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BFCSA investigates fraud involving lenders, spruikers and financial planners worldwide.  Full Doc, Low Doc, No Doc loans, Lines of Credit and Buffer loans appear to be normal profit making financial products, however, these loans are set to implode within seven years.  For the past two decades, Ms Brailey, President of BFCSA (Inc), has been a tireless campaigner, championing the cause of older and low income people around the Globe who have fallen victim to banking and finance scams.  She has found that people of all ages are being targeted by Bankers offering faulty lending products. BFCSA warn that anyone who has signed up for one of these financial products, is in grave danger of losing their home.

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BFCSA: Hayne shines a light on bargain basement penalties

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Hayne shines a light on bargain basement penalties

Australian Financial Review Sep 20 2018 7:31 PM

James Frost, Misa Han

 

The corporate regulator's failure to issue major companies with fines of any consequence was again highlighted at the Hayne royal commission on Thursdaywhen evidence showed Suncorp was fined just $43,200 when it was liable for a $7.2 million penalty.

The Australian Securities and Investments Commission told Suncorp its promotion of insurance was false and misleading and issued the company four infringement notices with penalties of $10,800 per infringement.

Breaching this section of the law is a criminal offence and carries a maximum penalty of $1.8 million per contravention.

Emails between Suncorp employees show they knew promoting complete replacement cover was likely to infuriate both regulators and politicians but "the risk was accepted" after they considered the potential financial reward. Suncorp reported net profit of $1.1 billion for the 2018 financial year.

Counsel assisting Rowena Orr, QC, questioned Suncorp's chief executive officer insurance Gary Dransfield on Thursday about Suncorp's complete replacement cover and the quantum of the fine issued to the $19 billion financial services giant.

"You tell us in your statement that the total premiums received by AAI last year from AAMI policies with complete replacement cover was over $426 million," Ms Orr asked.

"Yes," Mr Dransfield responded.

"So the cost of paying the four infringement notices was approximately, on our calculation, 0.001 per cent of premiums received in that year?" Ms Orr asked.

"I will accept your calculation," Mr Dransfield replied.

Claiming innocence

Mr Dransfield said he did not believe Suncorp was guilty of the offences but paid them regardless as Suncorp respected the role of the regulator and would always deal with such matters in this way.

Commissioner Kenneth Hayne interjected at this point, asking why Suncorp didn't fight the charge of false and misleading.

"Well, doesn't that suggest you fight it, if you believe you haven't misled and deceived? Doesn't the concern about reputation mean you get in there and fight for your reputation?" Commissioner Hayne asked.

"In this case Commissioner, and generally, we take the view that we should, you know, pay the penalty and move on," Mr Dransfield said.

'A very low cost of doing business'

But Commissioner Hayne replied: "An alternative construction of these events might be that imposition of an infringement notice of 1 per cent of the available maximum penalty, was, in the scheme of things, a very low cost of doing business."

Suncorp was also heard to have systemic issues within its claims handling department identified by the Financial Ombudsman Service (FOS) relating to delays, failures to provide information and implement determinations. Suncorp was fined a total of $15,150 over the last three years by FOS.

The exchange followed a long examination of promises made by Suncorp in relation to "complete replacement cover", which was the default level of cover Suncorp offered with its home and contents insurance through Suncorp subsidiary AAMI.

AAMI was promoting the policies with the promise of "peace of mind that we cover the repair or rebuilding of your home if it is damaged or destroyed by an insured event, no matter what the cost to us".

Suncorp has been criticised for settling up to 80 per cent of claims made under complete replacement cover with cash settlements rather than repairing or rebuilding, leaving it open to criticisms that it is motivated to low ball customers to settle claims.

Bushfire settlements

Ms Orr repeatedly suggested to Mr Dransfield that Suncorp tried to pressure customers including victims of the Wye River bushfires into accepting cash settlements that were well below market value.

AAMI would receive 34 claims from the 2015 Wye River fires and 28 of those would have complete replacement cover.

Mr Dransfield said there were circumstances where a cash settlement would be sought by Suncorp such as when negotiations were dragging on or customer's expectations were too high but denied it tried to pressure customers into accepting low ball cash settlements.

"Well certainly commercially we want to achieve what we feel is a reasonable claims cost outcome for us and the customer," Mr Dransfield said.

Mr Dransfield was shown emails from Suncorp's former head of insurance Anthony Day to CEO Michael Cameron sent on Monday, November 14, that said "Our preference (and contractual right) is cash rather than full rebuild" in relation to a series of outstanding claims from the Wye River fires after it attracted media and political attention.

Ms Orr presented evidence showing cash settlement offers that were considerably lower than independent quotes obtained by policyholders.

One example that was highlighted in a meeting held between Suncorp and Sarah Henderson MP included an offer from Suncorp of $783,000 compared with an independent quote of $1.6 million.

Mr Dransfield accepted there were variations in the quotes and accepted that Suncorp would ask for two quotes before using the most competitive.

He said that in many circumstances following a bushfire customers would prefer to move to another region or rebuild a different structure, which was outside the scope of Suncorp's obligations and would require a cash payment.

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