Bendigo and Adelaide Bank publicly shamed for banking code breaches
A new banking industry watchdog has used its teeth for the first time, sanctioning Bendigo and Adelaide Bank for “serious and systemic breaches” in how it has treated customers since 2015.
The Banking Code Compliance Committee (BCCC) was set up in the wake of epic failures with the industry exposed at the Hayne royal commission.
It holds members to standards set out in a code of practice, a set of guidelines that has no weight in law.
Until now, it has never named a bank for breaches, although it has revealed the practice of knowingly charging dead customers continues to plague the industry.
There is no financial penalty. The entire sanction is being ‘named and shamed’ in articles like this.
The committee did not apply any of its other limited powers, including imposing staff training, insisting on customers being repaid or referring issues to the Australian Securities and Investments Commission (ASIC).
The committee, under a different title, only named one bank in the previous decade, preferring to keep bad behaviour quiet.
In its annual report, the committee said the breaches occurred within Bendigo and Adelaide Bank’s Great Southern Loans business from February 2015 to February 2019.
They include failing to comply with consumer protections in the code, “such as debt collection practices and the treatment of customers experiencing financial difficulty”.
The committee’s chair, Ian Govey, said the decision to name the bank had been difficult.
“In deciding to name Bendigo and Adelaide Bank, the committee has given careful consideration to a number of factors, including the seriousness of the breaches and their likely impact on Great Southern Loans customers,” he wrote.
“We acknowledge the work the bank has undertaken to date to address the issues that came to light following an audit … and to fix the root causes to ensure code compliance.”
The scathing report is rare in an industry that the royal commission showed preferred to deal with its problems away from public view.
The committee slapped Bendigo and Adelaide Bank for “serious and systemic” breaches in the following areas: debt collection, financial difficulty, complaints handling, privacy and confidentiality, training and competency, and acting fairly and reasonably.
Naming not enough, says lawyer
Just naming a bank for breaching the code is not enough, said Elise Bant, a professor of private law and commercial regulation at UWA Law School.
“It is important to call out systemic misconduct by banks, not just because of the harm it causes but because it betrays the corporate mindset: profit first and community and legal obligations a distant afterthought,” she said.
The BCCC was created to report on breaches of a code beefed-up after the obvious failures of self-regulation were exposed in the year-long , leading toagainst some of the largest financial institutions in Australia.
“Repeated misconduct that results from the corporation’s systems, policies and processes can’t simply be downplayed as involving ‘system errors’. Justice Hayne rightly called that out in the royal commission,” Professor Bant added.
“How come none of these systems make errors in favour of their customers?
“When corporations put in place systems, policies and practices that routinely breach the law, their misconduct can be understood as intentional, not mistaken.
“And this calls not just for ‘naming and shaming’ but for effective penalties and other orders that are fit to denounce, deter and, where necessary, punish this sort of wilful misconduct.”
Patrick Veyret, a banking policy expert from consumer advocacy body Choice, said the public expected institutions to be held to account when they did wrong.
“It is a welcome sign the Banking Code Compliance Committee has chosen to name and shame Bendigo and Adelaide Bank for poor conduct,” he said.
“However, this sanction amounts to a simple slap on the wrist for the bank.
“This is a clear example of the failure of self-regulation in achieving justice. The community expects executives to be held to account and face genuine penalties when they hurt customers — this is very unlikely to happen.”
The committee’s report comes the same week the Government has announced it .
However, consumer advocates argue watering down so-called ‘responsible lending laws’ will remove the burden from banks to check whether people can repay loans without going into hardship.
“If the Government goes ahead with its disastrous policy to axe responsible lending laws, expect to see a surge in unfair banking conduct,” Mr Veyret added.
“Rather than make banks less responsible for their actions, we need to see the Federal Government implement all the recommendations of the banking royal commission. Bank executives need to be held accountable with new executive accountability laws.”
Banks self-reported 20,863 breaches of the industry code in the six months to December 2019. Just the number of breaches in that half-year period make up almost a third more than the entire 2018–19 period.