Bank named and shamed for hounding investors

Code violations are so serious that it's the first time in history that the industry watchdog has explicitly named the financial institution.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Bendigo and Adelaide Bank Ltd (ASX: BEN) has been shamed by an industry authority for its debt collection practices from investors.

The Banking Code Compliance Committee (BCCC) found that Bendigo and Adelaide Bank violated the code multiple times from 2015 to 2019. 

The breaches related to "debt collection practices and the treatment of customers experiencing financial difficulty" by its Great Southern Loans (GSL) business unit.

This is the first time ever the committee has explicitly named a bank for violations.

"In deciding to name Bendigo and Adelaide Bank, the committee has given careful consideration to a number of factors, including the seriousness of the breaches and their likely impact on GSL customers," said BCCC chair Ian Govey.

GSL, a managed investment scheme from an agri-business, was acquired by Bendigo and Adelaide Bank upon its merger with Adelaide Bank in 2007.

The agri-business failed and was liquidated a couple of years later, leaving some investors with debt without any assets.

Legal cases over $300 million in outstanding loans then ensued with GSL stopped from collecting debts in 2012.

The bank was finally authorised from 2015 to start calling in those debts — and that's when the troubles seem to have started.

"We regret our actions and sincerely apologise for any negative impacts these breaches have caused for our customers," said Bendigo and Adelaide Bank managing director Marnie Baker.

"We fell short of our own expectations and that of our customers and the community. These actions do not reflect who we are and what we stand for. We always strive to put our customers and communities first and these historic issues are not acceptable."

Govey acknowledged that Bendigo and Adelaide Bank has taken remedial steps since an audit into GSL.

"We also note Bendigo and Adelaide Bank has commenced efforts to remediate customers who were adversely impacted by non-compliance with the 2013 Code," he said.

Bendigo and Adelaide Bank shares were down 2.74% at 2:20pm AEST Wednesday, to trade at $6.03.

What exactly did Bendigo Bank and GSL do?

The BCCC found the bank hounded customers to the point where they were spammed repeatedly with payment demands to wrong email addresses and had their private information disclosed to third parties.

Process servers who served legal papers from the bank to the customers also violated the BCCC code.

Bendigo and Adelaide Bank was also accused of not properly training its debt collections staff nor keeping appropriate records. The GSL collections team ignored customers who were in financial distress and the bank didn't have a separate unit for dealing with complaints.

Bendigo and Adelaide Bank also initially "failed to co-operate" with the committee's investigation in 2017. 

"We accept and have reflected deeply on the findings and we understand how the mistakes occurred," said Baker.

"Our Great Southern collections team was established and operated separately from the bank's broader operations, was inadequately resourced, and our processes and systems were insufficient for these staff and the Great Southern customers."

Bendigo and Adelaide Bank has set aside $1 million on its books for remediation to customers.

"The bank has addressed the operational issues to prevent this from happening again and has established a remediation program to provide payments to customers where we made mistakes that had an adverse customer impact," Baker said.

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

The words short selling in red against a black background
Share Market News

These are the 10 most shorted ASX shares

Let's see which shares short sellers are targeting this week.

Read more »

Woman in celebratory fist move looking at phone
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »

A female financial services professional with a manicured black afro hairstyle turns an ipad screen to show a client across the table a set of ASX shares figures in graph format.
Share Market News

Record CBA share price and blockbuster merger push ASX 200 financials sector to the top

ASX financial stocks led the 11 market sectors last week with a 1.95% gain.

Read more »

A graphic showing a businessman running up a white upwards rising arrow symbolising the soaring Magellan share price today
Share Market News

CBA Shares in focus: How Australia's most valuable company is using AI to compete

Could AI initiatives drive CBA shares higher?

Read more »

Man jumps for joy in front of a background of a rising stocks graphic.
Broker Notes

These ASX 200 shares could rise 20% to 50%

Looking for big returns? Brokers think these shares could do the job.

Read more »

asx share price represented by cartoon letters spelling the word FOMO
Share Market News

What did Macquarie's "FOMO Meter" reveal about the stock market in May?

Is the market getting frothy or is there still room to climb?

Read more »

Market up or down
Share Gainers

Here are the top 10 ASX 200 shares today

ASX investors had a rough end to the week...

Read more »

Man in an office celebrates at he crosses a finish line before his colleagues.
Share Gainers

4 ASX 200 shares racing ahead of the benchmark this week

ASX investors sent these four stocks soaring 12% to 18% this week. But why?

Read more »