Commonwealth Bank of Australia (CBA) cannot continue to suggest its involvement in the collapse of advice firm Storm Financial (Storm) was simply the work of a rogue bank branch, the Finance Sector Union (FSU) has said.
“Evidence given by the CBA appears to be portraying its role in the Storm collapse as the work of a rogue branch. However, the FSU understands that a CBA audit of 600 files in relation to loans provided to Storm clients uncovered no breaches,” the union said in its submission to the Parliamentary Joint Committee (PJC) inquiry into Australia’s financial products and services.
The CBA provided hundreds of margin loan facilities to Storm clients that were “obviously inappropriate” despite the involvement of inadequate or misleading information provided by third parties, the FSU said.
“We believe the CBA had an obligation to lend responsibly by verifying the information and where appropriate modifying or rejecting applications – obviously this did not occur,” the union said.
The North Queensland bank branch’s attention to sales targets instead of client needs helped create the Storm debacle, according to the FSU.
“The behaviours of Storm and CBA employees were driven by a culture that encourages sales ahead of good customer service, which has become widespread in the financial services industry,” the union said.
“The use of upfront commissions, trailing commissions, soft-dollar incentives, volume bonuses, rewards for achieving sales targets and fees based on a percentage of funds under advice are all symptomatic of the culture that allowed and encouraged unsuitable and unsustainable products to be marketed en masse.
“We note that these types of remuneration are exactly the ones that ASIC are suggesting should be banned.”
While the FSU accepts a major aim of any business is to make profits, the sale of major credit products has ethical dimensions as well as wider implications for society.
“The majority of the negative impacts when things go wrong are primarily absorbed by the consumer and society – not the institution engaging in the practice,” it said.
