Banking royal commission: Suncorp loan demand to widow not reasonable, says ombudsman

The bank ombudsman says Suncorp should drop its demand a jobless widow repay $220,000 in six months to clear a loan.

Lead ombudsman of the Financial Ombudsman Service Philip Field leaves the bank inquiry. Pic: AAP

The Financial Ombudsman Service has told Suncorp it should backflip on its position that a jobless widow should pay back $220,000 within six months to clear a loan the bank should never have made.

Lead ombudsman for banking and finance, Philip Field, told the financial services royal commission that after reflecting on the case of Jennifer Low, who was left with a series of commercial loan debts following the death of her husband, it “wouldn’t be reasonable” for Suncorp to ask her to pay the money within six months.

He admitted he had previously told the Low family and their lawyers, the Consumer Action Law Centre, that it would be reasonable for Suncorp to insist on repayment of the loan,

which FOS found should never have been made, within 12 to 18 months, with five years as an outer limit.

“In hindsight I don’t think that was the correct thing to do,” Mr Field told the commission this morning.

“I should have accepted the CALC position was correct and got on the phone to the bank to resolve the matter.”

He said he had been concerned that under the existing terms of the loan the 62-year-old Mrs Low would still be making repayments when she was 80.

However, he now accepted that Mrs Low was entitled to rely on the original terms of the loan.

The Low family had offered to make repayments of $1100 a month — more than the repayments required under the original deal.

Counsel assisting the commission, Rowena Orr, QC, asked Mr Field what he would say to the proposition that if people considering a complaint to FOS knew that success at FOS could result in having to pay back a loan sooner and on worse than existing terms, they would not use the service.

“I would encourage them still to come and use our service, which as you said at the start is free to them,” he said.

“We have staff who try very, very hard to get the right outcome.”

Asked if he was aware that Suncorp’s position remained that it was entitled to demand repayment within six to 12 months, Mr Field said that having reflected on the case file “it’s certainly not a position they could continue to take”.

Ms Orr asked: “Would you expect the bank to now change their position and allow Mrs Low to make principal repayments over the life of the loan?

“Yes I would,” Mr Field said.

Suncorp has been contacted for comment.

On Friday, its chief executive of banking, David Carter, defended the group’s handling of the loan, telling the commission that it was reasonable for Suncorp to demand the money from Mrs Low within six months.

“Our understanding of what is acceptable practice is six to 12 months would be acceptable practice,” he said.

He could not point to any documents that let Suncorp insist on early repayment.

“I want to put to you that applicants may not proceed with applications to FOS if they realise that this is what success looks like,” Ms Orr said.

“I accept that,” Mr Carter said.

Suncorp executive David Carter. Pic: AAP

He defended most of the bank’s treatment of the Lows and blamed Mrs Low’s late husband, Peter, for the saga.

Suncorp “were misled and deceived as to the purpose (of the loan) by the borrower”, he said.

“This is something that we have found ourselves in as a result of the misdeeds of others.”