Wrong advice

Widow loan breach

SUNCORP was wrong to tell a grieving Healesville family that a loan breaching its responsible lending standards needed to be paid back ahead of other debts, the banking royal commission has heard.

The Low family only learned they inherited debts totalling $1 million from five loans after Peter Low, 63, died in a workplace accident in 2015.

Appearing at the commission this morning, the Financial Ombudsman Service has also admitted it was wrong to advise that the $240,000 loan ought to be repaid within 12 to 18 months.

The service had ruled that Suncorp should not have made the loan, but still advised that it should be repaid within the short time frame.

Financial Ombudsman Service banking and finance services lead ombudsman Philip Field was questioned this morning at the commission about how Suncorp and the ombudsman dealt with the Low family. Mr Low’s widow, Jennifer Low, and son, Rien Low, complained to the ombudsman after Suncorp denied a 12-month payment pause on the interest bill.

The ombudsman ruled one of the small business loans for $240,000 did not meet prudent lending standards set out in the banking code of conduct, which is legally binding.

It ruled the original amount needed to be repaid but $40,666 in interest charged had to be forgiven.

No more interest and fees could be charged on the loan.

Last week, Suncorp told the commission it understood the ombudsman’s position was that a loan ruled to have breached responsible lending standards was to be paid back ahead of other loans among customers who had multiple debts.

Mr Field told the commission this was incorrect.