A Wunch of Bankers

Daniel Ziffer



Rien Low has been in the spotlight before. A TV producer, he was in a boyband and sang on televised talent shows for millions of people. Now he’s just handsome, well dressed, and in the royal commission’s witness box, desperately alone.

After his father, Peter, died in a 2015 industrial accident, Rien, his siblings, and his mother uncovered the breathtaking amount of credit he’d been saddled with by Suncorp — almost $1 million in five separate outstanding loans that had been extended to a 62-year-old blasting contractor, a sole operator with no staff and half a shed on a bush block that was to be his superannuation.

It was a second shock after the death. Rien gave his evidence slowly, thoughtfully. His father’s name is his middle name. Focused, despite his emotion, he had the tight jaw of someone who had not just tasted tragedy, but had it roll around in his mouth for a few years.

After he, his sister, and other relatives delved into the situation in the weeks after Peter’s death, Rien contacted Suncorp. You have to sell your mother’s house was ‘the extent of the conversation’, he told the commission.

Without the father’s income, Rien’s mother, Jenny, a full-time housewife of 30 years’ experience, was to be $3,000 a month short on the payments. The family asked for a year’s pause on the repayments, so they could grieve and restructure their affairs.

Suncorp offered to defer the next four monthly payments, but noted that the repayment amounts could be recalculated — increased to make up for the gap.

Rien tried to consolidate the five loans, which were accruing $1,200 interest each week. Knocked back there, and unable to refinance with other lenders, Rien examined the financial position of his father’s business at the time of being given the loans. With that, he contacted the Financial Ombudsman Service with a complaint about Suncorp’s conduct in approving the loans in the first place.

The ombudsman found that the final of the five loans to the Low parents — for $240,000 — was ‘irresponsible’. That’s because one of the purposes of the loan was to fund construction of a factory on a block of land that the parents owed, when just a year earlier Suncorp had lent them $200,000 for the same purpose.

But it was a perverse win.

The ombudsman’s determination meant that the bank couldn’t charge interest on the irresponsible loan. The family wanted the existing payments — $1,005 a month — to go towards paying down the principal of the irresponsible loan.

The bank called that plan an ‘interest-free loan spanning 17 years’, and wouldn’t do it.

So instead of letting Mrs Low make the existing payments (as it would have if her husband was alive), Suncorp now wanted the entire remainder of the irresponsible loan — $221,000 — cleared.

In just six months.

At this point in the timeline of bastardry, someone in the public gallery — loud and audible in the quiet space — said: ‘SHIIIIIT!’

Incredibly, the family got a letter from the CEO, David Carter, expressing a change of heart: ‘We’re writing to let you know the minimum repayment for your loan has decreased and the minimum repayment amounts will now be $792.53.’

It was over. The four loans would be paid for by the sale of the house. The last one, even though it was irresponsibly lent, would be paid back in a way that wouldn’t put the entire family in penury.

A Suncorp employee, Wendy Calcott, called. Rien told her they’d got the offer in the mail and were ‘really happy’ and ‘humbled that the amount had been lowered’.

She had no idea what he was talking about.

The next day, Ms Calcott sent an email: she wanted to see the letter, because the CEO’s office had confirmed they hadn’t made any offer. Rien might be holding the piece of paper, but it never happened.

Behind the scenes, there was a desperate top-level search for the letter. CEO David Carter is emailed directly about it. ‘???????’ one executive writes in their response. ‘Sounding a little strange to me,’ says another.

One executive emails with his suspicions: ‘This sounds like he’s up to something.’

Rien wasn’t. He was just a grief-stricken son attempting to navigate a system that had already seen him deal with 15–20 Suncorp staff over hundreds of hours, while holding down a full-time job, supporting his grieving mother, and grieving himself.

Rien made another complaint to the ombudsman. Suncorp told him the deal was off the table unless he withdrew the complaint. (The ombudsman came back with a preliminary view that Suncorp hadn’t misled them with the ‘phantom’ letter from the CEO).

The family accepted a deed to pay back the irresponsibly lent loan in five years. It was a better offer than six months. There was also a confidentiality clause that not only stopped them bad-mouthing the bank, but would kill off a mooted complaint about the broker who facilitated the loans.

Rien was struggling:

I mean, the impact it has had on Mum — she’s not here today, because the — the pressure and the expectation — it just — everything the bank and obviously what has happened to my father, it has just — it’s taken its toll on her, unfortunately. It has taken its toll on all of us. It’s just very, very stressful and a lot of pressure, you know, just — and trying to live a normal life and work full-time. It has — it has just been very, very difficult.

Later, Suncorp executive David Carter would agree it wasn’t good enough.

The loan was irresponsible, he concluded. Of course, that didn’t stop the bank from vigorously fighting the ombudsman at every step. Suncorp even used the Google Earth satellite photo service to argue — years after the loan was granted — that the ‘factory’ was 90 per cent completed.

When staff emailed each other, saying ‘WTF is this son up to?’, Carter agreed the ‘language was inappropriate’. But he disagreed that the sentiment behind the language was inappropriate, because the ‘intent of the team involved was very good’.

But before those mealy-mouthed responses, another injustice scratched the skin.

As Rien spoke, the Westpac team relaxed outside the courtroom after their witness had been excused on an unrelated earlier matter.

Their light, relieved laughter slid under the door of the court, which was silent but for Rien’s responses.

‘She wasn’t really coping,’ Rien said, about his mother, as the peals pinged around the room. It was an unwitting response from outside — but all it sounded like was mockery.

I was alone in the back row, with my colleagues all downstairs in the media room.

What do you do? I put out an instant ‘metaphor alert’ on Twitter, as though a sad-face emoji could outweigh the aching testimony of a family broken by tragedy, which was then compounded by bureaucracy and cruelty.

Just another day in the commission. Just another day.



I won’t lie: I didn’t think they’d find this much. I knew the royal commission would be interesting, but I struggled to see how much dirt it could dig up after more than 70 relatively recent inquiries and reviews from parliamentary committees, expert panels, and regulators.

The government didn’t want it to happen. Despite a mounting list of scandals, and an increasingly fractious group of rebel Coalition members disposed towards an inquiry, it held the line.

But the Greens had it as a policy, and Labor took it up, too. It was a time for populism, with stagnating wage growth, and evidence — and, more importantly, sentiment — of growing inequality.

Dropping into that maelstrom was the spectre of well-compensated bank executives apologising for the latest stuff-up — ATMs that might have helped finance terrorism, misdiagnosing heart attacks to avoid insurance payouts — and keeping their millions in bonuses despite shareholder anger about remuneration bubbling up at annual general meetings.

A private member’s bill from dissident Nationals MP Barry O’Sullivan was the final straw. With support from Labor and the Greens, it was to set up an inquiry that would look very different.

The Coalition had other problems. Its numbers in the House of Representatives were down, with multiple members fighting by-elections (after the constitution-powered Section 44 scuffles, where some MPs found their parents’ old foreign passports under a couch). All of a sudden, the bill was on track to go from unwanted distraction to potential success. And every day, Labor banged the drum about the government’s reluctance to commit to an inquiry.

Eventually, the Big Four sniffed the wind of what a royal commission would look like under a likely Shorten Labor government. No, thanks. So, on 30 November 2017, they dropped a letter signed by all eight of the chief executives and chairs of ANZ, NAB, the Commonwealth Bank, and Westpac. (Actually, NAB’s Dr Ken Henry had sent a draft of it to the treasurer the day before — ‘Dear Treasurer. Further to our discussions, attached is a draft letter sent on behalf of the major banks. This remains subject to final approval’ — lest you think the thought just dropped from the sky as the banks woke up and ‘read the room’.)

Though they’d consistently argued against it, the speculation was ‘hurting confidence’, ‘undermining the critical perception that our banks are unquestionably strong’, and this meant it was now ‘in the national interest for the political uncertainty to end’.

The bosses asked the treasurer to establish an inquiry into the sector ‘to put an end to the uncertainty and restore trust, respect and confidence’.

Writing this at the end of the process, I think I can say: one out of four ain’t bad.

Because you’re buying this book to get inside information, I’ll tell you. CommBank chair Catherine Livingstone, the only woman among the eight names, had the most legible signature. Her CEO, Ian Narev, had a practical but hasty scrawl emphasising the I, N, and V — like a star cricketer who needs to sign a lot in a hurry.

ANZ CEO Shayne Elliott wrote his surname in beautiful cursive script. But his first name was apparently just the vowels. ANZ chair David Gonski was crafting his signature when someone pulled the paper away from him. (Only available explanation.)

NAB chair, Ken Henry? Beautiful. Although based on his testimony in the final round, he snapped the pen straight after using it. Like his answers, NAB boss Andrew Thorburn started well — it was definitely an ‘A’ — before going in a lot of directions. Just the first name (superfriendly), although I’m still mystified as to how a lower-case ‘w’ ends in a straight horizontal line.

Westpac boss, Brian Hartzer? Majestically presented, bold and authoritative. Bloody Americans.

The greatest was Westpac chair Lindsay Maxsted. His signature was a work of minimalist art. Forget cheques, he should be writing this on a canvas and sending it to the Venice Biennale. Look at it! You’d need Mr Squiggle to solve that one.

The letter forced the prime minister into one of the truly great climb-downs.

Having been banging on, on breakfast TV, just 48 hours earlier about how it was an unnecessary distraction, Malcolm Turnbull said the ‘only way we can give all Australians a greater degree of assurance’ was an inquiry into misconduct into the financial services industry.

It won’t be ‘open-ended’, the PM assured us. ‘It will not put capitalism on trial.’

The jury didn’t buy that. When the sharemarket opened, Commonwealth Bank shares dropped 2.6 per cent, Westpac 2.06 per cent, ANZ 1.6 per cent, and NAB 1.7 per cent by mid-morning. In the fullness of time, those drops would come to be seen as hurting like a paper cut.

In 2016, a royal commission was estimated by the Parliamentary Budget Office to cost $53 million and take two years to complete. The PM’s 2018 version would cost $75 million, although each of the big banks would spend a further $50–$100 million on legal fees in a bizarre swimming-pools-private-school-fee-and-orthodontics-led stimulus program for the stuttering economy.

When it was announced, I thought that at $75 million it’d be cheaper and easier just to hire Adele Ferguson as a personal assistant. Look, a researcher, too … if you’re splashing it about.

Maybe, if you were really keen, give every business-reporting unit in the country (there’s not many) a commerce degree–toting junior who’d realised that working 80-hour weeks at a consulting firm was too time-consuming and lucrative, and wanted to cut back to the more relaxed 65 hours a week offered in the media industry.

But that would cover it. I mean, these are the Big Four. Their brands are imprinted in our brains. Their branches are in a (diminishing) number of high streets. They make $5–10 billion profit a year. Not turnover, pure profit.

Seriously, if either BHP, Rio Tinto, or CSL didn’t exist, they’d all fit in the top-five biggest companies on the Australian stock exchange without some being nudged just out.

I hardly think that banking is going to be revealed as a hive of iniquity where regulation is ignored, law-breaking is tolerated— or even made part of an accepted business model — and the interests of the customer are laughed at, discarded, or trampled by executives chasing bonuses that ignore prudent risk or clear problems.

Certainly, the royal commission wouldn’t expose the kind of problems where an ordinary person — were they helicoptered into the meeting room — would hold their hand up and meekly say, ‘I’m sorry, none of you are serious about doing this… right?’

Let’s be real. I hardly expect we’re going to find that sort of stuff.

It begins

There are some great suits here. It’s Monday, 12 February 2018, at 10.00 am. We’re at the Fair Work Commission on the corner of Exhibition Street and Flinders Lane in Melbourne. It’s a half-block from the ‘Paris End’ of Collins Street, so called due to its elegant late-19th-century buildings, gentlemen’s clubs, and snootily serviced dining options.

Just one tiny lift well foyer is jammed with lawyers and bankers in incredible suits. Money suits.

There’s already a laser-cut sign with the full name of the shebang — Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry — so it must be serious. The doors open, and we file in quickly. There are no spare seats.

They start reading the entire Letters Patent that outline the shape and scope of the commission. It’s legal poetry, lots of ‘and we further declare’.

Even though I’ve read the document several times previously, it’s hypnotic to hear it recited. Like, go-to-sleep-on-camera hypnotic. Having just nine ‘contact hours’ of tuition a week made for an enjoyable Bachelor of Arts degree, but right now I’m kind of regretting not doing the double degree and getting that law qualification I was desperately unprepared for and would have hated.

For all the internet hoo-ha about this being a neutered inquiry, set up to avoid a tougher one from a government of another political stripe just down the way … it opened with a full slap in the face.

Hayne had asked institutions for up to 50 pages of extreme honesty: any misconduct from 1 January 2008 to 14 December 2017. Setting the bar even lower, each institution also had to give up anything ‘which it considers has fallen below community standards and expectations’.

Hayne wanted responses by 29 January. Most gave examples of wrongdoing, not — as the commissioner requested — the reasons for it, ‘the nature, extent and effect of the conduct they had identified’.

Commissioner Kenneth Hayne wanted frankness. He got spreadsheets. Hayne wrote back on 2 February, asking entities to be more specific about misconduct in the previous five years. The deadline was 4.00 pm tomorrow, 13 February. Most — large entities — said they couldn’t meet it.

Hayne was astonished. They don’t have this stuff written down?

HAYNE: It needs to be remembered that misconduct is defined in the terms of reference as including conduct that is an offence against commonwealth, state or territory law, conduct that’s misleading or deceptive, conduct that is a breach of trust, breach of duty, or unconscionable conduct, and conduct that breaches a professional standard or a recognised and widely accepted benchmark for conduct.

So, you know, bad stuff.

The fact that the initial request had been made two months earlier, and still couldn’t be met, ‘is itself a matter to which further attention may have to be given’. It was. And banks kept missing deadlines.

Then, another bomb. Confidentiality clauses are dead, Hayne said, and I dare you to try it on.

If someone has signed a deal, but wants to make a submission to the royal commission, go for it. Any institution that took on a whistleblower or member of the public could look forward to ‘two immediate consequences’.

First, the commission would use its compulsory powers to get the information. And the kicker: the fact that an institution tried to stop the information ‘would excite the closest attention’ about the legality of the conduct and ‘what were the institution’s motives for seeking to prevent the commission having that information’.

Hayne finished up, and ended in what would become a common lamentation. Sounding like a question, but in many ways a signal, he simply said: ‘Ms Orr.’

Senior counsel assisting, Rowena Orr QC, stood up. Tall. Glasses. A warm voice backed by steel. By the end of the year, she’d be pictured on the front page of The Australian Financial Review under the banner ‘Australia’s Favourite Barrister’. The Australian would be using her photo — just the glasses and up — to convince people to subscribe to the paper.

One of the key reasons was that she let the work speak for itself. There were no interviews. No comments. With the exception of a few, rare frames of her entering or leaving court, the only way you’d see Ms Orr was in the room or on the webcam.

And she was relentless.

Answers that equivocated were interrogated. If a document said something, and you — the boss — disagreed, well, ‘What are we to make of it?’ If a claim was rubbished, the dreaded phrase came out: ‘Let me take you to a document’ that would then lay it out in black and white. Sitting through it every day, you wanted to occasionally yell out It’s a trap! as a hapless witness made bold pronouncements about a list of potential elements, noting that they wouldn’t be the case … before being drawn to the document that detailed each one as policy and procedure.

The royal commission came during a year of epic failure for the government. The popular leader, Malcolm Turnbull, unable to hold back angry conservative agitators fronted by immigration minister Peter Dutton, brought on the fight by spilling the leadership. Dutton failed, but the margin was small enough to attract another contest. The government’s most consistently popular member, Julie Bishop — deputy to four Liberal leaders — could have won, and stemmed anger about the decapitation. Members looked at that option and said, ‘Nah, let’s do something else.’ They chose treasurer Scott Morrison, who’d pledged his support for Turnbull by hugging him days earlier, to see off a challenge from a minister in charge of the hundreds of thousands of people who come to Australia, but who proved unable to count to 43.

The most charitable way to describe it was ‘messy’. It was an almost unprecedented shambles that left the government without two popular leaders, with diminished numbers in the opinion polls, and facing an imminent election. Meanwhile, the Nationals had a problem with male leaders — with strong opinions on the sacred, heterosexual nature of marriage — succeeding in having or attempting to have sex with women they were not married to.

As members jumped ship and the government’s hold on power become tenuous, they worked out a way to hold on: not work. As few as seven sitting days in almost six months were scheduled, to avoid an implosion before the election.

That was Canberra, beamed out on the evening news.

Often, the next story would be the flipside. The commission and Ms Orr, doing her job: holding the powerful to account for unconscionable actions against the vulnerable.

Calm, unflappable, and tenacious, Ms Orr’s persistence was her most terrifying attribute.

By the end of the year, multiple shareholders would stand up at NAB’s annual general meeting and ask for Ms Orr to be brought onto the board. In the Herald Sun’s end-of-year cartoon, she was sandwiched between late singer Aretha Franklin and exiled Nationals leader Barnaby Joyce — Orr tightly holding the tail of a fat pinstripe-suit-wearing cat with B.A.N.K.S. tattooed on its fingers, the cat clawing a fistful of cash.

Ms Orr read some detail from ‘Background Paper 1’, a kind of cast list for the murder mystery/relationship drama we’re about to sit through for the next year.

The four big banks — Commonwealth Bank, Westpac, ANZ, and NAB, in that order — are huge. The Commonwealth Bank is that biggest company listed on the Australian stock exchange. Its market capitalisation, the total value of the shares, is $125 billion.

Even the laggards have a ‘cap’ of more than $70 billion. Authorised deposit-taking institutions (ADIs), including other banks, building societies, and credit unions, held approximately $4.6 trillion in assets in late 2017. That’s essentially two-and-a-half times the size of Australia’s

$1.8 trillion nominal economy. So, you know, big. And the major banks have three-quarters of the total assets held by institutions — so, for most customers, that’s who is looking after their money.

Ms Orr kept at it, swiftly and briefly.

‘The commission is not adversarial litigation. It is an inquiry,’ she said. A lot of work had been done. A lot was to come.

‘Thank you, Ms Orr,’ commissioner Hayne said. ‘Adjourn the commission.’

After just an hour and six minutes, we rose in our seats, giving a small nod/bow as the boss gathered his things and left.

The mood in the packed lift was silent and gloomy. For the bankers. My new colleague on ‘The Business’, presenter Elysse Morgan, and I … we sailed out.

‘It’s going to be great!’ I told a grey-faced public relations man I knew from one of the Big Four banks. ‘Sunlight is great.’

His face didn’t agree.

I’d got a new job. After almost a decade of producing radio programs — for Steve Price, Steve Vizard, and Andrew Bolt, and, for a rewarding six-year-stretch, Jon Faine — I’d gotten sick of the 4.40 am alarm. On top of that, our two children were threatening to begin to sleep regularly through the night, and I needed a new challenge.

Producing daily news and current affairs is a demanding job, and one that requires quick thinking and a thick contact book. If I search my phone for ‘Eddie’, I get broadcaster McGuire, entertainer Perfect, as well as ‘Knew Church Sex Abuser’ and ‘Windsurf to Tasmania’. I’ve always had a password on my phone so that my children don’t send emojis to Tanya Plibersek or Mick Fanning, bum-dial John Howard’s house, FaceTime Karl Stefanovic, or accidently prank ‘Gloria’ (a former adult-phoneline worker who surprised Tony Abbott on-air one time) or three-time Brownlow Medal winner Bob Skilton.

Inexplicably, I’d talked my way into a job covering business for the ABC. On television. I’m not a complete idiot, so I knew a little of what to expect. I’d been a presenter on The Breakfast Show on Melbourne’s Channel 31, and had been a talking-head expert on Today Tonight when I wrote about entertainment for The Age. The main thing was that everyone dressed better, you only had to write a few hundred words a day, and pictures were important.

The ABC didn’t provide any training — beyond the quiet exasperation of the poor camera operators who had to film me — so I decided to model my tone somewhere between Frontline’s Martin Di Stasio and The Simpsons’ Kent Brockman. That wasn’t the intention, but if you saw my early reports you’d certainly think that. My eyebrows seemed to be separately attempting to escape my face in my piece-to-camera (PTC) segments, my 40-year-old face had been hiding wrinkles that only showed up when I spoke, and I stared with a look of such pained intensity it would only be explicable if I were recording the footage while the building was being demolished by wrecking ball around me.

It slowly got better.

My job would be to cover the hearings for the ABC’s business program ‘The Business’, producing and presenting a four-minute package each day of the commission’s hearings. I’d have to appear on News24, do crosses to radio, write online pieces, and create a shorter version of the story for the national 7.00 pm news bulletins, I was told, if there ‘was interest’. If you’ve got this far in the book, you’ll know: there was.

But TV remains weird. Everyone is strangely impressed by it. I was used to, with the help of a producer and host, booking 2.5 hours of live radio interviews, on topics of the day, with ten to 12 different ‘talent’ from a ludicrous spread of topics, ranging from the premier to a woman who got stuck in a drain. That’s every day, at a time most people are asleep. Standing in front of a building and answering three questions — which I wrote — on live TV seemed easier.

I would find out that it’s not.

SCAM ALERT: I was robbed in Myer. I needed a ‘compact’ of make-up: a plastic disc with a mirror, above a brown disc of powder slightly bigger than the size of a 50-cent coin, recommended by the make-up artists at the ABC. I opened my wallet to buy it, and suddenly $50 was gone. I was left with just the make-up. People, particularly the women in our community, need to be vigilant about the dangers of this fraud.

It really begins

The first hearings are tragically comic. Awful, dumb stuff: shady characters bribing staff to write loans that earned millions in commission payments; shonky car dealers selling lemons to hard-luck customers; a gambling addict given credit-card limit increases.

We’re in a different place, the Commonwealth Law Courts in Melbourne, across the city from where we started. To one side of the wide forecourt is the green glory of the Flagstaff Gardens. Beneath it is the subway station. To the other side, the hulking monoliths of the court district: Children’s, Magistrates’, County, and Supreme.

Don’t worry, we’ve got our own category of misery. As well as hosting the royal commission and Federal Court — with companies duelling over transactions — a steady stream of restless children and harried mothers reminds you that the building holds the Family Court, too.

Go up the spiral staircase one level to Court 4A, have the heavy door opened for you by a security guard, and walk in. You’re here, in a room clad in honey-orange wood, staring at just six rows of seats in the public gallery. After that, two rows facing each other across a long table. To the left, the witness in the box. Behind, above them all, the commissioner.

But what a mix in front of him. Commission lawyers. Bank lawyers.

Rows of them.

Behind them, rows of clerks, security guards, a smattering of bank victims, and — up the back — journalists. It takes me a while to realise: our rows are the only ones not getting a swimming pool out of this.

I sit down, set up my laptop and notepad. It begins.

Knock-knock: the first sounds of the first day of public hearings at the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

The quiet mumble of voices, of people showing each other things on phones, become silent as the knock is heard and the clerk asks those present to rise.

Commissioner Kenneth Hayne lopes in from the secure door to the seat in the centre, beneath the coat of arms. He seems resigned to, but doesn’t like, the fuss, and bows gently and sits promptly, allowing the crowd to return the gesture.

His first words: ‘Do sit down.’

Before the gory battle of examination, senior counsel assisting, Rowena Orr QC, briefly details what would be the flipside of the royal commission. Away from the sweat/tears/forced admissions of bloody failure in the witness box is the boring-but-important work of researchers and experts in preparing background papers on the industries examined.

One of the earliest papers would include data from the Australian Securities and Investment commission (asic) revealing that Australian banks had paid nearly $250 million in compensation to almost 540,000 home-loan customers since 2010, relating to fraudulent documents, errors, and breaches of lending laws.

Commissioner Hayne had been furious about the banks’ initial lax homework in detailing their misconduct. They’d clearly got the message and hit the books, because what they turn in about a decade of misconduct is riveting and shocking, a dirty laundry list of misconduct and misdeeds.

At least, that’s what you call it on TV. In the back row, it’s the ‘shit-list’.

Every company asked by the commission to appear in that hearing was given 50 pages, and told to go back up to ten years. Everything that met the definition of ‘misconduct’ or ‘below community standards and expectations’ went on it. The shit-list dominates the first day, as each organisation drags out their dead. Much of it was known — much of it was lawsuits, asic action, and ombudsman decisions — but to see it pile up is monstrous. It is read out clinically, but you can’t escape the mounting scale and diversity of the problems. The journalists just copy it down, and, like a loving mother bird for its children, chew it up and regurgitate it for readers.

Truly, it is a shit-list:

ANZ: For a decade, some ANZ home-loan customers were charged a higher interest rate than they should have been. Oops. Also, 400,000 offset accounts weren’t properly linked to home loans, so customers were charged excess interest. The bank charged 52,135 customers a higher interest rate on their credit card than they’d advertised. Also, it mailed out offers for overdrafts — which looked like free money — without making any enquiries about the customer’s credit limit or ability to pay. As part of a 2015 industry-wide review of interest-only home loans, asic checked on a sample of 25 customer files. Where were the genuine inquiries into customers’ living expenses? ANZ said sometimes there weren’t any. Good news! There’s a whole chapter on this.

AUSSIE: Although it’s wholly owned by the Commonwealth Bank, Hayne wrote and asked it to provide a 50-page summary of its misdeeds. Aussie responded with eight paragraphs, as part of the CBA’s submission. ‘Aussie Home Loans acknowledged no misconduct in the last ten years,’ Ms Orr noted.

SPOILER ALERT: This undercooked it a bit.

Hayne wrote back. We never got access to that letter, but I’m convinced he would have expressed a sentiment, if not a form of wording, along the lines of, It wouldn’t be clever to treat me as an idiot. Wow, a spreadsheet came back! It detailed breaches of responsible lending obligations, brokers failing to provide credit products in line with a customer’s requirements, and eight further events in relation to ‘other types of misconduct in respect of home loan applications’, including document falsification.

CITIBANK: Who? I thought their only existence in Australia was those guys in airports who try to give you a case of wine or 100,000 frequentflier points if you sign up to a credit card. Didn’t realise they were an actual bank. So, they didn’t tell customers they were putting international transaction fees on some purchases. They ‘had not been actively refunding credit balances on closed credit card and loan accounts to all customers’, which is, when you think about it, pretty mean. They also may have subcontracted their ‘get the money’ division to some heavy goons, given the ‘customer contact for the purpose of debt collections was a category in which misconduct … may have arisen over the years’. Those collections happened to people in ‘financial hardship’, which may have been deeper because of the ‘excessive time’ the bank took to assess applications for hardship review. Alternatively, it could be because Citibank acknowledged it had listed some customers in ‘hardship arrangements’ as being in default, both incorrectly and inappropriately. That makes it a particularly tough argument for consumers, when the men in dark suits from Citibank collections turn up to your door to repossess your stuff.

COMMONWEALTH BANK: Where do you start? By giving them a novelty coffee mug with colourful writing saying: ‘You Caused This!’ Because we’re only using a pitchfork to heap dung on the field of consumer finance — home loans, car loans, credit cards — let’s just go with court proceedings, asic infringement notices, and penalties. The times in which Which Bank? acknowledged it had an adverse comment or finding against it or an entity aren’t innumerable — nothing is — but I do want you to get to at least the end of this chapter before you get kicked out of the bookshop, so I’ll just say: plenty.

Let’s let the commission summarise. ‘The volume of material provided made it difficult to assess in a meaningful way the type and scale of CBA’s misconduct.’ Certainly, the way it went about ‘seeking consent’ from credit-card customers to receive limit increases was so flawed it entered into a negotiated settlement with asic in 2012. Don’t worry, two years later they had more problems with unsolicited offers of credit. After that, it sold 65,000 credit-card customers, and 20,000 loan customers, insurance products that they couldn’t have met the criteria to claim on. (For example, income-protection cover for people who didn’t have jobs.) This was described by CBA not as misconduct, but as ‘conduct falling below community standards and expectations’. Lest you think they were doing a good job in the field of responsible lending, there were problems with ‘calculations, insufficient documentation and verification’, as well as misconduct by employees, and third-party misconduct. Truly, a hamburger with the lot.

NAB: When you read the chapter on home loans and ‘HEM’, don’t think for a second that it’s only an ANZ problem. Before June 2013, NAB didn’t look into the declared living expenses of home-loan applicants. If they were below a certain benchmark — in. They also acknowledged misconduct in screaming from the rooftops in 2014 that they had the lowest standard variable rate for more than five years … when the four major banks all had much the same rates. And then there were the 16,288 times the bank recorded their customers as being in default, when they weren’t. And they contravened the Privacy Act in the process. Not paying customers who expected payments, millions of dollars in incorrect fees, and the really tough bit: this isn’t even all of it. ‘The submission did not grapple with the task set by you, commissioner,’ Ms Orr noted. Gulp.

WESTPAC: Despite making two submissions, the bank confirmed — Last night, Your Honour! — there was more coming. Westpac applied higher interest rates to credit cards than required by an enforceable undertaking Westpac had given to the Australian Securities and Investment commission (asic). This is actually worse than it sounds. Having done the wrong thing, confessed, and avoided court by the regulator committing them to an agreement … they’d failed to meet it for 67,000 customers. That’s before the unsuitable sale of insurance and the use of flex commissions, which essentially give an incentive for people like car dealers to bump up the price of a loan. There was enforcement afoot about responsible lending obligations (like when it accepted a broker pushing a $529,000 home loan and credit card onto an 80-year-old man who spoke poor English). That’s before they charged 69,000 home-loan customers more interest than they were entitled to over the life of their loan, and misled thousands of customers by creating the impression they had to agree to receive credit-card limit increases to get the benefits from their cards.

Newspapers have fewer than 1,000 words on a page. My two-minute reports have around 200 words in them. Can you see why we called it a shit-list?

Despite having almost a year to do its work, the commission knew it had little time. One witness was tortured for three days, but most for just a few hours, and some for as little as 20 minutes. What the commission cannily did was use case studies — like that of Rien Low, above — to expose systemic problems across the banks, and then force the institution named to answer questions.

The themes kept popping up, the questions became the same, and the answers were varied but similar. If you sat in the commission long enough, the conclusions solidified like milk being churned into butter before your eyes. Because counsel like Ms Orr kept hammering on, and the answers kept coming back the same:

  • There was misconduct. Was it because of a particular culture, system, or practice within the bank — particularly remuneration, incentives, or commission arrangements?
    Yes and yes. It was money.
  • Why did it go undetected for such a long time?
    Didn’t care. Was making tonnes of money.
  • Were the entities’ processes adequate to prevent and detect the misconduct?
    No. Not a huge concern.
  • When it arose, did the bank respond in a timely and sufficient way to the misconduct?
    No. Would have cost money.

It would go on. From Melbourne to Brisbane, Darwin, and Sydney, and back again. Through it, we got to look right into the heart of Australian banking, at the decisions made in meeting rooms and in email exchanges that sidestepped the law, broke it, and put making money ahead of making sense.

But this is not going to be like The Years of Lyndon Johnson, the acclaimed five-volume biography of the US president by award-winning writer Robert Caro, whose first volume was published in 1982 and whose final one isn’t yet completed. Unlike that, this book is not going to win the Pulitzer Prize (mainly, you know, for reasons of ineligibility), because more than once I’ll use the phrase ‘holy shitballs’ to give you a sense of the reaction to something that happened.

Like the commission, I’ve focused on a few larger case studies that expose particular aspects of wrongdoing and ineptitude, coupled with colour and shock from the hearings that give you a deeper understanding of why the inquiry would reach the conclusions it did. By the end of this book, you’ll have plumbed the depths, you’ll have seen the light, and you’ll know a lot more about the practical limitations of the application of benchmarks for household expenditure on potential loans than you ever thought possible.

There were 69 long days of public hearings, 130 witnesses (including some frequent fliers), 6,500 exhibits, and 30 background papers on specific topics. And, I’m sorry, but if I meet you at a party and you can’t engage with in-depth chat on ‘Background Paper 6 (Part C): Financial Products Available to Retail Investors’, then I’m just going to head the kitchen, take one of your beers from the fridge, and try someone else.

To be, like, financial-planner-honest with you, there’s no way to absorb the full breadth. Instead, I’ll give you most of it — the best of it. What I’m saying is, if you can buy a couple of copies of this book for friends, and convince a few people to do the same as well, there is more than enough filthy gear left over for me to crank out A Wunch of Bankers II: Shock and M-Orr, and even the unexpected end to the thrill-ogy, A Wunch of Bankers III: Diminishing Returns.

I mean, there’s no shortage of terrible things to discuss.

The Commonwealth Bank kept offering credit-card limit increases to roofer David Harris, even after he told them he’d maxxed out $35,000 because he was a problem gambler.

He’d never even had a credit card until he got one in 2014 to get some dental work done and to fund a trip home to England. Gambling, and ‘panicking’ about how to pay off the first card, he got a second one, and a third.

At one stage, he worked 40 days straight trying to pay it off, toiling under the Sydney sun on a hot roof.

Through tears, he explained how he told bank staff he had a gambling problem — as if this couldn’t be discerned from his transactions — and begged not to be given more increased offers. A recorded call was played:

HARRIS: I think that it’s pretty bad of them to offer me that when I clearly have a gambling problem.

OPERATOR: Well, I mean what you choose to do on your card, we can’t control. We obviously look at payments and things like that.

HARRIS: Of course, of course. No, I know. But really they should look at that and go, Clearly, right, he gambles, so we are not going to give him any more money.

But the letter came in the mail. And online, every time he’d pay his rent or transfer money, it would pop up: ‘You are eligible for a credit limit increase, You are eligible for a credit limit increase.’

Read the statements and quake at the mind-blowing amounts he’s putting through online bookmaker Crownbet: $6,430 in one day; $4,550; $8,540 on others. In one long weekend, he uses his credit card for $18,700 in Crownbet transactions. That’s a quarter of what Mr Harris earns in an entire year — before you take out tax — up ladders, on the roof, sawing, and hammering. Apart from a few Uber rides and a streak of ‘CBA Other Cash Adv(ance) Fees’ in the seven-page statement covering one hellish month of $49,979.88 in transactions, there are none other than betting. None.

The statement helpfully notes on the front that if Mr Harris paid just the minimum repayment each month, it would take him 138 years and one month to clear the debt.

Generously, his boss offered him $35,000 — almost half his year’s salary — to pay it off, and joined him in a bank branch to ensure he did. The staff told him to call a phone line. The phone operator told him to go to a branch. Eventually, Mr Harris got out a pair of scissors and cut the card up.

But, addiction.

Two months later, he applied for and got a new card. ‘Then I maxed it out again in an even shorter period.’

Seeing him struggle with answering, commissioner Hayne was calm, telling Mr Harris to take a deep breath, and that he could stop if he wanted.

Mr Harris pressed on, his face occasionally in his hands as he cried about the difficulties of addiction: admitting your problem and trying to get help.

‘I tried to reach out for help, and I didn’t get any,’ he said, straining. ‘I got the opposite. I got more credit-limit increases sent through when I tried to tell them I had a problem.’

The bank knocked $10,000 off the total and stopped future interest.

He owes $23,400.

Not that it’s all one way. As Clive van Horen, who runs ‘retail products’ within the retail bank of the larger CBA monolith, noted: gambling is legal.

‘At what point do we say it’s not okay for an adult to choose how much to spend on different activities?’ he asked. ‘You can quickly see the slippery slope that puts us on if we say you can’t spend on gambling. Well, then what about other, you know, addictive spending on shopping or on alcohol or any other causes?’

But ‘serviceability’ is a loose concept. Under the bank’s formula (and most use the same one), for a $1,000 credit limit, you have an ability to service debt if you lodge the $20 minimum repayment on your credit card and are left with just $5 left at the end of the month.

At the Commonwealth Bank, if your average repayments over the past six months add up to 2 per cent of a potential new limit … you are eligible for a credit-limit increase. I’m not a consumer economist — Scott Pape does a great job of that — but I can add up enough to know that it means you might not be paying 98 per cent of what you could owe.

This is living.

Betting the house

But there was a bigger problem. Even this early in the piece, the royal commission had been swamped by more than 1,800 public submissions: two-thirds on banking, and most of those on consumer finance. Mortgage brokers were a key issue, and commissioner Hayne had them in his frame.

Across Australia, 56 per cent of home loans are written using mortgage brokers. They help people through the confusing and labour-intensive process — selecting the most appropriate product, sorting the paperwork, ticking the boxes. (A home loan can require more than 400 separate actions to be completed.)

Brokers are generally paid in two ways: an upfront commission at the inception of the loan and a trailing commission over the term of it — the kind of figure you don’t notice but adds up, like ten bucks a month until the end of time. Figures from asic put broker commissions on a half-million-dollar loan at around $2,700 upfront and a ‘trail’ of $700 each year until you pay it off.

There are two inherent conflicts of interest in the way they’re paid: by the banks. (Don’t worry — you, the client are paying, over time, but the varying upfront and trail commissions are problematic.) You’d have to be naive to think they couldn’t infect the advice given.

The ‘lender choice’ conflict arises because a broker has a self-interest in recommending a loan from a lender that will offer a higher commission. The ‘product choice’ arises because the more that that customer borrows, the greater the upfront commission for the broker.

Consumers understandably feel they’re going to get a better deal than if they walk straight into a bank, but it’s not necessarily true. Like those ‘comparison’ websites that offer to sort out the cheapest health insurance for you, brokers are often not looking at the whole market. Brokers send the vast majority of borrowers to four preferred lenders.

And the bar for the obligation they owe you is low. They have to provide you with a ‘not unsuitable’ loan. For the likely largest financial transaction of your life, that’s low.

From a long run-up, it took commissioner Hayne until the final day of the first set of hearings to distil his escalating questions about brokers into one killer line. Already, the reporting had sent shudders through, and provoked protest from, the broking industry. Sitting there, as he made rare but pointed questions or observations, you couldn’t help feeling he was winding up for a big hit.

But, as he interrupted Ms Orr, the signs were there he would knock the industry’s rich harvest of fees out of the park:

HAYNE: So who does a broker act for, who does the customer think the broker acts for, who does the lender think the broker acts for, are there varying or varied answers at various steps? If there are, what are they?

While the questions were deceptively simple, it was clear that the companies answering them wouldn’t enjoy it.

Commissioner Hayne acknowledged it was ‘the sort of question that invites, “You have three hours in which to answer it, you may commence writing now,” I think. “And don’t forget to put the number at the head of each page.”’

There are reasons he got there.

Daniel Huggins had entered the witness box. Since 2014 the boss of the home-buying division of Commonwealth Bank, he has oversight of $374 billion in home lending, a full 64 per cent of the bank’s total lending of $586 billion.

I don’t believe he’s paid on percentage, but you’ve got to admit: that’s mad money.

The commission had the bank’s homework in front of it, and had done some of its own. They didn’t muck around.

ORR: And CBA has recognised, has it not, that upfront and trailing commissions for mortgage brokers can lead to poor customer outcomes?

HUGGINS: Yes. I think we have acknowledged that there is a conflict in the commission structure, as I think has been recognised by others as well, in that the commission structure is linked to the size of the loan and therefore the — there is a conflict in that the upfront commission — the larger the loan, the larger the upfront commission and then, as you mentioned before, the longer a loan takes to pay off — and the larger it is — then the larger the trailing commission and that can lead to a conflict — well, there is a conflict between — between the customer, you know, and — and the broker.

Longer. Larger. Riskier. A higher loan-to-value ratio. More expensive over time. Higher rate of ‘interest-only’ loans. Higher incurred interest costs. Higher default rates.

ORR: Because it’s in the mortgage broker’s interests to get the largest loan approved possible to extend over the longest period of time for the customer to repay it?

HUGGINS: That’s — that’s how they would maximise their income, yes.

They know there’s a conflict. It’s written in the bloody contract. You have to sign it away. ‘The customer acknowledges that as a broker or other intermediary may provide services to me or us, it is possible that a conflict of interest will arise. I/we consent to a broker or other intermediary acting in this way.’

Lest you think this is just self-interest, the Commonwealth Bank also owns brokers Aussie Home Loans and eChoice Home Loans, and part-owns Mortgage Choice. And it’s not just Mr Huggins who thinks customers who use mortgage brokers are losing out through fees, interest, and incentives.

A bombshell submission, previously confidential, from Commonwealth Bank chief executive Ian Narev made all the same statements. It was given to former Australian Public Service commissioner Stephen Sedgwick in February 2017, who was tasked by the Australian Bankers’ Association to review remuneration in retail banking.

‘While brokers provide a service that many potential mortgagees value, the use of loan size linked with upfront and trailing commissions for third parties can potentially lead to poor customer outcomes,’ Mr Narev wrote.

Furthermore, the Commonwealth Bank boss supported ‘the delinking of incentives from the value of the loan across the industry’ and the potential extension of regulation to mortgage brokers that would force them to work in the customer’s best interests at all times.

The confidential submission went on to note that the ‘differences in remuneration between [brokers and bank staff who write loans] are driving different customer outcomes,’ which supports the case to kill off commissions.

So the Commonwealth Bank knew it was dudding its own customers, because the ways that mortgage brokers are paid include perverse incentives to write loans that suit their interests. It knew the loans were longer, larger, paid down more slowly, and got into more trouble. But a year later, with Mr Huggins in the box, what had Commonwealth Bank done?


Actually, it’s worse than that. They’d repeatedly squibbed crunching the conflict of interest at the heart of broking, and instead were trying to squeeze brokers and get more people through their proprietary channel — the front door — because they made more that way. Let’s do them in turn.

A Wunch of Bankers Daniel Ziffer