Royal commission interim report: BoQ cops bollocking while Suncorp avoids heavy reprimand in case studies

THE ROYAL commission into banking has slapped down BoQ, saying the Queensland lender’s failure to confess to problems with a troubled shop loan was not “fair and reasonable”.

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THE ROYAL commission into banking has slapped down BoQ, saying the Queensland lender’s failure to confess to problems with a troubled shop loan was not “fair and reasonable”.

In an interim report handed down on Friday, Commissioner Kenneth Hayne also raised questions about whether BoQ’s unique franchise-branch system also triggered botches in the loan process.

The findings were among some blistering commentary from Commissioner Hayne about the banking system, although fellow Queenslander lender Suncorp was found not to have engaged in misconduct in recovering a loan from a widow.

The commission had earlier this year looked at a case study of BoQ lending money for Suzanne Riches to buy two Wendy’s food outlets. Problems erupted and her company folded. She later sought help from the Financial Ombudsman Service, an umpire in disputes.

Commissioner Hayne found that BoQ, during the dispute with FOS, “omitted an important fact: namely, that BoQ was aware that there had been errors made in the serviceability calculation (for the loan)”. “It was not fair and reasonable to do other than tell FOS what BOQ had concluded from its loan review,” Commissioner Hayne wrote.

He said problems had started with the then owner of the Adelaide customer’s branch, such as the owner failing to tell her about changes to loan terms. “These matters invite attention to what connection, if any, the events had to BoQ’s franchise arrangements,” Commissioner Hayne said.

He noted BoQ had improved compliance among franchisees. But he also said a question to be pursued involved any sales-based remuneration for franchisees, and how that would fit into recommendations from the Sedgwick review, which seeks to ban staff incentives based solely on sales performance.

Fellow Queenslander lender Suncorp was luckier in its case study, which involved a bitter dispute over extracting loan repayments from a widow.

That dispute also went to FOS. But because of a lack of precise guidance from the umpire, Mr Hayne wrote it “cannot be said that Suncorp might have engaged in misconduct”.

Still, Mr Hayne said Suncorp could have better communicated to the widow and her family.

Suncorp had also initially confessed overall to a string of problems where its conduct fell below community standards and expectations. That included problems with systems for margin calls, that exposed borrowers to incorrect margin calls worth $4 million.

BoQ had told the commission that it had found instances where it did not provide an extensive period of notice before taking action against a borrower in default, giving rise to complaints. The bank maintained that legitimately relying on contract terms should not been seen as conduct that fell below community standards.

Suncorp on Friday said it would review the report, BoQ did not comment.

Commissioner Hayne’s interim report did not dig into the insurance sector, which heard harsh stories during recent hearings, but is to rake over the sector in a final report due next year.