David Fawcett (SA, Liberal Party) Share this | Hansard source

On behalf of the Parliamentary Joint Committee on Corporations and Financial Services, I present two reports of the committee on the impairment of customer loans and the examination of the 2014-15 annual reports of bodies established under the ASIC Act, together with the Hansard record of proceedings and documents presented to the committee. I move:

That the Senate take note of the reports.

I will need to keep my comments very brief because I am aware that other members of the committee are keen to speak on these reports. I would like to speak particularly to the report on the impairment of customer loans. It dealt predominantly with lenders—banks in particular—but it also looked at the actions of receivers, valuers, regulators and existing external dispute resolution providers. We found a number of gaps in the system that particularly small businesses face as they are dealing in this sector or as part of the financial services sector.

The focus of the inquiry was very much around small business, but it also included some larger businesses, some listed, and it was around the constructive defaults of loans that occurred. A lot of focus was on the post-GFC period, around the takeovers by Commonwealth Bank of Bankwest and by ANZ of Landmark, but many other lenders and financial service providers were brought up by witnesses. I would like to note that many of the witnesses had been through significant trauma, and not just financially; there was also a very high human cost, in terms of lives, families and relationships, that came out of the actions of the various stakeholders in this process.

We have seen much evidence of unconscionable conduct between borrowers and lenders. The almost complete asymmetry in power between the lenders and the borrowers is something that needs to be addressed. It is not necessarily illegal, but, because of that asymmetry of power, there is much behaviour that was unconscionable. We have seen a number of actions stemming from the financial services inquiry, through things initiated by the industry themselves and with the ABA's decision to review conduct and codes, which were all commendable. The problem is that with multiple parties addressing this from multiple angles we run the risk that we will end up with the same kinds of gaps that small businesses face now, where they fall out of the purview of EDRs and, because they have been sent bankrupt, they do not have the money to actually take their claims into the courts.

In the committee's view we need to take action and we need to take it now. We believe that the establishment of the Australian Small Business and Family Enterprise Ombudsman provides a suitable opportunity and vehicle to provide some management, coordination and leadership to the activities by these various parties to make sure that we get outcomes that are fair, reasonable and transparent and to shape the relationship between lenders and borrowers across the nation in a very standardised way, getting ethical conduct and standards around things like loan contracts. Where necessary, and where we cannot join the boundaries between the existing external dispute resolution providers, this body—the ombudsman—can act as a tribunal to hear the cases of people who have a valid grievance with the banks. We need to have balance in the system.

We see in the ANZ's case them taking action to recognise that perhaps some of their conduct has been unreasonable, and they have taken action to make restitution with some customers. We commend them for that and would encourage other providers to look at that. Our recommendation is that, once the ombudsman has issued the new standards in terms of what is considered to be ethical and appropriate conduct in this sector, lenders would take action to consider legacy cases lest the tribunal need to do so.