A bank manager who doubled repayments without warning on a business loan, crushing an Adelaide school teacher’s Wendy’s franchise, was sacked for stealing $156,000 the following year, the royal commission has heard.
Bank of Queensland, one of the biggest banks in Australia after the big four, made its first appearance at the banking royal commission on Thursday to face questions over its lending to small businesses.
The commission heard that BoQ resisted settling a dispute with Adelaide customer Suzanne Riches for many months despite admitting her account had been ‘maladministered’ in internal documents, to try to reduce its compensation bill by around $20,000.
Mrs Riches and her husband saw their fast food business go into liquidation soon after BoQ doubled the repayments on a loan they were offered without warning after they had made a commitment with Wendy’s to buy two franchises in 2012.
They had made the commitment on BoQ’s offer of $4420 a month, a figure which would lead their profits to be “skinny”, their accountants had advised. But when they were presented with loan documents by the bank to sign a week after the deal was due to be settled, monthly repayments had jumped to $8696.
BoQ executive Douglas Snell told the commission the branch manager who made the conditional offer to the Riches was acting outside his authority. But the Riches were right in “having comfort to proceed” with signing up for the franchises on the basis of the letter of offer, he said.
The manager who made the initial offer, followed by the unviable deal, had been found to be an unsatisfactory performer in previous years. Despite this, the deals he put together were not reviewed by the credit department. It approved the loan.
The same manager was later dismissed for taking $156,000 from two clients’ accounts.
The bank later admitted the Riches had never been able to service their loan. Its internal assessment of the loan found that once mistakes made by its staff were factored in the Riches’ business equation went from a positive $15,003 to a negative $14,447.
Mrs Riches took her case to the Financial Ombudsman Service in 2014 seeking reimbursement for her losses after she had been forced to close one of her two franchises. FOS ruled the Riches had to repay the debt but not the interest on the loan fees attached to it.
The Riches were forced to sell a block of land to reduce their debt. Eventually BoQ challenged FOS’ findings on maladministration despite its staff internally accepting it.
Further FOS findings split the benefit from waiving fees and charges between the Riches and BoQ and the bank continued to fight.
A BoQ internal document stated “as we were aware from the outset that there was maladministration in lending the goal has been to limit the amounts payable to the customer”.
The memo said the bank had to pay $23,850 to the Riches and said this was acceptable as “it could have cost BoQ anywhere from circa $44,000”.
BoQ’s intransigence ultimately did not pay off. FOS had first demanded it carry 40 per cent of the burden of fee and interest removal while the Riches were to carry 60 per cent.
But its ultimate ruling was reversed with the bank carrying 60 per cent.