Predatory Loans
Selwyn Krepp’s story
My name is Selwyn Krepp and I have been trying to resolve disputes with Commonwealth Bank. This has proved difficult.
In 2009, I had two investment properties in Queensland, units located at Cairns and a house nearby. Both investments were in good condition and the Bank required me to use them as securities.
I discussed my concerns with other small businesses that attended Parliament House meetings in August 2018. I noted that they also had concerns that their Banks had not provided them with the 2004 Code of Banking Practice which was an essential part of all loan contracts.
I was experiencing difficulties with the Bank in 2021. On 29 September 2021, I contacted Commonwealth Bank Moonee Ponds’ Manager, James Dargin because, under the Code of Banking Practice, I was entitled to believe the Bank would treat me respectfully. It had to provide ‘effective disclosure of information’ to customers like me and without the Code of Banking Practice, it did not.
Mr. Dargin should have been sufficiently well trained to have ‘an adequate knowledge of provisions in this Code.’ He understood my complaints related to the Internal Dispute Resolution (IDR) procedures in clause 35 of the 2004 Code of Banking Practice but did not explain whether the Bank had complied with them.
In late 2021, I obtained a financial loss report carried out by a professional forensic accountant. On 26 January 2022, I forwarded a copy to Commonwealth Bank’s Managing Director, Mr. Matt Comyn. He did not respond and therefore I arranged to have a copy of it hand-delivered to his office on 1 April 2022.
I asked him to deduct $4.5M that I owed the bank from my damages of $11,080,103 stated in the financial loss report. This should have happened and any further concerns in relation to my associations with Commonwealth Bank would have ceased.
By providing the report to Mr. Matt Comyn, the Bank now had 21 days, or under exceptional circumstances 45 days to complete an investigation and ‘provide written reason for its decision on the dispute.’ Comyn did not meet these requirements.
Background to my case
I registered a company Rakaia Pty Ltd (‘Rakaia’) as a Proprietary Company on 4 October 2005. It held the leasehold business and Management Letting Rights (MLR) of Inn Cairns Boutique Apartments (‘Inn Cairns’), acquired for $2.2M and funded by National Australia Bank Limited (‘NAB’). Inn Cairns is comprised of 38 fully self-contained apartments and management of downstairs car parking and 3 commercial premises.
In late 2008, Jonathan Tobata and I (‘Tobata’) bought all of the remaining share capital in Rakaia. I borrowed $667,100 from Commonwealth Bank, via Better Business Loan facility (‘BBL 3’), to payout the other shareholders. Knight Frank had valued Inn Cairns, MLR, and the manager’s unit at $2.6M.
During the 2009 financial year, Rakaia borrowed $1,350,000 and $72,500 from Commonwealth Bank and reduced its NAB loans from $2,139,562 as of 30 June 2008 to $775,613 as of 30 June 2009. BBL loan terms were for 12 months although I requested longer-term loans, enabling sufficient time to pay down the principal.
On 6 December 2010, in our capacity as Directors of Rakaia and Guarantors, we received Commonwealth Bank’s Letter of Offer to refinance the BBL 1 and BBL 2 facilities of $1,350,000 and $72,500. We signed these on 31 December 2010. The loan terms were for 6 months and maturity date of 31 May 2011. Security was provided over the whole of Rakaia’s assets and Director guarantees limited to $1,422,500 over my personally held residential property.
On 6 December 2010, in a personal capacity, I received the Bank’s Letter of Offer to refinance the BBL 3 facility of $667,100. I signed it on 29 December. The term was for 6 months and matured on 31 May 2011. Security was provided over the whole of Rakaia’s assets and the Director guarantee was limited to $1,422,500 over my personally held residential property.
On 18 May 2011, I received Valuation Report from Knight Frank, valuing the MLR and Manager’s Unit at $1.9M and $400,000 respectively.
The property, plant and equipment increased from $961,090 in 2008 to $1,087,835 in 2009. Overall, the balance sheet, on paper, remained stable and consistent from 2007 to 2011, with no evidence of Rakaia being not able to meet its obligations.
From May 2011 to December 2012, the Bank extended the existing BBL facilities, with no longer-term options. By the end of 2012, the BBL facilities had been in existence for 4 years.
On 30 March 2012, I received a Finance Proposal from Suncorp Bank to payout BBL 1 ($1,350,000), 2 ($72,500), and 3 ($667,100), along with refinancing a home loan on a personally held property. The proposed facilities for refinancing BBL 1, 2, and 3 were on an interest-only basis, with 4 years terms for BBL 1 and 3 and 30 years for BBL 2.
On 23 January 2013, the Commonwealth Bank issued me notices, advising of actions required to be taken to remedy purported my defaults, with respect to the BBL facilities. Prior to these notices, I had never missed a loan repayment on BBL facilities, nor had any defaults, arrears, or contract breaches. The Bank proceeded to charge default interest, for which I continued to service.
On 7 February 2013, Anthony Jonsson and Gerard Miller of KPMG Chartered Accountants (‘Receivers and Managers’) were appointed by the Bank over the assets of Rakaia, and they a signed Deed of Indemnity relating to the latter’s appointment.
The financial loss report stated the Bank did not act in good faith or ethically in failing to extend the BBL facilities, to allow suitable time for the refinance from it. Instead, the Bank issued default notices and appointed Receivers over Rakaia’s assets.
On 3 May 2013, I received a letter from Commonwealth Bank B M Gordon, following our discussions in relation to the Bank’s notices and defaults which had not been remedied.
On 14 November 2013, I received Commonwealth Bank’s letter, advising that the BBL facilities and offer of forbearance had expired on 31 October 2013. Because the Deed of forbearance was offered and the option to execute remained open, the appointment of Receivers and Managers was not in good faith or ethically, they damaged me financially and emotionally.
The Receivers and Managers rewrote the MLR, which had an unexpired term of 12.5 years, which was less favourable to Rakaia and the Bank consented to the new MLR.
On 14 February 2014, the Receivers and Managers sold Inn Cairns MLR for $1.1M. The MLR was valued previously at $1.9M.
In April 2014, the Receivers and Managers sold the manager’s unit for $180,000, which was valued previously at $400,000.
In May 2014, my 6 units were sold by the Receivers and Managers for $531,000, which was lower than sales at the same time for almost identical units.
During the period Inn Cairns was under the Receivers and Managers’ control, they mismanaged the business, causing significant financial loss, and also received various complaints from patrons. This is evidenced by the large drop in revenues, profits, and occupancy rates subsequent to the Receiver and Manager’s appointment (over the 12 months from April 2013 to March 2014).
To quantify this loss and to make a statement of claim with Commonwealth Bank, a forensic accountant report was commissioned. On 4 May 2015, via my lawyers Nicolaides & Associates, I received Consulting Expert Forensic Accountant Report, from Michael Rosner FCPA, stating that my total estimated loss was $1,414,472.
On the same day, 4 May 2015, Nicolaides & Associates filed a submission with the Bank noting that Trading loss ($258,639); Reimbursements, rebates, and trade debts ($45,102); under sale of M&LR ($935,833); under sale of real property ($288,000), which was totally $1,527,574.
On 11 December 2014, the Receivers and Managers lodged a notification of ceasing to act with ASIC
On 1 June 2021, Matthew Joiner and Bruno A Secatore of Cor Cordis were appointed as Agents for the Mortgagee in Possession over several of my personal properties.
Since February 2013, I have been in dispute with Commonwealth Bank and the Receivers and Managers. I have filed a number of claims with the bank and its Directors, the Financial Ombudsman Service (FOS), ASIC, the Australian Financial Complaints Authority (AFCA), and the Senate, with no success. I have sent more than 35 letters to Commonwealth Bank Management, I received only one response.
As of today’s date, in my own capacity and as guarantor, I have received a number of Notice of Demands from Commonwealth Bank in relation to debts outstanding on BBL 1 and 3 facilities;
On 5 October 2021, BBL 1 facility balance was $2,053,033. On 16 December 2021, BBL 3 facility balance was $1,714,855.
As of today’s date, Rakaia is in liquidation, by Court order, in relation to another matter and has NIL assets. As company assets were sold by Receivers and Managers, my shareholder loan of $935,389 has been lost. The Receivers and Managers and Enforcement (Legal) fees were $345,000 and $196,000 respectively. My costs in relation to this matter were $597,260, for which the bank did not act prudently or diligently.
According to the financial loss report provided to Comyn and the bank’s directors, Commonwealth Bank had:
- provided pure asset or ‘predatory’ loans without considering serviceability requirements
- provided short-term high interest-bearing loans, not suited to my circumstances, not suitable for the underlying assets;
- breached the loan contracts by withholding documents pertinent to my rights;
- not acted in good faith or ethically when appointing the Receivers, which caused material losses in lost trading, and under sale of assets;
- caused material financial losses and irreparable reputational damage.
Because of these practices, I suffered damages amounting to $11,080,103 as of 19 December 2021 inclusive of Commonwealth Bank debt and costs.
This information confirmed Commonwealth Bank’s directors did not intend to resolve disputes as set out in the loan contracts I signed.
For your information
Thanks
Regards
Selwyn
Disclaimer
This story has been prepared for and at the request of Mr. Selwyn Krepp. In preparing this story, I have relied on the source information provided to us by Mr. Selwyn Krepp and have believed this information is accurate and complete.
I have also supplemented the source documentation provided with publicly available information, where appropriate.
Jim Davidson’s Story
My name is William James Davidson and I arrived in Australia when I was 46 years old. I wanted to set up a family business.
I was operating as a sole trader prior to 2008. In May, I set up the Far North Queensland Cattle Company Pty Ltd ACN 131 125 838 (‘FNQCC’). The farms were located near Atherton and also near Innisfail in Northern Queensland. We traded cattle and it was a successful business. The company was set up in 2008 but did not operate for the first 5 years.
In 2013, I met Suncorp Bank’s Atherton’s Manager, Ben Houlihan (‘Houlihan’) and Robert Drewitt (‘Drewitt’) because I wanted to refinance my debt. I required additional working capital and Houlihan had a cattle supply company, Farm North Queensland Stock & Realty Pty Ltd (‘Houlihan Rural’).
In February 2013, I was provided a Suncorp’s finance proposal from Houlihan. It offered $8.5M. I believed Houlihan falsified my application and prepared cashflow statements without my authorisation. As a result, my Suncorp application was approved.
On 30 June 2013, I owed Rural Bank $14,116,495.85 and it wrote off $6,116,495.85. This meant I still had to refinance $8M with Suncorp Bank. The value of my farms at that stage was $24M.
In August 2013, I received Suncorp’s Offer of Finance for $8.8M noting:
- Term Loan Facility No. 1 of 18 months with a limit of $6,000,000;
- Term Loan Facility No. 2 of 15 years with a limit of $1,800,000;
- Business Premium Account Facility No. 3 and No.4 with a limit of $800,000 and $200,000 respectively.
When I signed the agreement, I provided a personal guarantee along with the charge over up to 6,000 heads, but actually, I only had 100 cattle at that time.
In September 2013, I signed Suncorp Bank’s Offer, and in October, Houlihan, in his role as Suncorp Bank’s branch manager, purchased cattle, in my company’s name. I later found out that this transaction was carried out at inflated prices which benefited Houlihan. I did not authorise the purchases of these cattle, which had a total cost of $582,841.62.
At the same time, I discovered that Robert Drewitt had been purchasing other products, including fertiliser, and using my Suncorp Bank overdraft without my consent. Many of the items he ordered were defective.
Also at that time, Houlihan had used about 70% of my Suncorp Bank’s Overdrafts within a few days of it being active. He transferred nearly $500k from my account into his own and other accounts without my written or verbal authorisation. In late December 2013, I confronted Houlihan about this and he had extended the overdraft without my consent.
On 14 January 2014, Suncorp bank froze my accounts, and I was not overdrawn or had been issued with a default notice.
In February 2014, Suncorp Bank advised me that an investigation into Houlihan’s conduct was underway and that Houlihan had resigned. Its investigation concluded that all the transactions were authorised by my company, which was distressing. I confirmed with the bank that these documents were created, and none was signed by me.
In early April, I was suffering from stress and suggested that under the circumstances I could not continue looking after the cattle. But I retracted this statement not long after but the bank ignored it.
On 4 April 2014, Suncorp appointed receivers and managers from BDO (‘Receivers and Managers’) to FNQCC, claiming for reasons of default and safety concerns of the Heidke Road property. The company did not default, was never issued with a default notice, remedied the insurance policy lapse, and advised Suncorp thereof, before the Receivers and Managers were appointed. Suncorp Bank appointed receivers on the grounds the cattle were at risk and there was no insurance l had previously written a letter saying the cattle were in the fields and had lots of grass. Suncorp had also paid the insurance up to the end of April.
I filed proceedings against Suncorp and BDO, claiming that the appointment of Receivers and Managers was baseless. I also accused the bank’s employee, Houlihan, because his misconduct caused my company’s loss of $700,000. He had transferred about $700,000 from my company since October 2013 without my authorisation.
At about this time, cyclone ‘Ita’ hit North Queensland. My company lost almost 800 cattle and BDO did not attend to the farms to inspect the damages caused by cattle dying.
In May 2014, Suncorp Bank, BDO, and my company entered into a Deed of Settlement (‘Deed’). It required BDO to resign and for the bank to rebate my company $205,000 in interest. However, $95,000 was paid to Gadens Lawyers (Suncorp’s Counsel), and my company had to release the bank and BDO for the damages caused. The Deed was signed by me only due to the bank’s threatening practices.
In June, the company’s accountants prepared 2014 financial statements. They illustrated a loss of income of $638,067.72. Suncorp Bank’s debt was now $9,147,702.04, despite the original facility of $8.8M, with $800,000 undrawn. It meant my company’s debt in September 2013 had increased from $8M to $9.15M.
In July 2015 l had Chinese investors who entered a JV to purchase farms for $9M plus put $550000 deposit into the lawyer’s trust account. This JV offer was forwarded to Suncorp Bank for its consideration.
In August 2015, my company defaulted on Suncorp Bank’s loans, and I was required to attend Farm Debt Mediation (‘FDM’) without my lawyers. We settled with a Heads of Agreement (HoA) that provided an extension to pay certain amounts.
In 2016, Suncorp Bank rejected the Chinese JV offer, on the advice of BDO, previous Receivers and Managers.
On 7 March 2017, Suncorp Bank appointed BDO’s agents, Helen Newman and Andrew Peter Fielding, for the mortgagee in possession (‘AMIP’). In May, it issued my company with Notices of Exercise of Power of Sale and the following month, required me to vacate the Heidke Road property.
On 14 February 2019, I received advice from Michael Murphy, The Valuer, noting the value of my company was $22,581,000.
In 2021 ASIC deregistered my Company which l had previously sold all my machinery & cattle to fund my legal expenses.
I had a professional accountant review my case and it stated that Suncorp Bank:
- provided pure asset or ‘predatory’ loans without considering serviceability requirements;
- was not a prudent and diligent lender;
- falsified loan application forms and cashflow statements;
- was complicit in fraudulent activities of its staff members;
- facilitated inappropriate advice on the cattle operation that was to the advantage of its employees;
- breached the loan contracts by withholding documents pertinent to their rights;
- prejudiced and forced the signing of the Deed of Settlement under duress;
- caused material losses and irreparable reputational damage.
As a result of these practices by Suncorp Bank and its staff, I suffered damages totaling $24,040,275.
How could this happen to Queensland farmers for 20 years?
When my company signed loan contracts with Suncorp Bank, I did not know that its practices were deceitful, and that it had concealed relevant documents.
In August 2018, I attended meetings at Parliament House with other farmers and they were complaining that their banks were involved in dishonest practices. I suggest none of the farmers knew that the Royal Commission which was underway at that time was misled by the directors of leading banks.
At about that time, the Code Compliance Monitoring Committee (CCMC) noted there were more than a million complaints per year, and a quarter of a million had requested financial assistance. Therefore, complaints like mine were not unique.
On 14 December 2017, Prime Minister Malcolm Turnbull and the Governor General signed a Letters Patent, which was the Royal Commission’s first step regarding Misconduct in the Banking, Superannuation, and Financial Services Industry. It required Suncorp Bank’s directors to provide Kenneth Hayne information regarding misconduct, whether criminal or legal, and whether its practices, behaviours, and business activities fell below community standards.
The farmers attending Parliament House in August 2018 reviewed the Royal Commission transcripts. They wanted to determine whether Dr. Zgmunt Switkowski AO, Suncorp Bank’s Chair, and his directors, including its managing director Michael Cameron, had provided these documents to Kenneth Hayne as requested on 15 December 2017.
Our review, during the past 12 months, notes Suncorp Bank’s directors, when questioned by the Royal Commission, had to swear they would tell the truth, the whole truth, and nothing but the truth. However, there was no evidence suggesting that the bank’s officers met commitments under the Oath.
Since 2021, there are other allegations concealed by Suncorp Bank’s officers, including Christine McLoughlin, Lindsay Tanner, and its General Counsel Belinda Speirs.
Apart from writing to the bank’s directors and the regulators, my greatest concern was the complaints farmers like me filed with the Commonwealth Ombudsman. It had to determine whether the regulators met their requirements under the Act. However, when we contacted the Ombudsman, we were confused because Penny McKay, Acting Chair, and her Minister, Mark Dreyfus QC would have known our allegations were withheld from farmers in every state of Australia. This was extraordinary.
I repeatedly told the bank’s officers and the regulators that Suncorp Bank’s Chairman adopted the 2004 Code without including essential documents. In particular, by omitting ASIC Regulatory Guide 165 (2001) from the Code, the bank had a clear intent of committing a crime.
My complaint had previously been filed with Christine McLoughlin and her directors. They had to meet their responsibilities under the 2004 Code. When I attempted to resolve my disputes free of charge, (Clause 35.1(a)), it was not going to happen. The bank’s directors had also previously made a commitment to meet the Australia Standard AS 4269-1995 (Clause 35.1(b)), but this was misleading because the standard was not free of charge.
Suncorp Bank also, under clause 35.1(b), had to comply with the industry dispute standard or guideline which ASIC declares to apply to this code. However, this document was not available, and the farmers did not obtain a copy until recently.
We were fortunate to identify this crime. It explained Suncorp Bank’s directors did not comply with the code nor pay for dishonest practices. It provided evidence that the bank’s directors could avoid having to pay compensation and provide farmers with an apology as set out in the AS 4269-1995 Standard.
I have filed complaints with Joseph Longo and Sarah Court, but they did not use ASIC’s powers to suspend or cancel Suncorp Bank’s license when it was involved in criminal practices.
I am one of the farmers who wrote to the new Prime Minister, Anthony Albanese, shortly after he was appointed. We were victims of practices by banks and regulators for 20 years and trusted Albanese to take immediate action.
Disclaimer
This story has been prepared for and at the request of Mr. William James Davidson. In preparing this story, I have relied on the source information provided to us by Mr. William James Davidson and have believed this information is accurate and complete.
I have also supplemented the source documentation provided with publicly available information, where appropriate.
