A unit of Bendigo and Adelaide Bank handling the collection of loans to investors in Great Southern Plantations schemes has been called out by the Banking Code Compliance Committee for “systemic and serious” breaches of the banking code.
It is the first time the BCCC has used the sanction of naming a bank for non-compliance with the code.
It said the bank breached provisions of the code relating to debt collection, financial difficulty, complaints handling, privacy and confidentiality, training and competence, complying with BCCC requests and acting fairly and reasonably.
In 2009, Great Southern Plantations, an operator of agribusiness managed investment schemes with A$1.8 billion of investors’ funds, went into liquidation.
Bendigo and Adelaide was a provider of loans to Great Southern Finance and when the agribusiness failed the bank had 8,200 borrowers with a total of $556 million of loans taken out to fund investments in Great Southern funds.
Great Southern investors who funded their investments with loans sold by Great Southern Finance pursued a class action against Bendigo and Adelaide Bank for relief from their loans.
The claim that the product disclosure statements were defective failed and in 2015 Bendigo started loan recovery action. The bank has been involved in a number of court cases, with mixed results.
An audit of the Great Southern lending unit, ordered by the BCCC, found that it was largely segregated from the bank’s broader operations and had inadequate systems, processes and resources to cope with its collections activity.
The BCCC found that there was a lack of oversight from the bank, which led to a failure to build a strong compliance framework.
It said the bank has worked on the problems since the completion of the audit and has remediated customers who were adversely affected by the non-compliance.
According to Bendigo and Adelaide’s 2019/20 financial report, the Great Southern portfolio has run down to only $20 million. The bank took provisions over 25 per cent of the portfolio and wrote off $900,000 of bad debts.