Financial Documentation

The recent Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in Australia highlighted the extent of frauds and misappropriations financial institutions and its clients go through to obtain a loan.

Some of the key themes or conduct raised in the Commission are:

Responsible Lending:

The primary concerns raised included:

  • failure by lenders to take into account the financial or other circumstances of a borrower when approving a home or car loan, particularly where the borrower was a low income earner, on an aged or disability pension, or otherwise unlikely to be able to service the loan;

  • failure by lenders to apply any criteria for suitability when offering credit products or increases to credit limits, including offering high-limit products to individuals who had disclosed gambling problems, or to students or other low income earners who had not demonstrated capacity that they would be able to meet repayments;

  • recommending the sale of products to consumers that were not suitable for their needs and attracted additional fees, charges or risks, including offers of overdrafts, personal loans or credit products when applying for a home loan; and

  • targeted marketing by lenders to vulnerable markets, including advertising reverse mortgages to elderly consumers.

Improper conduct:

Common types of improper conduct identified in public submissions included:

  • falsification of loan application documents by bank employees, including inflation of income or asset values, forgery of signatures, and backdating of documents;

  • intimidating or inappropriate behaviour by bank employees, often following the default of a loan, including consumers being harassed about repayments, or being coerced into signing a settlement agreement;

  • unauthorised disclosure of a consumer’s personal information to a third party, including disclosure to abusive parties in the context of family violence; and

  • facilitation of unauthorised transactions by staff members, or failure to respond to reports of unauthorised or fraudulent transactions.

Poor administration:

Poor administration or processing errors by financial services entities in relation to consumer lending and personal finance functions included issues such as:

  • lenders setting up incorrect facilities for consumers, including approving a business loan when a consumer has sought to take out a domestic mortgage, or approval of a credit facility instead of a personal loan;

  • incorrect calculation of interest or fees charged; • loss of documents or records relating to a consumer’s banking arrangements;

  • closure of accounts without instruction from the account-holder, and in many cases this was said to have occurred without notification;

  • general concerns about the training and expertise of staff involved in sales and approval of loans and credit products; and

  • delays in responses from a financial services entity to address the consumer’s concerns.

Through the use of Luca+, all financial transaction records will be captured and stored on the Ledgerium Blockchain which is immutable, and therefore gives confidence that there is no fraud or financial misappropriation. Financial documentation would be far more accessible in this scenario as there will be no need for manual checks and confirmation, thus reducing time and cost to obtain decision for the lender to provide loan to their clients - especially when Luca+ is integrated directly into the lenders IT systems.