Why has there been no Royal Commission into Bankers and Banking Products?
Banks: still the untouchables
12 December 2011
Evan Jones
http://www.smh.com.au/federal-politics/editorial/banks-still-the-untouchables-20111212-1ug7i.html
Ten years ago, this page published an article of mine on bank malpractice against small business/farmer clients. I wrote then: ''Major bank practices towards small business and the family farm range from the insouciant to the malicious, with parlous effects. This environment has been facilitated by comprehensive indifference to bank practices by borrower representative bodies, regulatory authorities and political parties.''
A decade later, nothing has changed. When a small business/farmer contracts for a substantial loan with
a bank, they enter into the most asymmetric of any relationship in modern commerce. Henceforth, the
bank has your assets and the future of your family at its discretion.
Banks: still the untouchables
Borrowers believe that they are negotiating with a professional, with attendant capacities and scruples.
On the contrary; they are meeting a money lender, whose prime interest is not the viability of your
business but your assets and gaining security over same.
Family farmers are particularly vulnerable. The NSW Farm Debt Mediation Act was passed in 1994 to partially offset the bank-borrower power imbalance. But the banks have learned how to rort the mediation process, entrenching borrower subordination. Section 11 (3) was inserted into the Act after a 2000 review which directed the lender to act ''in good faith''. But this section was repealed in 2004 after the National Competition Council deemed the amendment anti-competitive.
The Big Four (occasionally the second tier) have their dark side, but the top performer appears to be the National Australia Bank. Some recent stories:
Western Australia, 2006: The bank lent on a rural property on a contrived loan application, including false documentation, unseen by the borrowers. The success of the venture depended upon the borrowers' existing ''urbanising'' property being subdivided and sold.
The bank foreclosed on both properties just as subdivision gained approval. The properties were sold under value and both have since been subdivided, with significant capital gains for the purchasers. Predatory lending in operation.
Victoria, 2007: A couple were induced to move their (trivial) home mortgage from one bank to the NAB as partial security for an initial business loan for the wife's parents' business venture. The loan ''application'' concocted details of the couple's employment status and income, and even had the house located in the wrong town. In 2009, the couple were served with a claim for the entire business debt as well as the entire home-mortgage principal. The couple was subsequently locked out of the home and their personal property stolen. The NAB has added another oppressive weapon to its armoury. For long, its overdraft facility has been repayable at call - itself unsavoury. The NAB has now introduced mortgage facilities that are repayable at call ''whether or not the borrower is in breach of the agreement''.
More, a defaulted customer can be loaded with penalty interest rates (up to almost 20per cent) that drain customer assets, rates that are not in the contract.
Once in default, getting discovery of original documents, undoctored, out of the NAB is a struggle.
Victoria, beginning 2006, another instance of predatory lending: The borrower's annotation on a key loan document, noting that the borrower was dissuaded from seeking external advice, was not on the bank's discovered copy.
At a subsequent meeting at the bank's headquarters, the borrower's folder of documents was purloined. The bank's leverage is enhanced by controlling the information available in prospective litigation.
The bank also conjoined its attack with a law firm, the latter suing the borrower for bankruptcy on the strength of a contrived minor debt. The banks buy or warn off law firms and others. Bank corruption thus poisons the cognate professions - the law, receivers, valuers, real estate agents, bankruptcy trustees, etc.
The courts are the banks' best friend. Judges will grant a bank writ of possession over a customer's home before reposing over a self-satisfied lunch. A contract is a contract, regardless of how corruptly it has been constructed or manipulated (c/f NAB v Lawrence, November 2011). Judges will readily decide for a bank for which they have acted en route to the bench, or in which they hold shares or have a banking relationship. The absence of a register of financial interests facilitates the complicity.
In NAB v Thirup, August 2011, Johnson J handed the Thirups' property to the bank on the preposterous grounds that the Thirups had benefited from the NAB's paying out of the Thirup's existing mortgage. Yet the Thirups are victims of a criminal conspiracy, involving a rogue NAB officer. The NAB mortgage documents, which the Thirups refused to recognise, contained forged signatures, false information on the property, and facilitated the disbursement of moneys for the presumed purchase of non-existent earthmoving equipment.
Bank victims rarely get redress. The Financial Ombudsman Service is an inappropriate instrument for small business/mortgagor complainants. The FOS lacks enforcement powers, and it is bank-financed, making independence impossible - the power imbalance and bank venality are assumed away. The ombudsman might obtain the odd bank document for victims, but (from cases known to me) the latter waste their time and come away with nothing.
Business to business unconscionable conduct was legislated into the Trade Practices Act in 1998 (s.51AC).
Responsibility for unconscionable conduct in financial services was handed to the Australian Securities &
Investments Commission beginning March 2002 (s.12CC of the ASIC Act), following the Wallis financial
system inquiry.
No litigation against a bank has yet been pursued under these provisions by ASIC. ASIC tells complainants to go away (I have copies of correspondence). ASIC lacks commitment to and competence in unconscionable conduct, responsibility for which should be returned to the Australian Competition & Consumer Commission.
Treasury and the Treasurer's office care only about bank stability, not bank integrity.
Some Members of Parliament are regular recipients of bank victim stories. But the party bosses will not touch bank power.
It is long overdue that those in political authority confronted that bank malpractice is systemic, and that they acquire some moral fibre in addressing this continuing scandal.
http://www.austlii.edu.au/au/legis/cth/consol_act/tpa1974149/s51ac.html
Australia: Farewell Trade Practices Act. Welcome Competition and Consumer Act
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Last Updated: 30 January 2011 Article by Calum Henderson Norton Rose Fulbright Australia Key Points
Background2 phases of changeThe new year has ushered in phase 2 of a raft of changes to the consumer law landscape in Australia with the Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010 (Cth) which commenced 1 January 2011. This followed on the heels of the first phase of amendments commencing on 1 July 2010 with the Trade Practices Amendment (Australian Consumer Law) Act (No 1) 2010 (Cth). Together, the two amending Acts create the Australian Consumer Law (ACL), a new, national regime for fair trading and consumer protection, set out in Schedule 2 to the newly styled Competition and Consumer Act 2010 (Cth) (CCA) (that is, the former household named Trade Practices Act 1974 (Cth)). Phase 1 introduced into the then TPA and the Australian Securities and Investments Commission Act 2001 (Cth) a new prohibition on unfair contract terms in standard form consumer contracts. Unfair terms in such contracts will be void under the new national regime but a contract will continue if it is capable of operating without the unfair term. While to a large extent the effect of the Phase 2 reforms is to harmonise the existing State and Federal consumer law, it does also implement some important substantive changes to the law of which all businesses ought to be aware. Relevant changes have also been reflected in amendments to the ASIC Act. Key legislative changes from 1 January 20111. Renaming of TPAThe TPA has been renamed and is now known as the CCA. For transactions that occurred up to 31 December 2010, the TPA will continue to apply. 2. Repeal of State and Territory lawsAll States and Territories have enacted legislation repealing their respective fair trading legislation and adopting the national competition and consumer law regime For transactions that occurred up to 31 December 2010, the previous State or Territory consumer laws will continue to apply. 3. Consumer protection provisions now found in the ACLThe following Parts of the old TPA have been repealed and re-incorporated into the ACL found in Schedule 2 to the CCA. In a number of cases the provisions have been modified:
4. Infringement noticesPart VIC (infringement notices) of the TPA has also been repealed and moved to part XI of the CCA. Infringement notices can now be issued by the ACCC for alleged breaches of certain provisions of the ACL as an alternative to the commencement of legal proceedings. A person is not obliged to comply with the notice and may instead elect to have proceedings commenced against it. However, in the event of compliance, the regulator is precluded from taking any further action. 5. Consumer guaranteesStatutorily implied conditions and warranties have been replaced with new consumer guarantees. Consumer guarantees are unlikely to create significantly different rights and obligations but are intended to set them out in a clearer way. Importantly, a person is taken to have acquired goods as a "consumer" where the goods or services:
Certain exceptions apply, for example, where the goods are acquired to be re-supplied or are to be used up in commercial production or manufacture. This significantly broader concept of "consumer" under the ACL means that these guarantees will have a much wider application than the former implied conditions and warranties regime. Clearly, a significant number of business-to-business transactions will be subjected to the new statutory guarantees. 6. Product safety law and enforcementThe ACL provides a single national approach and enforcement tools for product safety in relation to consumer goods and product related services including safety bans, product recalls and reporting and notification requirements. 7. Unsolicited consumer agreementsThe ACL includes a new, national law for unsolicited consumer agreements which replaces existing relevant State and Territory laws. (Unsolicited consumer agreements include agreements formed through door to door selling, telephone sales and non-retail direct selling.) The ACL sets limits upon the formation and negotiation of unsolicited consumer agreements including in relation to permitted contact hours, disclosure, the exiting of premises on request and cooling off periods. 8. Lay-bysThe ACL provides simple national rules for lay-by agreements. The ACL now requires all such agreements to be in writing and the provision of a copy of the written agreement to the consumer. 9. OffencesThe ACL implements a criminal offence regime for certain provisions of Chapter 3. A corporation convicted of an offence under the ACL can have a criminal conviction recorded against it and pay a fine of up to $1.1 million while an individual face a criminal conviction and pay a fine of up to $220,000. 10. Enforcement and remediesThe ACL introduces some new penalties, enforcement powers and options for redress of consumer grievances. The enforcement measures available for breaches or suspected breaches of the ACL are:
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PALTRY PENALTIES AND REMEDIES ENSURE SAFE PASSAGE OF WHITE COLLAR CRIME