Banking Royal Commission Reveals Culture of 'Greed and Dishonesty'
On the 28th of September, Kenneth Hayne, Head of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, published an interim report following months of investigations. The report reflects on the first four rounds of public hearings, which considered consumer lending, financial advice and small to medium enterprise loans.
Commissioner Hayne’s findings reveal that misconduct in the banking sector has been driven by greed, with financial institutions prioritising profits over people, and upholding shareholder interests over those of their customers.
Among the illegal and unethical practices exposed by the inquiry are findings of fees for no service, irresponsible and negligent lending practices, and failure by the banks to comply with policy requirements in the event of a breach.
Moreover, the investigation has revealed instances of charging fees to deceased persons, advice that cost one consumer almost $500 000 and the issuing of a credit card that would take the holder 138 years to pay off.
Whilst no recommendations will be provided until the final report is published next February, the interim report poses 693 questions about the banking, financial services and superannuation industry. These include;
- Whether existing law should be administered differently;
- Whether bank employees should continue to be rewarded for selling products; and
- Whether the current Household Expenditure Measures used by banks to assess suitability for 75 per cent of all loans is still viable, and if not, what should replace it.
As highlighted on the commission’s website, “the Commission cannot resolve individual disputes. It cannot fix or award compensation or make an order requiring a party to a dispute to take or not to take any action.” Instead, the Royal Commission simply investigates and provides recommendations to the government, who will decide which recommendations they wish to adopt by reforming the law.
Therefore, whilst individual consumers cannot expect financial wins to come directly from the Commission, they are still likely to see positive outcomes. This is because the recommendations handed down in the final report will likely prove a catalyst for legislative change, ultimately resulting in greater transparency for banking consumers.
The Commission is currently seeking submissions in response to the interim report, with the final report due on 1 February 2019.
