Bonuses for NAB bankers were a “significant cause” of a scandal involving alleged bribery in a program where third parties received a commission for referring home loan applications to NAB, Commissioner Kenneth Hayne said.
The commission heard tales of white envelopes full of cash passed across counters and loans approved on the basis of potentially fraudulent documentation such as forged pay slips. NAB accepted there had been misconduct.
Mr Hayne said bankers received bonuses for meeting home loan sales targets while introducers received commissions tied to their volume of loans, which created a “further incentive for collusion”.
Commonwealth Bank was right to admit it fell short of community standards when it gave a problem gambler a bigger credit card limit, Mr Hayne concluded.
CBA admitted to misconduct and said it should have used the information David Harris provided about his gambling problems before offering him further credit.
The bank accepted that its internal systems were deficient but gave no indication it planned to work on this, Mr Hayne said.
Commissioner Kenneth Hayne has raised the prospect of potential criminal breaches by AMP over its so-called independent report on its fee-for-no-service scandal.
Mr Hayne noted that the corporate regulator was looking at the matter in relation to section 1315 of the Corporations Act, which covers criminal breaches.
The group’s financial planning boss, Jack Regan, told the commission the group made as many as 20 false or misleading statements to ASIC about the issue.
AMP has a culture and governance practices that show “insufficient concern for adherence to the law” and senior staff think it acceptable to deal with ASIC “other than frankly and candidly”, Mr Hayne said.
AMP asked law firm Clayton Utz for an independent report into the affair but given the “number and nature of the changes made”, Mr Hayne said it may be open to conclude AMP knew it was not an independent report.
Commonwealth Bank and its financial advice licensees had a “cultural tolerance” of risks and conduct that could hurt clients but that was to the financial advantage of the bank, Mr Hayne said.
The culture is more focused on maximising revenue than providing the best possible service to clients, he wrote, in comments about the bank’s charging of fees for no service.
Senior management of CBA and its financial advice businesses knew clients were either being charged or likely to be charged fees for no service for at least 18 months before telling the corporate regulator, he said.
Mr Hayne has taken celebrity financial adviser Sam Henderson to task for saying his advice was not advice because it was a draft.
Client Donna McKenna would have lost $500,000 by following the advice while Mr Henderson would have received upfront fees of almost $7000, brokerage of more than $4000, ongoing investment management fees of more than $14,000 a year and possibly a fee for an SMSF.
Small and medium enterprises
Commissioner Kenneth Hayne lashed Westpac for pre-filling in a form for a blind disability pensioner who was going guarantor on her daughter’s small business loan.
Mr Hayne could not say if Westpac acted unconscionably in taking Carolyn Flanagan’s guarantee, recalling her plaintive statement: “If you can’t help your children, who can you help?”
But enforcing the guarantee was a different question. “The community would not think it right for Westpac to deprive Ms Flanagan of the use of her home during her life,” he wrote.
Mr Hayne has blamed the Financial Ombudsman Service for making a dispute between a grieving widow and Suncorp worse.
Rien Low told the hearing of the toll the dispute took on his mother, after the family discovered a string of loans when his father died.
“The chief difficulties that emerged between the parties stemmed from the inconclusive nature of the FOS determination: requiring the parties to decide between themselves how the loan was to be repaid,” Mr Hayne wrote.
A funeral insurer that said it tailored its product to indigenous people offered products that were neither tailored to indigenous people nor beneficial for them, Commissioner Kenneth Hayne said.
If a customer of the Aboriginal community Benefit Fund has a medical condition that is more common among indigenous people, he or she is likely to pay higher premiums.
Customers may pay more in premiums than they will be entitled to receive.
And the group corresponded with customer Tracey Walsh in an “aggressive and hostile manner over a significant period of time”.
Select AFSL might have breached the Corporations Act when its representative gave personal advice to a customer about funeral insurance without being authorised to do so, Mr Hayne found.
Kathy Marika said she did not want a second funeral insurance policy but Let’s Insure rang her again and sold her Select funeral insurance, which might have breached anti-hawking laws, Mr Hayne said.
By Elizabeth Redman (Elizabeth Redman is a property reporter for The Australian. She was previously the North American Correspondent for The Australian Business Review. She has also covered superannuation and investing for Eureka Report and worked as a breaking news reporter at Business Spectator. She has appeared at the Melbourne Writers Festival and is an occasional commentator on ABC Radio.)
29 September 2018