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Bank 'failed to check' repayment prospects

ninemsn   9News   September 26 2012

Macquarie Bank signed off on multi-million dollar margin loans without considering whether Storm Financial clients could repay them, a court has heard.

The bank is currently being pursued in the Federal Court in Brisbane by a group of investors whose financial security was devastated when the Townsville-based financial services company folded in early 2009.

They are seeking compensation from the bank on the grounds that it engaged in unconscionable conduct by approving the loans, and that it also breached the terms of those loan contracts.

The class action is being run in conjunction with a case by the Australian Securities and Investments Commission (ASIC), which is asking the court to declare that Macquarie and the Bank of Queensland were "knowingly concerned in the operation of (Storm's) unregistered scheme" and were aware investors would lose their money if the market crashed, as it did during the global financial crisis.

A second class action will be heard later this year.

The court heard on Wednesday that Macquarie lent $2 million to Tracey Richards - a mother-of-three on a $24,000 annual salary - in 2006, without assessing her ability to service the loan, paying interest or meeting margin calls.

The court heard Ms Richards, who has since lost everything, applied for the margin loan on the advice of Storm, with whom she had been dealing with since 2001.

Her lawyer said she will give evidence that if Macquarie had refused the margin loan, her fears about Storm's financial advice would have been reignited and she would have left their scheme.

It's alleged the bank lent numerous Storm clients money in comparable circumstances, with similar disastrous results.

The hearing continues.

Last modified onTuesday, 28 May 2013 09:25
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