Suncorp didn’t know what was going on. The offer was made and if Mr. Low’s mother had accepted it in writing at the time, it would have been difficult in law for the Suncorp Bank to then renege on this offer. No mention of this fact was made by Ms. Orr! Why not?
The very fact that Suncorp then misled Mr. Low’s mother into believing that this wasn’t an offer thereby causing her non-acceptance of such may also be grounds for forcing this issue still.
Another point which should have been followed up by the Commission’s legal bods was the contractual issues surrounding the rejection of FOS’s findings by the Suncorp Bank and its subsequent coercion of the Lows.
Again, there seems to be a lack of contractual awareness in the approach adopted by council. Instead, a lot of time was wasted trying to get Mr. Carter to admit that the Suncorp Bank has acted inappropriately.
Mr. Carter should have been informed at the outset that the Suncorp Bank was in contractual breach by ignoring the Decision handed down by FOS. These loans were taken out in 2013. Therefore, FOS (Financial Ombudsman Services) Terms of Reference, as outlined on the FOS web site, applied:
3.3 Disputes lodged with FOS on or after 1 January 2012 FOS will apply these Terms of Reference to all Disputes that are lodged with FOS on or after 1 January 2012.
13. Legal proceedings and other matters
13.1 Debt recovery or other proceedings
a) Subject to paragraph b), where an Applicant lodges a Dispute with FOS, the Financial Services Provider:
(i) must not instigate legal proceedings against the Applicant or any Other Affected Party relating to any aspect of the subject matter of the Dispute;
(ii) must not pursue legal proceedings relating to debt recovery instituted prior to the lodging of the Dispute with FOS save to the minimum extent necessary to preserve the Financial Services Provider’s legal rights and, in particular, must not seek judgment in those legal proceedings provided the Dispute is lodged before the Applicant or Other Affected Party takes a step in those legal proceedings beyond lodging a defence or a defence and counterclaim (however described); or
(iii) must not take any action to recover a debt the subject of the Dispute, to protect any assets securing that debt or to assign any right to recover that debt, while FOS is dealing with the Dispute.
b) Notwithstanding paragraph a), with FOS’s agreement and on such terms as FOS may require, the Financial Services Provider may:
(i) issue proceedings where the relevant limitation period for such proceedings will shortly expire - but those proceedings may not be pursued beyond the minimum necessary to preserve the Financial Services Provider’s legal rights; or
(ii) exercise any rights it might have to freeze, preserve or sell assets the subject of the Dispute.
c) If the Dispute is subsequently decided by FOS and becomes binding upon the Financial Services Provider, the Financial Services Provider will abandon any aspect of proceedings against the Applicant or Other Affected Party that are inconsistent with that decision.
13.7 Non-compliance with these Terms of Reference Where a Financial Services Provider fails to meet its obligations under these Terms of Reference, FOS may take any action it considers appropriate including expelling the Financial Services Provider from membership of FOS in accordance with the FOS Constitution.
What the Suncorp Bank did by ignoring the decision handed down by FOS was in breach of its agreement with FOS and its obligations under the banking code that governs that particular bank.
In Suncorp Bank’s ‘Customer Relations’ brochure it states on Page 5, ‘Taking Your Complain Further’:
“We expect our processes to fully deal with any difficulties you may be experiencing with our products and services. However, should you be dissatisfied with our decision or the way we handled your complaint, please let us know. Alternatively you can make contact with a range of External Dispute Resolution (EDR) schemes. The contact details of the EDR schemes of which we are members are provided in this brochure. Financial Ombudsman Service (FOS) The Financial Ombudsman Service (FOS) provides dispute resolution services for Australian banking, insurance and investment disputes. They can assist to resolve disputes through negotiation, conciliation or determinations. FOS is an alternative to taking your dispute to court and they can make decisions which are binding on participating financial service providers. FOS is made up of three divisions that cover a wide range of financial products and services. These divisions are: • Banking and Finance Division. • General Insurance Division. • Investments, Life Insurance and Superannuation Division. Please see over for further information on each division
I was astounded at the response by FOS when Mrs. Low’s son informed that Office of his difficulties with the Suncorp Bank because it was not complying with the determination by FOS. Instead of exerting itself on behalf of the Lows as it should have, FOS allowed the Suncorp Bank to strong-arm this family thereby demonstrating that it is impotent in practice and of no use to anyone.
What I also found extraordinary was the answer Mr. Carter gave during cross examination, when he was asked,
“Is Suncorp in fact a subscriber to the Code of Banking Practice?---I believe so.” he replied.
Hang on! Isn’t Mr. Carter the chief executive officer, banking and wealth, at Suncorp Group? If he doesn’t know with any degree of certainty whether the Suncorp Bank is a subscriber to the code of banking, how can anyone else that works under him be expected to know. More to the point, if he is not aware of what the Suncorp Bank’s obligations are to its customers under that code of banking, how can he have any informed views with regard to the rights of the Suncorp Bank’s customers? Why wasn’t this question put to him?
Perhaps he should have read Page 2 of Suncorp Bank’s ‘Customer Relations’ brochure under the section entitled, ‘Our complaint resolution process’:
We have developed a complaint resolution process which will make voicing your concerns an easy task, ensuring a resolution is reached quickly and fairly. Our complaint resolution process meets our complaints handling obligations under the following Codes to which we subscribe as well as our regulatory obligations under the Corporations Act 2001: • Code of Banking Practice • Electronic Funds Transfer (EFT) Code of Conduct • General Insurance Code of Practice. Copies of these Codes are available on request.
Again, why wasn’t he quizzed on this?
It is fairly evident from Mr Carter’s attitude and his responses to the questions asked of him, that he, his bank, and the rest of the banks simply ignore FOS if they don’t agree with the Decisions handed down by it.
This speaks volumes about the way the banks operate and their general attitude to statutory rules, statutory bodies and anything and anyone else that tries to dictate the way they should perform. They feel that they are a law unto themselves and they act accordingly. The fact that the banks control and fund FOS might have something to do with their ‘laissez-faire’ attitude to any of its rulings.
The only way you can get recalcitrant entities to obey the law is to punish them severely when they fail to do so. A holiday in Dubbo’s old jail, which I toured around recently and gave me the chills, would do some of the banks’ CEO’s a world of good.
Seriously though, the Commission needs to look at the number of times the Banks have ignored FOS and have taken a completely different approach to the one FOS has directed them to take.
One other thing that surprises me about the way this Commission is being conducted is the questioning of people within these banks that are middle management rather than the people at the top; the CEO’s to be more precise.
Further, many of those called up by the Commission are fairly new to the bank they work for and weren’t around, or so they claim, when the banks were up to their dirty tricks.
Furthermore, many seem to have vague notions of the banks’ policies when asked to give an opinion as to how the particular bank they work for conducts its business.
As for asking such individuals for their personal opinion on the performance of their employers, this appears to me to be a pointless exercise. Their opinion is irrelevant because it’s subjective. They are not the ones that dictate the way these banks conduct their business. Therefore, their personal opinions don’t mean anything! Those at the top that decide the policies and strategies are the ones that need to be interrogated, not those underneath who are only trying to hang on to their jobs, and therefore have a one-eyed view and a wish to survive the experience.
Let’s get to the real truth behind what’s been happening within these various banks rather than listen to those that have been nominated by the banks to be cannon fodder.
Also the Commission needs to establish what laws these banks are in breach of so that they can be suitably punished. It has done a good job to date but these banks need to be fully exposed or nothing will change.
Maybe next week, we’ll see the boot go in? It could well be that I have totally misread the situation and Ms. Orr and her crew have set a trap for those to come when the role of FOS and the banking codes are discussed. Maybe some clarity will emerge with regard to these issues then? Let’s hope so for the sake of all those poor buggers out there that have been the victims of these unconscionable banks, and have paid the ultimate price.FRANK AINSLIE - 28th MAY 2018