The Unpleasant Truth About Australian Banking

Michael Murphy & Tracey Moore’s Story

Prior to 2008, I was living at Mount Newman (“Newman”), and Tracey was living in Perth. We wanted to purchase a home in Perth for our future.

We discussed this with Commonwealth Bank, and it loaned us funds to purchase an investment property at Newman. This made sense because we had not owned our own home before, and this provided us an opportunity to invest in real estate and purchase a home later.

To obtain the investment funds from Commonwealth Bank, required Tracey to obtain a guarantee from her friend, June Avila, which did not prove difficult because we trusted the bank.

A few weeks later, when completing Newman’s purchase, a house in Perth became available. We asked the bank if we could purchase it for our home, but it meant we now would have two properties, the Newman investment, and home at Mount Nasura, Armadale, Southeast Perth.

In October 2008, Tracey asked June Avila, who had two properties in Perth, if she would guarantee our Commonwealth Bank’s loans. Avila agreed, and we now owned a home at Mount Nasura and an investment property at Newman. However, Avila would have to guarantee both loans.

The funds provided by Commonwealth Bank for the Nasura home had been changed and, without our knowledge, we now had two investment properties. This meant the bank’s salesman misled us.

This was a problem 3 years later when Tracey’s son (Ned) suffered a serious hit-and-run incident and was institutionalised in hospital for almost a year. In 2012, Tracey had to stop working and we found it difficult to continue paying the bank’s interest from the Newman house rent with a single income.

This problem was serious and was caused by Commonwealth Bank’s failure to provide us with mortgage insurance for the loans or the correct type of loan.

In 2016, Tracey was caring for Ned, and I was suffering from poor health. This meant Commonwealth Bank had taken a risk when it did not ask us to sign insurance for the loan when we signed contracts, and now we had to accept the damages that followed.

In August 2021, I wrote to Catherine Livingstone, Commonwealth Bank’s Chairman, and Matt Comyn, its Chief Executive regarding the bank’s practices. Neither responded despite statements that the bank had adopted the 2004 Code, and that compliance with it was mandatory.

In these circumstances, Commonwealth Bank was not a prudent and diligent lender, nor did it comply with the rule of law. Now Tracey and I could not resolve disputes free of charge dispute being a commitment by the bank in both contracts.


And this is our story.

Prior to 2008, Tracey and I worked as fly in fly out mining workers. We were operating large haul trucks and earthmoving machinery at Newman, Western Australia and our gross income before tax was about $200,000.

In September, we purchased an investment property at Trotman Avenue, Newman, for $570,000. Commonwealth Bank’s mobile lender, David Evans, helped us with the application. The bank loaned $600,400.00 without insurance. This meant it approved a value ratio (LVR) of 105% with Tracey’s friend, June Avila, as guarantor. June and Tracey also had a weekend at Pingelly WA, which they owned 50/50.

David Evans said that he would use our personal details from the Newman loan for the Mount Nasura loan application. We did not have an opportunity to review the loan documents nor contact a solicitor to obtain independent legal or financial advice. We were asked to sign documents with “yellow sign here stickers”. Given the high LVRs with Tracey’s friend as guarantor, the limit of 80% would have been prudent and diligent for Commonwealth Bank, Australia’s leading lender. The licensee did not recommend we obtain independent legal or financial advice when it did not offer us a home loan insurance policy.

This policy would have covered repayments in the case of injury or illness, unemployment or to pay a lump sum in the instance of a trauma event, terminal illness, and or death. Tracey already had Commonwealth Bank’s care plan insurance policy, set up by our self-managed fund. However, when Evans and the bank were preparing our loans there were multiple errors, and when we identified those errors, the bank took no action. The errors included incorrect employment details, inconsistencies with dependents and child support payments, the incorrect type of loan, changed marital status, and misrepresentation of asset value used in the loan application.

The Commonwealth Bank’s loan provided for Mount Nasura was a Viridian Line of Credit (“VLOC”) with interest only and not meant to be an investment loan. It was for our home. Therefore, required a primary residence principal and interest (“P&I”) loan. Without independent legal or financial advice, the bank sold us a VLOC interest-only loan, and we discovered it was more expensive than a comparable P&I loan.

In February 2011, Tracey’s seventeen-year-old son was a victim of a hit-and-run incident, leaving him with a severe diffuse axonal brain injury. He required twenty-four-hour care for the rest of his life. We took time off from work to assist with his recovery and rehab. Tracey and I then suffered post-traumatic stress disorder (PTSD) and could not continue being fly-in and fly-out workers.

In 2011, we received an offer for our Newman property $810,000. We accepted it, but we only had $180,000 after paying out the Newman loan. We used this to cover costs for the Nasura loan, for supporting Ned, and to cover our living costs.

We reached out to the bank for assistance with the Nasura Loan, due to our changed circumstances. The bank provided a three-month payment holiday but did so on the Pingelly loan incorrectly. After multiple calls to the bank, we continued to take payments for the Nasura loan, which then led us to make our first complaint with the Financial Ombudsman Service (FOS).

At the time we were out of work and caring for Tracey’s son, we were receiving gratuitous service payments from Insurance Commission of Western Australia (ICWA), whilst Tracey’s son’s compensation matter was going through the courts.

On 14 December 2012, we applied for financial difficulty assistance with Commonwealth Bank. It took the bank ten weeks to respond to us, for which the temporary repayment variation was provided.

In 2013, Tracey’s son received monetary compensation from ICWA for the incident, with a Court Ordered Trust (“Trust”) enacted to manage the monies.

In March 2014, Tracey and I went to Commonwealth Bank in Maddington to change the Mount Nasura loan from a Viridian Line of Credit to a standard variable home loan in 2014. The Commonwealth Bank staff member, Rose Shepis, told us that we had probably paid about $200,000 too much on the line of credit. It was not a lump sum but just what had been accumulated through monthly payments on the loan.

She is then arranged for the VLOC to be switched to a variable rate home loan in March 2014, with the opening balance of Complete Home Loan Account Number 777519557 (“Complete Home Loan”) of $570,000.

In early 2015, I found a local job but was made redundant in late 2015.

In January 2016, I suffered from a heart attack, for which due to the stress from the fallout from Tracey’s son’s incident along with the bank’s disputes and issues.

In October 2016, we applied for financial difficulty assistance. The bank granted a three-monthly repayment deferral. Again, in January 2017, we applied for financial difficulty assistance and the bank granted another three-monthly repayment deferral.

In October 2018 Tracey and I attended a round table meeting with Clare O’Neil MP and Matt Keogh MP, which arose out of the Royal Banking Commission. As a result of that meeting, our second dispute through AFCA was started. AFCA found in favour of the bank, without explaining the bank executives and directors had probably sold us predatory loans, which is a crime.

On 2 November 2018, AFCA ruled in our favour and ordered Commonwealth Bank to pay us each $500, by way of loan credits, per case 528696.

On 27 September 2018, we emailed Matt Comyn Commonwealth Bank’s Chief Executive, with further complaints. On 28 November 2018, Commonwealth Bank Alexandra Colnan replied to the email noting that they had reviewed our concerns but would not be investigated due to similarities with prior case 528696.

In December 2019, we filed a complaint with AFCA with case 609992, raised the following issues:

  1. Commonwealth Bank’s decision to initially approve the VLOC in 2008;
  2. Commonwealth Bank’s actions when it changed the VLOC to variable rate home loan and whether it complied with its responsible lending obligations in 2014; and,
  3. Commonwealth Bank’s management of the new home loan including the current balance owing and the date repayments are made.

On 3 March 2020, AFCA ruled that Commonwealth Bank did not make any errors listed in our complaints.

Therefore, Commonwealth Bank did not have to pay us any compensation or take any further action in relation to the matters we raised.

Furthermore, AFCA claimed that we could pay the loans comfortably based on our incomes at the time of loan inception, this supplicates the question as to why Commonwealth Bank did not recommend a standard variable P&I home loan.

On 10 December 2020, we filed a complaint with AFCA (case 772841) in relation to the bank withholding information and deliberately misrepresenting our personal details on the loan applications.

On 16 February 2021, AFCA wrote to us advising that our concerns raised had already been subject to an AFCA determination (case number 609992);

On 8 May 2021, due to a dispute with the bank, we stopped making repayments on the Complete Home Loan.

On 27 May 2021, we emailed Senator the Hon Michaelia Cash and the Chief Executive and Chief Ombudsman of AFCA in relation to our prior complaint cases 609992 and 772841.

On 27 July 2021, AFCA wrote to us, advising that our determination per 60992 was in favour of Commonwealth Bank and closed and that case 772841 is outside AFCA Rules and as such had been closed too.

In about August 2021 we had a research team review our case. We discovered the Commonwealth Bank’s directors had not instructed their managers to pay the damages in our Financial Loss Report. These damages amounted to $227,417, plus compensation and an apology. The Commonwealth Bank’s directors knew that the AFCA’s advice was deceitful. If they claimed otherwise, there is proof that Catherine Livingstone and her directors did not have to pay the damages, compensation, and apology.

As of the date of this report, the Complete Home Loan balance is around $525,000.

At no time did the Commonwealth Bank’s managing director or directors require their staff to provide evidence that they had appropriately responded to complaints we had filed during the past 15 years. This level of negligence would have allowed us to obtain the justice that you and the bank’s directors did not provide us.

I believe there is a difference between the Commonwealth Bank’s directors’ decision to conceal predatory lending and fraud. In our case, we believe the misconduct by the bank’s directors was intentional. By definition, the bank dishonestly acted to obtain a financial advantage and caused us a financial disadvantage. The silence by the Commonwealth Bank’s directors throughout this disputed period meant we were victims of fraud.

I have filed several complaints to my local bank manager in Armadale since August 2021, and at no time did the bank manager and the directors comply with the 2004 Code, an essential part of my loan contract.

We were suffering from Commonwealth Bank’s decision to have:

  1. failed in being a prudent and diligent lender;
  2. misled and deceived us;
  3. provided VLOC interest-only loan not suited to our circumstances, not in our best interests, and not suitable for the underlying assets;
  4. breached the loan contracts by withholding documents pertinent to our rights.

More seriously, it was not until recently that we understood Commonwealth Bank Chief Executive and Managing Director in 2002, David Murray, was one of the Architects of the 2004 Code.

When Commonwealth Bank adopted the 2004 Code, its directors omitted ASIC Regulatory Guide 165 (2001) from clause 35.1(b). By omitting this guide, the bank intended to commit Australia’s greatest crime. Its Chairman, John Ralph AC, and his directors were not prudent and diligent. This meant we could not resolve disputes free of charge as set out in IDR procedure in clause 35 of the Code.

The directors, including Catherine Livingstone, Paul O’Malley, and others must have known this and should not have caused us extreme pain and suffering when we filed complaints with them. We might consider this was a deceitful act or simply negligent by the bank’s directors since 2003 or was it criminal conduct by the regulators ASIC and APRA.

We are still waiting for the bank to repay our damages, plus compensation and a letter of apology as required under the AS 4269-1995 Standard.

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