Appendix A: CBA Agrees to Change Lending Practices in Remote Indigenous Communities
Thursday 19 January 2006 06-010
The Australian Securities and Investments Commission (ASIC) and the South Australian Office of Consumer and Business Affairs (OCBA) have welcomed moves by the Commonwealth Bank of Australia (Commonwealth Bank) to review its lending practices in Indigenous communities in South Australia, Far North Queensland and the Northern Territory.
The review follows an investigation by ASIC and the OCBA into personal loans arranged for borrowers in Far North Queensland, the Torres Strait, and the Anangu Pitjantjatjarra Yunkatjatjarra (APY) Lands and Port Augusta region in South Australia. The loans were arranged by a number of different brokers.
This action follows concerns about the eligibility criteria used by the Commonwealth Bank to assess loans, and discrepancies in some loan applications submitted by the brokers. As a result, some loans left borrowers over-committed and unable to afford the repayments.
ASIC’s Acting Executive Director of Consumer Protection, Ms Delia Rickard, said the majority of loans were for $20,000 or less to purchase second-hand motor vehicles, and that many of the borrowers were dependent on Centrelink payments for their incomes.
‘ASIC welcomes the constructive manner in which the Commonwealth Bank has acted to amend their guidelines for borrowers with specific needs.’
‘There is a need for all financial institutions to adopt responsible lending practices. ASIC encourages all lenders that haven’t already done so recently, to review their lending guidelines to ensure that they are fair and effective,’ Ms Rickard said.
Ms Rickard said the Commonwealth Bank had acknowledged defects in its procedures and policies and had emphasised to ASIC that these problems were unintentional.
‘The Commonwealth Bank has implemented new lending procedures and assessment criteria following an extensive review. The Bank has also agreed to review the loans of approximately 400 borrowers from remote communities experiencing any hardship in meeting the repayments under their loan,’ she said.
The Bank has also agreed to fund a dedicated financial counsellor for remote communities for an initial period of three years.
‘Given the problems with financial literacy levels and budgeting experienced in many remote Indigenous communities, ASIC is especially supportive of the Commonwealth Bank’s commitment to funding a dedicated financial counselling position to work with remote Indigenous communities,’ said Ms Rickard.
‘ASIC is also encouraged by the Bank’s commitment to playing a role in remote communities where continuing access to mainstream credit providers, such as the Commonwealth Bank, is of particular importance.’
ASIC has established formal reporting arrangements that require the Commonwealth Bank to report on the implementation of changes to its procedures and the adjustment of borrower’s loans. ASIC, in conjunction with the OCBA, will continue to oversee the Commonwealth Bank’s progress in its review and the implementation and effectiveness of its new policies.
In accordance with its general policy, the Commonwealth Bank has advised Indigenous customers experiencing financial difficulties to call 1800 634 700.
For further information contact:
Delia Rickard
Acting Executive Director, Consumer Protection
Telephone: (02) 6250 3801
Mobile: 0412 673 026
Emma Forehan
ASIC Media Unit
Telephone: (03) 9280 3354
Mobile: 0409 702 310