Bank’s facts ‘ error’
Townsville AUSTRALIA’S biggest bank denies trying to minimise the extent of problems with credit card insurance sold to 64,000 unemployed and therefore ineligible customers.
There was never any intent to tell a different story to the regulator over the issue that sparked a $ 10 million refund to customers, a senior Commonwealth Bank executive told the financial services royal commission.
A bank audit in April 2015 identified 64,000 customers who were unemployed at the time they got a CBA credit card and were sold credit card plus ( CCP) insurance.
Sales staff were not required to tell the customer that they therefore could not claim the involuntary unemployment or temporary/ permanent disability benefits under the policy, the inquiry heard on Monday.
CBA told the Australian Securities and Investments Commission in May 2015, in a “good governance notification”, that an estimated 27,800 current CCP policyholders were affected.
Senior counsel assisting the commission Rowena Orr QC said CBA chose to only tell the regulator about 27,800 potentially affected customers and also chose not to make a “significant breach” notification to ASIC.
“I’m going to suggest to you that CBA was doing all it could to minimise this in its communications with ASIC,” Ms Orr said.
CBA’s executive general manager of retail products Clive van Horen said he did not agree.
“It’s not in our interests to try to mislead the regulator in any way, and that’s certainly never been the intent from anything I’ve ever seen or been involved with,” he said.
Commissioner Kenneth Hayne QC asked if CBA was telling its board or an internal committee one thing and ASIC something radically different, being half the number of custom- ers. Mr van Horen replied: “Was there ever any intent to tell a different story to regulators or our internal governance structures?
“Nothing I’ve seen suggests that’s the case.”
Ms Orr said by choosing to only notify ASIC about current policyholders, the problem was minimised.
Mr van Horen said the problem was incorrectly stated.
He said there should have been a significant breach notification to ASIC as CBA had breached its legal obligations to act honestly, efficiently and fairly.
Mr van Horen said the vast majority of those sold CCP when they were unemployed were students.
CBA last year refunded $ 10 million to about 65,000 customers. It is now refunding $ 16 million to 140,000 customers sold personal or home loan protection insurance who may have been ineligible to claim some benefits due to their employment status at the time they bought the policies.
CBA this month said it would stop selling its current credit card plus and personal loan protection products.
Incoming CBA CEO Matt Comyn warned its staff the banking royal commission would hear cases where customers had been treated unfairly.
“In many cases, our actions have had a significant impact on the financial and emotional wellbeing of our customers. This is unacceptable,” he said in an email to staff.
Earlier at the commission, ANZ stood by its decision to loan $ 50,000 to a 71- year- old pensioner who fell victim to a scam and could afford the repayments.
Commissioner Hayne pressed an ANZ executive on whether the bank stands by the decision to give Robert Regan the loan.
“Do you stand by the decision to make the loan to Mr Regan?” Mr Hayne asked senior ANZ executive William Ranken yesterday.
Mr Ranken, who is responsible for ANZ’s $ 265 billion home loan portfolio, said the decision was in line with the bank’s procedures.
“With the information that we had available at the time, and applying the policies and procedures that we apply for those types of loans at the time, it was in accordance with our policies and procedures,” Mr Ranken said.
Mr Hayne said, “I want to give you this last chance: do you stand by that decision?” Mr Ranken replied: “In hindsight, it’s hard to have that, you know, make that clear delineation.
“At the time, with the same information available to us, the same decision would be made.”
The inquiry heard Mr Regan took out the loan thinking he was helping a British woman bring gold to Australia, but instead he ended up getting scammed and was left with loan repayments so big he’s relying on food parcels to survive. The now 72- yearold used a mortgage broker to take out an ANZ loan last year, using his home as security.
He told the banking royal commission on Friday that income and expenditure figures used by his broker to get the loan approved were wrong.