Hindsight 20/20 #3 – shareholders before customers – nothing can go wrong
During the Banking Royal Commission, we have heard evidence of appalling behaviour by Australia’s major banks and financial planners from the past decade, including alleged bribery, forged documents, repeated failure to verify customers’ living expenses before lending them money, and selling insurance to people who can’t afford it.
In one example, ANZ admitted at the royal commission that it doesn’t actually verify a customer’s living expenses when it processes a loan that comes through a mortgage broker. Instead, the bank relies on murky indicators like a Household Expenditure Measure. [Source: ABC News]
In one case ANZ offered a 30-year loan to a 71-year-old. File notes revealed the bank’s ‘exit strategy’ was to sell the house to recover the outstanding mortgage after the man’s death.
Not unlike a number of other goings-on in the banking industry as of late, the tactic is a direct contravention of the National Consumer Credit Act (Source: www.choice.com.au).
So, this iteration of Hindsight 20/20 is going to focus on one of the behaviours that the Royal Commission has exposed.
The examples I’m going to use go to the very heart of what has been discovered by the Royal Commission: where staff put short-term profits ahead of customer welfare and legal obligations.
So, let’s look at a risk that should have been in any one of these bank’s risk registers:
Illegal or unethical behavior by a staff member or broker selling financial products.
In this case, the behaviour manifested itself as a ‘fee for no service’ scam.
If we look at the risk and some of the causes and controls, the first thing that should be noted is that, if the preventative controls had been effective, the likelihood would have been reduced. It should also be noted that, if the detective controls had been effective then it should have been discovered a lot earlier.