The four big banks are facing a growing backlash among their customers, the Australian Securities and Investment Commission, and the government.
A Brisbane woman allegedly bankrupted by the financial decisions of her ex-partner is taking on one of Australia’s big banks, alleging it failed to properly handle her banking needs. The National Australia Bank has denied any culpability in the financial fall of Paddington’s Leith Anne Williamson, saying that it’s Williamson’s responsibility to bear.
The 58-year-old is suing both the bank and her former real estate agent partner of 20 years, Phillip James Waight, for an undisclosed sum, saying both were equally complicit for her financial downfall.
In a statement of claim filed with the court, Ms Williamson alleges Mr Waight urged her to establish a joint bank account with NAB in 1996, four years after their relationship began. It came after she sold a unit she owned in Toowong with her sister.
In the ensuing 16 years, the couple used their joint accounts to buy and sell nine properties, before their relationship broke down when Ms Williamson, oblivious to their financial difficulties, received a letter from the bank advising all their files would be transferred to its collections department. In the entirety of their time together, Ms Wiliamson alleges Mr Waight managed all finances and loan applications pertaining to their joint accounts.
In November 2000, he established internet banking, which enabled him to transfer money from their account to his own $25,000 line of credit account with another bank without Ms Williamson’s knowledge.
The bank’s culpability in this, she said, was in not requiring her approval for Mr Waight to establish internet banking and linking his own account to it.
In the same timeframe, she says, without her knowledge two bank managers approved the pair’s mortgage limit increase from $150,000 to an eventual $729,000, money Ms Williamson alleges Mr Waight squandered. The bank denies the claim, arguing Ms Williamson signed to approve all mortgage increases.
However, it is also the bank and its two financial advisers, she said, that facilitated her financial downfall by failing to adhere to its implied promise to her that it would, “properly and professionally handle all her banking needs into the future”.
“Williamson says NAB failed to keep her informed as to the nature and extent of Waight’s business dealings with NAB insofar as those business dealings were likely to adversely affect her,” her statement of claim reads.
“Williamson acted to her detriment in relying upon NAB’s said first representation and has suffered loss thereby. Williamson says that such breaches constituted unconscionable conduct on NAB’s part.”
The bank has denied any responsibility, particularly rejecting any implication they had a duty to her. “NAB denies the existence of the implied term as alleged as there is no basis for implying such a term, (it) was not requested or required by Ms Williamson to keep her informed as to the nature and extent of Waight’s business dealings with NAB,” the bank said in its defence.
This is not the only court action the National Australia Bank is facing. ASIC, the corporate watchdog, will take legal action against the big banks, including the ANZ Banking Group, for allegedly rigging the bank bill swap rate and on Monday asked a court for more time to prepare its case against the ANZ.
The Commonwealth Bank and National Australia Bank are under investigation for allegedly rigging the rates.
ASIC alleged ANZ created an artificial price for bank bills on 44 separate days between March 2010 and May 2012. It also alleges a large number of ANZ’s products were pegged to the artificially created price for bank bills in order to maximise its profit or minimise its loss to the detriment of other banks not involved in the rigging.
ANZ is vigorously defending the claim. A bank spokesman declined to comment further on Monday. CBA declined to comment. Both Westpac and NAB would only comment that they would co-operate with ASIC’s investigation.
Opposition Call For Royal Commission Into Big Banks
However, the interventions of ASIC are not seen as enough by the Opposition. The Leader of the Opposition has called for an royal commission into the conduct of the four big banks.
Mr Shorten, Mr Bowen and the shadow minister for financial services Jim Chalmers confirmed that in the first 100 days of office they would consider carefully and put together the terms of reference for a royal commission. If the Turnbull government decides to hold a royal commission, Mr Shorten is expected to fully co-operate and provide suggestions.
It follows a string of financial scandals in the past few years, including the CBA financial planning scandal, bank bill swap rate rigging and the CommInsure life insurance scandal, which saw sick and dying people denied claims
A key area to be considered in any royal commission is compensation for customers and the treatment of whistleblowers.
Mr Shorten said Labor’s support for a royal commission into the big banks was a decision not made lightly.
“Public confidence in the banking and finance industry has taken hit after hit the past few years,” Mr Shorten said. “There are literally tens of thousands of victims if not more. Today I say, enough is enough.”
Mr Shorten cited retirees ripped off by planners, small businesses being driven to the wall by the big banks and the recent news major insurance companies (most notably CommInsure) had worked to ensure terminally ill people with life insurance were denied claims.
Mr Bowen said the royal commission would cover banks, superannuation funds, other financial institutions and insurance companies.
The royal commission will look at whether illegal and unethical behaviour in the financial services sector was widespread, duty of care financial institutions have to their customers, how business structures affect the behaviour of finance sector employees and whether Australian regulators have enough resources, Mr Bowen said.
Terminally ill cancer sufferer Evan Pashalis whose life insurance claim was denied by his insurer CommInsure welcomed Labor’s call for a royal commission.
Commonwealth Bank whistleblower Jeff Morris said he agreed “wholeheartedly” with Mr Shorten that this is the time for a royal commission.
“We had fine words from Malcolm Turnbull on Wednesday about the state of the finance sector but what counts is deeds, not words,” Mr Morris said.
Mr Morris said that so many victims of poor financial advice were still yet to be compensated showed the need for a royal commission rather than compensation schemes that were not delivering outcomes for consumers.
Merilyn Swan, whose elderly parents were victims of shoddy financial advice at CBA and a management cover-up, said anything less than a royal commission into the financial industry would be a slap in the face to the millions of Australians who do have a moral compass.
No doubt the issue of the big banks will remain a hot election issue.
We offer a free, 10-minute phone consultation. Please contact us today.