Bendigo and Adelaide Bank Ltd (ASX: BEN) has been shamed by an industry authority for its debt collection practices from investors.
The Banking Code Compliance Committee (BCCC) found that Bendigo and Adelaide Bank violated the code multiple times from 2015 to 2019.
The breaches related to “debt collection practices and the treatment of customers experiencing financial difficulty” by its Great Southern Loans (GSL) business unit.
This is the first time ever the committee has explicitly named a bank for violations.
“In deciding to name Bendigo and Adelaide Bank, the committee has given careful consideration to a number of factors, including the seriousness of the breaches and their likely impact on GSL customers,” said BCCC chair Ian Govey.
GSL, a managed investment scheme from an agri-business, was acquired by Bendigo and Adelaide Bank upon its merger with Adelaide Bank in 2007.
The agri-business failed and was liquidated a couple of years later, leaving some investors with debt without any assets.
Legal cases over $300 million in outstanding loans then ensued with GSL stopped from collecting debts in 2012.
The bank was finally authorised from 2015 to start calling in those debts — and that’s when the troubles seem to have started.
“We regret our actions and sincerely apologise for any negative impacts these breaches have caused for our customers,” said Bendigo and Adelaide Bank managing director Marnie Baker.
“We fell short of our own expectations and that of our customers and the community. These actions do not reflect who we are and what we stand for. We always strive to put our customers and communities first and these historic issues are not acceptable.”
Govey acknowledged that Bendigo and Adelaide Bank has taken remedial steps since an audit into GSL.
“We also note Bendigo and Adelaide Bank has commenced efforts to remediate customers who were adversely impacted by non-compliance with the 2013 Code,” he said.
Bendigo and Adelaide Bank shares were down 2.74% at 2:20pm AEST Wednesday, to trade at $6.03.
What exactly did Bendigo Bank and GSL do?
The BCCC found the bank hounded customers to the point where they were spammed repeatedly with payment demands to wrong email addresses and had their private information disclosed to third parties.
Process servers who served legal papers from the bank to the customers also violated the BCCC code.
Bendigo and Adelaide Bank was also accused of not properly training its debt collections staff nor keeping appropriate records. The GSL collections team ignored customers who were in financial distress and the bank didn’t have a separate unit for dealing with complaints.
Bendigo and Adelaide Bank also initially “failed to co-operate” with the committee’s investigation in 2017.
“We accept and have reflected deeply on the findings and we understand how the mistakes occurred,” said Baker.
“Our Great Southern collections team was established and operated separately from the bank’s broader operations, was inadequately resourced, and our processes and systems were insufficient for these staff and the Great Southern customers.”
Bendigo and Adelaide Bank has set aside $1 million on its books for remediation to customers.
“The bank has addressed the operational issues to prevent this from happening again and has established a remediation program to provide payments to customers where we made mistakes that had an adverse customer impact,” Baker said.
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