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Senate Inquiry: Regulatory failure and abuse of Aussie bank staff, borrowers

Posted by on in Bankers A Law Unto Themselves
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Australian Banks need to learn to value their frontline staff.

Unrealistic expectations, abusive conduct, bullying, intimidation:

Bank lending industry must be forced to address

their appalling track record of misconduct

toward both staff and borrowers.

FOFA legislation must apply to lending conduct and products -

not just investment conduct and products.



"It is unconscionable that a bank has a best interests duty

to its investors but does not owe the same professional duty

to its borrowers."




- 1 -
Submission to
Senate Economics References Committee
Inquiry into the Post-GFC
Banking Sector
Submitter: Geoff Derrick (National Assistant Secretary)
Organisation: Finance Sector Union of Australia
Address: Level 2, 321 Pitt street Sydney NSW 2000
Phone 1300 366 722
Fax (02) 9320 0094
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.

- 2 -
Disclaimer statement 3
Introduction 4
Scope 5
Operation of lending targets 6
Best interest duty 7
Changes in the lending environment 8
Impacts on finance sector workers 10
Conclusion 13

- 3 -
Disclaimer statement
Whilst all due care has been taken in collecting, collating and interpreting relevant
information, some omissions may have occurred. The statements and opinion
contained in this document are given in good faith and in the belief that they are not
false or misleading.

- 4 -
The Finance Sector Union of Australia (FSU) welcomes the opportunity to contribute
to the Senate Economics References Inquiry into the post-GFC banking sector.
The FSU represents workers employed in the finance sector in Australia and exists for
the purpose of providing a collective forum for them in pursuing fairness in their
employment and improvements to their working conditions. The finance sector
employs over 400,000 people in Australia and is a key contributor to the national
economy. It is in all of our interests to have a strong and healthy finance sector in this
country, and this includes a healthy lending market. The FSU is concerned about
lending trends that have become prevalent throughout the industry post the GFC.

- 5 -
The FSU will discuss concerns held around banking practices in a post GFC
environment, in accordance with the terms of reference as set out by the Senate
Economics References Committee Inquiry into the Post-GFC Banking Sector.
Particular attention will be paid to part d) of the Committee's terms of reference that
seeks to examine the impact on borrowing and lending practices in the banking sector
both during and since the global financial crisis.
Please note that our submission is primarily based on our experience as an
organisation representing finance sector workers, and so our particular concern is the
way that these borrowing and lending practices are affecting employees in the
industry as well as the broader borrowing community. It is the union's view that a
healthy lending market that has the confidence of the community requires effective
regulatory supervision and transparency. These things are in the interests of lenders,
their staff and their customers.
The FSU considers the operation of lending targets in the industry and how this
affects lending behaviour, best interest duty and the Future of Financial Advice
(FOFA) legislation, the growth in lending and the human impacts on employees in the
The following submission represents an overview of the union's analysis of the
current situation; we would welcome an opportunity to expand on this submission
through oral evidence if the committee thought this worthwhile.

- 6 -
Operation of lending targets
As the union representing banking workers, we hear a lot from our members about the
operation of lending targets, and the ways that these lending targets impact on both
our members as well as on the wider community. The FSU tracks incoming calls
from members and problems with performance targets consistently outnumber all
other issues that members call the union for advice and support on.
Current practices in the lending market are dominated by sales targets placed on
individual bank employees. These include but are not limited to targets around home
loans, credit cards and insurance products. Commissions and bonuses, as well as
access to annual pay increases are built into performance pay systems that are
designed to drive aggressive lending behaviour.
Sales quotas are set centrally and imposed from above, often apportioned to staff
members without regard to the demographics of the area, staff experience or to other
relevant market factors. They are used to threaten the security of employment of bank
staff with many employees suffering significant stress and related poor health. The
result is that bank employees are regularly placed into a conflicted position where the
interests of their customer do not align with the interests of their employer, or with
their own self interest of being able to maintain a job and receive an annual pay
increase to at least keep pace with inflation.
Over the past 12 months, FSU members have run campaigns in three of the major
banks about their lending targets. These campaigns addressed issues of the
unreasonable targets, micro-management as well as the fact that employees were
expected to make up their targets for any periods of absence from work including
annual leave and sick leave.

- 7 -
Best interests duty
The FSU supports the Future of Financial Advice (FOFA) reforms recently passed by
the Parliament as a first and necessary step in ensuring that members of the
community can be confident that when they deal with the banking sector, the advice
they receive is based on their best interests and that if customer interests conflict with
those of the bank or its representative(s) the advisor is bound to act in the interests of
the customer.
FOFA outlaws conflicted remuneration arrangements that, through the payment of
incentives for the sale of certain investment products put the interests of the financial
service provider and the provider's representative ahead of those of the client. This
conflict was at a centre of the Storm Financial collapse and has been a scourge on the
industry for many years.
The FSU believes that the same best interest duty that applies to investment products
from 1 July 2013 should apply to debt products. Put simply, investment products are
one side of the financial services equation and debt related products are the other. If
the principle of best interests duty applies to investment products, it should also apply
to debt products. It is unconscionable that a bank has a best interests duty to its
investors but does not owe the same professional duty to its borrowers.

- 8 -
Changes in the lending environment
It is acknowledged that the growth in bank lending in Australia has slowed markedly
since the global financial crisis. In an economy where banks are five of the top ten
companies (by market value) listed on the Australian stock exchange and banking and
finance makes up approximately 30% of the value of the stock exchange this throws
up significant challenges for the economy and the share market in particular.
Market analysts have ensured that our banks are continuously scrutinised for their
capacity to maintain and improve shareholder value. We have three of the "big four"
banks (ANZ, Westpac and NAB) reporting profits on a quarterly basis and the other
(CBA) reporting half yearly. All of them set individual performance targets on either
a quarterly or half yearly basis.
Despite some commentary to the contrary, the banks do compete head to head on
lending and deposits. But that competition is severely constrained by the dictates of
market analysts and the short term focus that they employ. Any bank that seriously
broke away from this short term focus and replaced it with long term investment and
strategic planning would risk the wrath of an insatiable investor class reliant on
exponential growth and short term results.
As a consequence of this, banks seek to drive competitive advantage through cost
saving regardless of whether these "savings" are in the national or even the corporate
interests. In the 1990's banks responded to an economic downturn with widespread
branch closures and sackings that led to many local communities and their economies
suffering through the centralisation of economic activity to regional centres and
capital cities. In the post-GFC environment we again see cost cutting through the offshoring
of entire processes that means that Australia risks losing its local capacity in
critical functions.
FSU has, with the Australian Services Union, separately released an updated report
entitled 2012 Report – Off-shore and Off work: The future of Australia’s service
industries in a global economy produced by the National Institute of Economic and
Industry Research on the impact of off-shoring now and in the future that
demonstrates the cost to the economy and to jobs from a failure to tackle the global
race to the bottom in service jobs.
While the system growth for borrowing pre-GFC levels was in the order of 7% to 8%,
today it is probably closer to 4% of 5%. However the competition between borrowers
still sees individual performance targets for employees in the sector rising by numbers
significantly higher than system growth predictions. This divergence is justified on
the basis seeking to grow market share but clearly not every bank can grow market
share and not every target can be met.

- 9 -
The consequences of failure to meet target can be devastating on bank employees and
they range from wage freezes through to bullying, mental health issues and sackings.
Knowledge of these serious consequences drives behaviours throughout the sector.
The result is that in an intense working environment customer interests can be
subjugated to those of the bank.

- 10 -
Impacts on finance sector workers
The FSU submits that a lending system that operates by placing individual staff
members under intense personal pressure will result in staff members engaging in
risky lending practices that are not always in the best interests of the customer. The
following is a brief summary of some of the cases that FSU has handled in recent
times, and some comments from members involved in a recent dispute around lending
targets at the Commonwealth Bank.
Written comments from CBA members in relation to lending targets

Example 1
I know when I have not made my targets; I sit in my car in the car park and have to
talk myself into going in. I feel so anxious and sick in my stomach that I have to take
deep breaths to relax and tell myself that “I can do this”. How ridiculous! I am a CSR
on $20,000 a year. This sort of anxiety should not be put on us. At one stage at my
branch, 5 out of 7 customer service representatives were on anti depressants for work
related stress issues.

Example 2
These targets have caused me stress at home and at work, I have begun to grind my
teeth and have erratic sleep at night due to stress. It has been increasing at a rapid
rate and I have seen a doctor over this. I am always in a hurry – no one has time to
do their job properly. At the end of every day I go home both mentally and physically
exhausted – I have no time to go to the toilet or even to get a drink of water. Branch
morale and self esteem are at the lowest ever in my 27 years in the bank. PLEASE

Example 3
My moods are now tied to how many referrals I achieve – if I have a week with no
success I’m stressed and anxious and have nightmares. Even with a good week it
doesn’t boost me that much because I am thinking ahead to the next week.

Example 4
Every day I go home and still keep thinking that I did not meet my target. Every day
we are told what we have to get and must report every hour what we have got, my
stress levels increase and make me feel that I wanted to force sales on the customer.
My year to date target is behind as I had four weeks annual leave to visit my dying
father and attend his funeral. Sometimes I am asked every hour what I have achieved
so far. I have tension headaches, stress and sleepless nights because the target is
hard to get and every product has to be activated to get points.

- 11 -
Recent members who have received assistance from FSU advocates
FSU advocates support many members around issues relating to their lending targets.
These issues include being placed on performance improvement plans over not
meeting targets, workers compensation claims due to stress as well as issues where
members have been dismissed. The following are a couple of examples.

Example 1
A member worked for ANZ for 30 years, she changed jobs but her targets didn’t
change and she could not reach them. The member felt she had no choice but to
resign as it was affecting her mental health and family.

Example 2
A member was placed on a performance improvement program, and was frustrated
and distressed about it not being conducted correctly. This led to high levels of stress
and during this process the member lost her unborn baby. The bank has denied her
workers compensation claim.

Example 3
An area manager has threatened members over poor sales performance leading to
hospitalization of 2 staff in the area.

Example 4
A branch manager was harassing staff members about targets, including conduct
such as banging on the toilet door asking how long our member would be. Member
developed high blood pressure and ended up leaving the industry.

Example 5
A member feels bullied by his branch manager but didn’t have the strength to deal
with it. At this point in time the member is due to be investigated but is not attending
work as he has a medical certificate which states “member cannot discuss any work
related issues”. The member has submitted a workers compensation claim (it is still to
early to say what will happen). The bank wants to have a meeting with him in despite
a recommendation against this from the medical professional who as of last week
wanted to institutionalise him due to his mental health. This is an ongoing case.
- 12 -

Example 6
A member changed branches and they only gave him five weeks to perform in the new
branch before they started performance managing him in a bullying way including
phoning him at 9 pm at home and telling him they were going to sack him.
Member had a breakdown and was hospitalised and is still unable to return to work.

Example 7
Member has a medical certificate dated in March 2011 which indicates a diagnosis of
“acute anxiety state with physical symptoms and secondary depression” due to “3
years of conflict at work”. NAB hasn’t accepted the claim yet (this has been going on
for a year, if not more). Member is institutionalised at the moment.

Example 8
Member has an issue around meeting sales targets. This was handled poorly
resulting in member suffering anxiety. He is currently receiving shock therapy and is
unable to return to work in his current state.

Example 9
The member had a work related accident. Her return to work plan was not followed
by her branch manager and the member would get in trouble for not doing more.
Eventually the member was placed on a formal performance plan due to not
achieving her targets. Member had a set back.

- 13 -
FSU is extremely concerned about the changes to lending practices post the global
financial crisis, and the impacts that these changes are having on finance sector
FSU believes that the current operation of lending targets for individuals combined
with the penalties employees face for failing to meet targets, such as failure to receive
pay increases, workplace bullying, performance management, and termination of
employment, work to create a climate where employees are often forced into
situations where they are not working in the best interest of the customer.
FSU supports the introduction of Future of Financial Advice (FOFA) legislation as a
positive step in breaking the conflict that employees face in deciding whether they are
providing advice that is in the best interest of the customer or in their own best
interest, when it comes to investment products.
FSU submits that the FOFA legislation should be extended from investment products
to also include all debt products.

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Guest Tuesday, 24 November 2020