Ombudsman disappointed with Hayne interim report

ASBFEO Kate Carnell said the interim report does not address many of the issues that have been raised over a considerable time by small businesses affected by bank misconduct.

She referred in particular to businesses affected by the purchase of Bankwest by the Commonwealth Bank of Australia (CBA).

“There were around 2,000 businesses with performing Bankwest loans whose loans were defaulted, using overly aggressive tactics, including revaluation of property, changes to loan-to-value-ratios, withholding valuation information and applying exorbitant default penalty interest rates,” Ms Carnell said.

“It is interesting that in the agribusiness part of the report, similar tactics in respect of the ANZ acquisition of the Landmark loan book were highlighted in the interim report.

“However, exactly the same conduct was seen in the CBA treatment of Bankwest loans, and this has not been addressed. CBA used the same aggressive tactics to serve their own commercial interests.”

Ms Carnell asked commissioner Kenneth Hayne to consider extending the timeframe of the royal commission to give small businesses an opportunity to explore this conduct beyond the agribusiness sector.

However, she was pleased that the commissioner took up a recommendation from the ASBFEO’s Small Business Loans Inquiry and supported its view that the small business definition of a loan facility in the Code of Banking Practice should be $5 million and not the current $3 million.

“We agree the Code of Banking Practice is pivotal in addressing future protection of small business borrowers,” Ms Carnell said.

“Additional regulation could have unintended consequences in tightening lending to small business even further. We agree that the application of the National Consumer Credit Protection Act should not apply to small businesses. Restricting lending or increasing the cost would not be good for the economy.

“If Commissioner Hayne is willing to hear from additional small businesses, it is important that the process regarding their legal representation takes into account their financial situation, appropriate timeframes and the scarcity of appropriate legal expertise.”