ACC3116: Accounting and Society - Shockers From The Banking Royal Commission - Accounting And Finance Assessment Answer

Subject Code: ACC3116

Accounting And Finance Assessment Answer

Assignment Task: ACC3116 The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has provided a rare glimpse into some of the inner workings of one of Australia's largest and most profitable industries. So far the view hasn't been pretty – and any question as to whether such a major inquiry was warranted has now been put to rest. The royal commission has recently been focusing on misconduct in the area of consumer credit and has found plenty of examples. Some of the self-serving shenanigans the banks got up to would almost be funny if they weren't so painful for the bank customers who bore the brunt. With the royal commission now a couple of weeks in and round one a matter of record, we thought it an opportune time to provide a brief rundown of some of the more hair-raising revelations to emerge from the proceedings. It's no accident that many of the issues that have surfaced in recent weeks are ones CHOICE has been drawing attention to for the past few months and years. CBA playing fast and loose Over the last couple of weeks, it's been confirmed that dodgy dealings in the area of credit card insurance, mortgage broking and credit cards themselves have been business as usual at Australia's biggest bank. Dangerous home loans anyone? CBA admitted at the royal commission that it relies heavily on mortgage brokers to vet the creditworthiness of its home loan customers and that verification is minimal at best. It's an approach that can easily leave borrowers in a tight spot since brokers are incentivised through commissions to line up the largest loans possible. The bank was aware that its arrangements with mortgage brokers weren't ideal,v but CBA let the brokers continue to drum up business because it couldn't bear the thought of losing market share on its home loan products – and perhaps even being bumped from its top spot as Australia's biggest mortgage lender. In our mortgage broker shadow shop, we looked at 15 mortgage brokers with the help of real consumers who were in the market for a home loan. We rated the brokers on how well the loans they recommended fit the home buyers' circumstances. Among the mixed results, there were seven total fails and two near-falls. One couple who wanted to buy a $600,000 investment property were advised to take out a $1m loan secured against their home. CBA also admitted at the royal commission that you actually pay more for your loan when you go through a mortgage broker than you do when you go straight to the bank, as customers aren't told about mortgage discounts that could save them thousands. NAB's 'gym bro' mortgage financing In one of the more entertaining revelations to come out of the royal commission to date, NAB revealed how far it's willing to go to line up more home loan customers. The bank hatched a deal to incentivise gym owners to get customers to sign up for a loan through its 'introducer program'. How did it work? Introduce a potential borrower to the bank and you get a sweet 0.4% of the loan value ($1,800 on a $450,000 loan) if it all goes through. The larger the loan, the more you stand to pocket. This one was so over the top that some NAB employees cooked up fake introductions and nabbed the commission themselves. About $50 million worth of NAB home loans where borrowers are having trouble making repayments have been linked to this practice. ANZ's 'low-doc' loans ANZ admitted at the royal commission that it doesn't actually verify a customer's living expenses when it processes a loan that comes through a mortgage broker. Instead, the bank relies on murky indicators like a Household Expenditure Measure. In one case ANZ offered a 30-year loan to a 71-year-old. File notes revealed the bank's 'exit strategy' was to sell the house to recover the outstanding mortgage after the man's death. Not unlike a number of other goings-on in the banking industry as of late, the tactic is a direct contravention of the National Consumer Credit Act.

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