Banking royal commission: Bruised pride put ahead of customer refunds

CBA executive Clive van Horen has confessed he put his “bruised” emotions ahead of giving 1500 customers a ­refund.

CBA’s Clive van Horen: ‘I think it was a poor judgment on my part’ asking for a 10-day delay in fixing the overcharging problem. Picture: AAP

Senior CBA executive Clive van Horen has confessed he put his “bruised” emotions ahead of giving almost 1500 customers a ­refund after they were ripped off by the bank charging them more than twice the interest it should have.

Appearing before the financial services royal commission yesterday, Mr van Horen agreed he asked colleagues for a 10-day delay in fixing the overcharging problem so it would not be brought up in a parliamentary hearing in the meantime.

“I think it was a poor judgment on my part,” Mr van Horen told the commission.

The CBA executive general manager of retail products said his feelings had been hurt by media reports about a previous issue at the scandal-ridden bank that he claimed were “100 per cent wrong”.

“Weighing quite heavily on my mind was a fairly recent experience we had had with customer letters going out which were — caused major distress to — whether internally, externally, around paper statement fees and personally I was quite bruised by that,” he said.

The risk of telling customers about the overcharging ahead of a parliamentary hearing was that the letters could get reported “in a way which was, if the previous ­experience was anything to go by, it was factually 100 per cent wrong”, Mr van Horen said.

CBA charged about 2500 small business customers more than double the correct interest rate for their overdraft facilities and remediated 1490 of those a total of about $3 million.

The bank charged 33.94 per cent instead of 16 per cent on some business overdrafts.

For about 860 customers where the refund due was less than $5, the bank trousered the cash, saying customers were ­annoyed by cheques for small change.

In other revelations at the commission yesterday, a Bank of Queensland executive said he did not have any idea how the bank would bring its bonus scheme into line with recommendations of an Australian Banking Association review that found bank managers should not receive bonuses based solely on sales performance.

BoQ general manager of product, performance and governance Douglas Snell said the bank ­intended to be compliant with the review by June 2019.

“But I’m not sure where we’re at at the moment,” Mr Snell said.

Some BoQ branches are company-owned but others are franchises where the owner/manager is paid on commission only and does not receive a salary package.

The bank assesses managers based on whether their customers see BoQ as their main bank, sales of insurance products, cross-selling credit cards, compliance and growth.

A manager who hit all the ­financial targets would win 850 points in their assessment, but if they were hit with disciplinary ­action, they would lose only 350 points.

The commission also continued to examine bonuses paid to bankers, after earlier this week hearing that Westpac staff still ­received bonuses largely based on selling financial products and that an ANZ executive thought a plan encouraging bankers to sell loans “relentlessly” made little sense.

Mr Snell faced questions about BoQ customer Suzanne Riches, a primary school teacher who borrowed $280,000 to buy two Wendy’s franchises after her husband received an inheritance and wanted to secure their financial future.

The bank, which at the time used the slogan “it’s possible to love a bank”, knew it had mishandled this loan but did not admit it to the Financial Ombudsman Service when asked, the commission heard.

The FOS summarised its understanding of the case by saying there was a question as to whether BoQ had engaged in ­irresponsible lending. The bank said this understanding was ­correct.

But senior counsel assisting the commission Michael Hodge QC put it that BoQ had already determined it had engaged in irresponsible lending.

Mr Snell could not explain why the bank did not tell FOS that the bank already knew of the poor practice.

BoQ later sacked the manager of the branch that handled this loan for misappropriating customer funds, and the branch had scored poorly on internal audits.