ASIC demands banks, insurers treat Aborigines fairly

The corporate watchdog has called on senior bankers to break out of their city bubbles to better understand remote communities.

ASIC chairman James Shipton. Picture: Kym Smith

Revelations at the royal commission of companies swindling Aboriginal and Torres Strait Islander people, including potential criminal offences by a notorious funeral insurer, have driven the corporate watchdog to call on senior bankers to break out of their city bubbles to better understand remote communities.

The new chairman of the Australian Securities & Investments Commission, James Shipton, who attended hearings for the banking royal commission in Darwin last week as part of a broader visit to the Northern Territory, said the inquiry had highlighted the threats from “totally unacceptable” behaviour from certain parts of the financial sector.

“I’ve talked about a trust deficit in finance and you see this nowhere more clearly than what’s been going on with indigenous consumers being sold inappropriate products,” Mr Shipton told The Australian. “I do not want any sector of our society, including our First Australians, not having access to the full benefit of our financial system; nor do I want them to fall victim to unscrupulous behaviour.”

The royal commission last week heard numerous tales of gouging of remote and regional communities, including dodgy car dealers exploiting relief payments made to Cyclone Yasi victims with sky-high interest rates of 48 per cent on loans, banks repeatedly and wrongly charging overdraft and dishonour fees to disadvantaged customers, and life insurers preying on indigenous mourning ceremonies.

Counsel assisting Rowena Orr QC recommended criminal charges be laid against funeral insurer Aboriginal Community Benefit Fund, a private company run by non-Aboriginal people that ­pushed largely useless funeral plans on thousands of indigenous children and babies.

There were recommendations that another life insurer, Select AFSL, which used high-pressure sales tactics to push Let’s Insure-branded funeral plans on to Aboriginal customers, be found to have engaged in unconscionable conduct and to have breached three sections of the ASIC Act.

Select AFSL chief executive Russell Howden attempted to hide the behaviour from the royal commission, it was claimed. In all cases, ASIC has been investigating and taking action against the practices through its Indigenous Outreach Program and other means.

“These threats and challenges are well known to ASIC,” Mr Shipton said. However, the royal commission heard the vast majority of city-based financial companies had no understanding of how their policies played out in regional communities.

Mr Shipton said the hearings made clear that “unless there is on-the-ground appreciation and understanding of the considerable task ahead it will be difficult for the financial sector to address these challenges and threats”.

“I want to encourage financial firms, especially their senior leaders, to actively engage in closing the financial inclusion gap in remote and indigenous communities,” Mr Shipton said. “And by that I mean coming to remote areas, meeting local people, listening to the issues they face and understanding the barriers they encounter.”

The royal commission also examined a series of case studies that were not in the public hearings, including that of a Broome woman, a CBA customer, who had trouble cancelling a direct debit arrangement on an interest-free loan used to purchase whitegoods. Another woman was “repeatedly” charged overdraft and dishonour fees of $21.50 and $40 by Bendigo Bank, while Traditional Credit Union, which relies on fee income rather than interest income, charged “high fees” that hurt remote communities, according to submissions.

Nathan Boyle, a policy analyst with ASIC’s Indigenous Outreach Program, said banks often asked nonsensical questions of indigenous customers, such as demanding street addresses where there were none. In one instance, a Cape York woman was asked to fly 800km to Cairns to replace a missing ATM card.

Mr Orr said the case studies “best demonstrated the complex and overlapping difficulties” experienced by Aboriginal and Torres Strait Islander people in remote locations.

Superannuation-related life insurance and death benefits for indigenous Australians are likely to be put on show next month when the royal commission probes the $2.6 trillion super ­industry.

After hearing evidence and expert testimony last week, Ms Orr has now asked banks to formally consider whether they have taken sufficient steps to promote fee-free accounts, and whether their identification requirements for indigenous customers are out of step with reality. ANZ admitted its process for charging vulnerable customers fell below “best practices”, after the royal commission revealed it was charging daily overdraft fees to a customer in a remote community whose main income was Centrelink payments.

In another case, ANZ took four months to open a fee-free bank account for an unemployed Aboriginal woman who was worried about paying dishonour fees.

Ms Orr has asked the industry to consider if they should have a telephone service staffed with people who have been trained for engaging with indigenous customers.

“I am determined for ASIC to keep doing its job of engaging with indigenous people to help them take control of their financial lives, engaging with financial firms to make sure they do the right thing,” Mr Shipton said.