Westpac fought aged pensioner’s hardship plea
WESTPAC has defended its lending policy which left a legally blind elderly woman with a history of cancer facing homelessness after she acted as guarantor for her daughter’s business loan.
Australia’s second- biggest lender has also told the banking royal commission it does not probe the health or income status of parents who put their homes up as security to help family members receive small- business loans.
The details emerged during the opening day at the third round of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in Melbourne yesterday.
Lending to small businesses is coming under scrutiny during this round.
The commission yesterday heard from Carolyn Flanagan, whose Western Sydney home was used as collateral for a loan taken out in 2010 to finance a business venture by her daughter and daughter’s partner.
Ms Flanagan, 67, lives on a disability support pension and has a long history of illness including glaucoma, pancreatitis, a broken pelvis and having tumours removed from her throat and tongue.
When her daughter’s business failed, Westpac moved to seize her house.
Ms Flanagan said she believed the loan was for $ 50,000 when in fact it was for more.
Under cross examination, she admitted her memory was “very poor” and she would have “signed anything” for her children.
Westpac produced a document that showed Ms Flanagan received independent legal advice during the loan application process.
Commissioner Kenneth Hayne noted the document “tells you nothing about the subject of that advice”.
Ms Flanagan initially lost a claim against Westpac lodged through the Financial Ombudsman Service that aimed to allow her to stay in her home until she died or it was sold.
The bank eventually granted Ms Flanagan this wish after the legal aid service in New South Wales applied for “hardship” circumstances directly with the lender on her behalf.
Westpac commercial banking general manager Alastair Welsh said yesterday the bank should have determined Ms Flanagan qualified for a hardship ruling earlier.
While Westpac needed to exercise “extreme caution” when parents were acting as guarantors for their children’s business loans, Mr Welsh defended the bank’s decision to accept Ms Flanagan’s house as collateral.
“My review of the files is that we followed up the process that I would have wanted to banker to follow,” Mr Welsh said.
“Technically there lem.”
Asked if that suggested there was a problem with the formal processes Westpac has around assessing guarantors, Mr Welsh replied: “No, there is not.”
He confirmed to the commission is not a prob- that Westpac did not check the health history or income of guarantors — only the asset that is being put up for collateral.
Earlier in the day, senior counsel assisting the commission Michael Hodge, QC, said the hearing would not probe “ulterior motive theories” that arose following the Commonwealth Bank’s takeover of regional lender Bankwest as they did not hold water.
“There are various ulterior motive theories and they are not consistent with each other,” Mr Hodge said.
“None of these … warrant further consideration.”
The commission continues today.