The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry delivers its final report today.
During its hearings there was an important problem that it has missed.
Banks and financial service providers are failing to adequately recognise the warning signs of economic abuse and family violence experienced by customers.
Family violence is a problem for the banks and their customers. It is a risk to them if it means loans can’t be repaid. It is a risk to their customers if they are made homeless and lose income and mental health in the financial fallout of abuse.
And it’s a problem for our community if banks and other institutions ignore or enable family violence.
Banks can spot warning signs
Customers, especially women, who seek loans from banks or who present to banks with high levels of financial stress might well be victims of economic abuse.
One recent Australian study found that nearly 16% of women had a history of economic abuse and 7% of men.
Economic abuse is a subtle form of violence that we often struggle to recognise.
Here are some of the ways in which it happens:
• A victim of family violence can be forced to seek a loan that only benefits the perpetrator or to guarantee a loan made to the perpetrator
• A loan can be made to the victim and perpetrator jointly, but only the victim might make repayments
• After the violent relationship ends, the perpetrator might not contribute to repayments, and the bank might move to sell mortgaged property
• A victim might have difficulty obtaining information about a loan held in the perpetrator’s name which is secured by a mortgage over a family asset
They are not yet doing enough
In recent years there have been changes to banking industry guidelines to encourage banks to prevent the financial abuse of victims of family violence.
The Australian Bankers’ Association is pushing for widespread staff training. Much has been done, but a lot more needs to be done.
A 2017 survey of 98 banks, building societies, credit unions and credit providers found an alarming lack of awareness of family violence amongst front line staff who rarely identify customers experiencing violence or are even aware of support services.
Most responding institutions said they did not have family violence training for staff or plans to introduce it.
One legal service provider recently assisted ‘Mi-Kim’.
Several months after Mi-Kim’s husband left her, a lender contacted her to advise that the loan to the home she lived in with her pre-school-aged children was in arrears. The loan was in her husband’s name but the lender could not contact him. Mi-Kim , whose English was poor, started paying money into husband’s account to make mortgage repayments. He was still able to access his account and made withdrawals. The lender moved to sell the property.
These victims are doubly disadvantaged by their exposure to violence as well as poor practices on the part of their credit providers.
We know that asking about the presence of family violence helps encourage victims to disclose it. Where loans are being made to couples, financial service providers should specifically ask each member of the couple about family violence and whether any intervention/apprehended violence orders have been made.
Where violence is identified or suspected, a set of automatic protocols should whirr into place.
For joint loans and guarantees in the name of family members who do not benefit, banks and other creditors should have a legal obligation to warn the person taking on the obligation of the importance of obtaining independent advice. The code of practice should mandate information provision about family violence.
We have a rare opportunity to secure a common approach to family violence as part of the response to the banking royal commission. Our financial institutions should embrace it.
We are grateful to Women’s Legal Service Victoria and South East Community Links for providing the case studies referred to in this article.
Becky Batagol worked for Victoria’s Royal Commission into Family Violence and is a member of a committee overseeing implementation of one of its recommendations.
Marcia Neave owns shares in a bank. She chaired Victoria’s Royal Commission into Family Violence and chairs or is a member of a number of committees involved in overseeing implementation of the recommendations of commission. She is also on the Board of a number of NGOs involved in social justice issues.