Exposing the inhumanity of banks to their customers
At the start of 2014 my wife, Emmaline, was in late pregnancy with our second daughter. It wasn’t going well. She was suffering from pain, which was becoming increasingly debilitating. Nobody could find the cause. The health professionals we consulted all said the same thing: “The pain will resolve once your baby is born.” We talked a great deal about the psychology of pain. Perhaps it was just her anxiety, she would say in the middle of the night, that was causing all the trouble.
We were wholly unprepared for what happened next. Following the birth of our daughter, Emmaline’s pain escalated uncontrollably. Within three days a large tumour was discovered in her retroperitoneal space. A couple of days after that, we received a diagnosis. Our newborn baby lay on the hospital bed next to us, asleep after breastfeeding, as we were given this devastating news. Emmaline had a terminal cancer, a leiomyosarcoma, already metastasised with multiple secondary tumours in her lungs and liver. She didn’t have long to live.
It’s hard to write about the months following the diagnosis. We went from trauma to trauma in a process of unravelling that we could neither contain nor hold. Sometimes Emmaline was overwhelmed with nausea. She was given hormones that made her writhe with anxiety. There were many days when her pain was unmanaged and unmanageable. We spent hours in emergency wards waiting for morphine to be administered. Often I would go to sleep afraid she would die before the morning. Sometimes we rushed to hospital in the middle of the night. Once she became so neutropenic (a blood disorder) that she had to spend 10 days in isolation in hospital, unable to see our children. Another day she collapsed in Melbourne’s Fitzroy Gardens, unable to move, and I didn’t know what to do. Then there was the ever-pressing question: How do you explain all this to our children? How do you explain sickness and death? The night I did tell my two-year-old daughter that her mother was about to die was a moment of deep rupture. The world as I knew it was irrevocably cleaved.
There was a flip side to all this suffering: times of great joy and clarity. Taking a spontaneous walk together on the beach. Sitting in the park as a family on a chilly but bright day. Cooking and eating a meal, with vegetables from our garden. In our adversity we had a heightened appreciation for things that we’d previously taken for granted. Amid all the chaos, we performed a great life-affirming act; we married. Our wedding was a beautiful ceremony that still fills me with hope.
Throughout this time I had to talk to my bank about assisting us with our mortgage. We were with Bankwest, owned by Commonwealth Bank. In 2009 they, along with the other major banks, had formally agreed with the Australian government to a set of principles for assisting borrowers facing financial hardship. The agreement still stands. Where a borrower is facing temporary financial hardship the bank commits to work with that person to determine the most appropriate assistance option for them, including postponing for up to 12 months the dates on which payments are due under their contract, with interest to be capitalised into the loan.
Not long after Emmaline was diagnosed with cancer, Bankwest granted us hardship assistance, but only for a deferral of mortgage repayments for three months, with all outstanding arrears payable on expiration of that period. Following these three months, we were given three more months where 50 per cent of our regular repayments were deferred, with all outstanding arrears payable on expiration. No further assistance was provided, though the payment date for all the outstanding arrears was set back by a further two months. Despite my pleas for more help, we were required to pay back all the outstanding arrears four months before Emmaline’s death.
Each time I had contact with the bank I had to call and speak to a new person with no prior knowledge of our situation. There was no case management of our file, and each critical decision was made while I was speaking to the person on the phone. The bank didn’t make allowance for the fact that our circumstances were more complex than could be neatly summarised in three minutes talking to a stranger. Nobody discussed with us what assistance options were available and it was wholly up to me to work out what to ask for. No consideration was given to the fairness of me having to repeatedly recount to strangers the traumatic events that were the basis for our request. No allowance was made for the fact that I was often calling in difficult circumstances, such as from a hospital in the midst of a medical emergency, or at home while looking after my wife and two children. When our final request for help was rejected, the woman I spoke to was rude and aggressive. We would have to sell our house, she said, if we couldn’t make our future repayments on time, every month. She may have thought I was being hyperbolic when I told her my wife was dying. I was not.
The assistance provided to us was a lot less than that which seems reasonable under the 2009 agreement. The limited help might have been justified if there was a risk that our loan would become unrecoverable, but that risk was low. Our loan was for about $170,000 on a house worth about $1 million. We had no other debt and a clean credit history. Emmaline was eligible at the time we were refused assistance for a life insurance payout that more than covered the full value of our loan, though the process for releasing it was slow.
The impact on my family of the bank’s refusal to grant us the assistance provided for under the 2009 agreement was devastating. We needed an ongoing source of income to keep paying our mortgage, so for the last six months of Emmaline’s life I had to keep working. I was routinely heading off to my office when where I was needed most was with my wife and children. Having to be absent at this critical time had a terrible impact on me and my family. Perhaps most painful, the threat of foreclosure weighed heavily on Emmaline’s mind right up to the end of her life.
Following Emmaline’s death in June last year I used her life insurance, when it came through, to pay off our mortgage in full. Then, in January, I lodged a complaint with the Financial Ombudsman Service (FOS) about the way we had been treated. FOS didn’t require the bank to provide a response to my complaint and summarily dismissed it by its own motion and for its own reasons. In so doing, it acted as the bank’s advocate. My complaint should have provided an opportunity for meaningful engagement and discussion with the bank, but FOS’s summary dismissal of the complaint prevented this from happening.
Last month our story was reported in the press, and was picked up by Pat Conroy at the parliamentary inquiry into the major banks. Under questioning from Conroy, Commonwealth Bank’s group chief risk officer David Cohen conceded that the failure to grant my family extended assistance was an “awful situation”. He went on to say: “I can only imagine Mr Mathews getting news like that from the bank at a time of such dire need would have been absolutely horrific. What I can say is that is not how we seek to deal with our customers at all and I’m very sorry it happened in this case.”
I watched the inquiry live and was genuinely moved to tears by these words. But why did it take such a public forum, and so long, for the bank to acknowledge that it could have done things better? And is the problem the fault of the bank, or the result of systemic, regulatory failures?
Banks necessarily have commercial expertise, rather than regulatory skill. Their primary focus is maximising profit for their shareholders. If we cede too much regulatory responsibility to banks, then we may create a weak financial system that will continue to be plagued by reputational crises. Providing financial hardship assistance to people when they are dying is not a commercial matter; it’s a profoundly moral one. If we leave it to profit-maximising banks to write and police their own rules for the provision of such assistance then we may fail people at their most vulnerable, and we are all poorer as a result.
There is much scope for reform of the rules surrounding hardship assistance, for anyone who cares to take a look. The National Credit Code could be amended to provide positive obligations on banks to provide reasonable assistance to mortgagees suffering hardship. Criteria for determining levels of such assistance could be codified. The space could be actively regulated and monitored by the Australian Securities and Investments Commission. There could be clear and transparent guidelines so banks know what to do, and consumers are assured a basic level of help when they need it. These are all reforms that could be implemented now.
To me, the availability of reasonable hardship assistance is an issue that needs to be addressed urgently, whether by banks themselves or through legislative reform. The thought that other families in crisis could right now be facing the same level of disrespect and inhumanity my family faced is just too terrible. An apology in front of a parliamentary committee does not change that.
This article was first published in the print edition of The Saturday Paper on Oct 15, 2016 as "Bank shaft". Subscribe here.