Aussie mum takes David-and-Goliath battle

with Commonwealth Bank to

parliamentary inquiry
December 2, 20158:09am

The Commonwealth Bank has been accused of predatory lending. Picture: Ian Waldie
Dana McCauleynews.com.au

Share
Share on Facebook
Share on Twitter
Share on Google+
Share on Reddit
Email a friend

WHEN Tasmanian mum Suzi Burge wanted to take out a loan to add a cafe to her craft
store, Australias largest bank was only too happy to comply.
But thanks to a bungle by the Commonwealth Bank of Australia, shes lost what was
supposed to be her retirement nest egg, and now the bank wants her house.
In a scathing submission to a parliamentary inquiry into banks lending practices, Ms Burge
accuses CBA which is due to give evidence in Canberra on Wednesday of fudging her
loan documents to sign her up for a business loan it knew she could never repay.
Its predatory banking at its worst, Ms Burge told news.com.au, backing calls for a royal
commission.
What happened reads as a cautionary tale for any small business owner thinking of taking out
a loan with one of the big banks.
Ms Burge lost her marriage and her finances are in tatters.
Now shes fighting a David-and-Goliath battle in the Tasmanian Supreme Court.
The bank has sold the property out from under her, and has started proceedings to sell all
thats left: the family home that she once owned unencumbered, and an investment property.
It all started in 2008, when Ms Burge and her then husband applied for a $300,000 loan to
jazz up their Launceston craft store and add in a cafe.

ADVERTISEMENT

The couple had bought the commercial property in 2002 to house the craft business Ms Burge
had started in the family loungeroom, redrawing on their home loan to buy the property
outright.
But while business had previously been booming, the global financial crisis combined with
ill-timed council works out the front meant it started bleeding money.
Yet the bank determined that the couple could afford repayments of $7000 a month, and
signed them up for a 15-year loan, secured against the property.

Suzi Burge has lost her the property where she ran her business after taking on an
unaffordable loan.Source:News Limited
Ms Burge said she was initially led to believe that she would be eligible for an investment
loan at a lower rate of interest, to be repaid over 30 years.
Thats why we put the application in our names and not the business, she said.
But when they brought the documents around, they said it had to be over 15 years at a
higher interest rate.

She said that while at that point we did have the choice not to sign it, the couple took an
optimistic view and figured that if the bank thought the loan was right for them, they could
make it work.
Ms Burge hoped, optimistically, improving the property and adding a cafe income stream
could help turn her financial situation around.
Wed already gone so far with the planning and the application fees, Ms Burge said.
We looked at each other and asked can we do it?
Unfortunately, they couldnt, and the bank foreclosed on the commercial building which
passed in at auction and finally sold for $400,000, almost 40 per cent below the banks
previous valuation.
This cleared the loan for the renovations but it left Ms Burge without premises to run her
business, and a big debt for the property that was sold out from under her.
Now the bank has taken possession of her investment property, along with the stock in trade
of her craft business, which she had stashed inside.
And Ms Burge is waiting for the knock on the door of the home she raised her family in, as
the bank is about to take possession of that, too.
Its a pertinent illustration of what can happen when banks lend people money beyond their
capacity to repay and why we have responsible lending guidelines enshrined in our
banking codes of practice.
OMBUDSMAN FINDS MALADMINISTRATION
The Ombudsman determined the bank should not have lent Ms Burge and her ex-husband the
money, and that CBA had engaged in maladministration in lending, by failing to adhere to
best practice, overstating the business income, understating the couples living expenses and
wrongly factoring in Ms Burges ex-husbands full income despite the fact he was on
probation.
Maladministration means conduct that is contrary to law or unreasonable, unjust, oppressive,
improperly discriminatory or based on improper motives.
The Ombudsman ordered the bank to deduct $144,000 from the debt as compensation, but
this still left Ms Burge with a six-figure debt she has no hope of paying.
Internal CBA emails seen by news.com.au reveal concerns were raised by the banks
assessors about the couples ability to repay the business loan.
I need to get some clarification around this paper prior to being able to decision this
application, one of the banks risk associates wrote.

The company balance sheet reflects an extremely poor position with major deficit (retained
losses) ... In comparison to past performances, the projected income seems optimistic. Please
comment.
The risk associate also wrote that the loan application had merit based on reasonably strong
personal balance sheets of the director and guarantor.
Ms Burge said these balance sheets had gone missing, and were not in the copies of her loan
documents that the bank submitted to the Ombudsman.
I certainly dont think it responsible lending to write that we have plenty of non sensitive
assets that can be sold to reduce or clear the debt, she said.
I believe the documents show that CBA knew I was not going to be able to afford these
loans, and yet went ahead loaning the money anyway, because they knew there were plenty
of assets to sell.
Ms Burge also argued the bank had failed to secure an appropriate price, having valued the
building at $650,000 in 2010, but the Ombudsman found that CBA did make all reasonable
attempts to obtain the best available price for the property in the circumstances and at the
time that the property was sold.
The value of the ... property had dropped significantly at the time of the sale and market
conditions were very soft, the Ombudsmans determination said.
The potential sale price of the property was also adversely affected by uncertainty over the
council zoning of the property.
COMMONWEALTH BANK DENIES WRONGDOING
A spokesman for CBA said it was not appropriate for the bank to comment on the
circumstances of individual customers.
Banks have no incentive to foreclose on loans everyone loses under this scenario, the
spokesman said.
The best outcome for the customer and the bank is when the loan is repaid in full, and that
often means coming up with a plan that will give the customer every opportunity to ride out
their difficulties. But, regrettably in some cases, these options simply wont avert an
inevitable fact if there is no realistic way that the loan can be repaid.
He said the bank welcomed scrutiny and had actively participated in all inquiries since 2008.
CBA is battling to salvage its reputation amid the controversy over its acquisition of
BankWest, which led to its foreclosing on more than 182 commercial loans worth more than
$8.2 billion.
A number of small business owners have accused the bank of deliberately impairing their
loans by deflating the value of their assets, in order to take advantage of a discount clause in
their contract to take over BankWest.

The banks submission to the Parliamentary Inquiry into the impairment of customer loans is
available online.
dana.mccauley@news.com.au

Aussie mum takes David-and-Goliath battle

with Commonwealth Bank to
parliamentary inquiry
December 2, 20158:09am

The Commonwealth Bank has been accused of predatory lending. Picture: Ian Waldie
Dana McCauleynews.com.au

Share
Share on Facebook
Share on Twitter
Share on Google+
Share on Reddit
Email a friend

WHEN Tasmanian mum Suzi Burge wanted to take out a loan to add a cafe to her craft
store, Australias largest bank was only too happy to comply.
But thanks to a bungle by the Commonwealth Bank of Australia, shes lost what was
supposed to be her retirement nest egg, and now the bank wants her house.

In a scathing submission to a parliamentary inquiry into banks lending practices, Ms Burge

accuses CBA which is due to give evidence in Canberra on Wednesday of fudging her
loan documents to sign her up for a business loan it knew she could never repay.
Its predatory banking at its worst, Ms Burge told news.com.au, backing calls for a royal
commission.
What happened reads as a cautionary tale for any small business owner thinking of taking out
a loan with one of the big banks.
Ms Burge lost her marriage and her finances are in tatters.
Now shes fighting a David-and-Goliath battle in the Tasmanian Supreme Court.
The bank has sold the property out from under her, and has started proceedings to sell all
thats left: the family home that she once owned unencumbered, and an investment property.
It all started in 2008, when Ms Burge and her then husband applied for a $300,000 loan to
jazz up their Launceston craft store and add in a cafe.

ADVERTISEMENT

The couple had bought the commercial property in 2002 to house the craft business Ms Burge
had started in the family loungeroom, redrawing on their home loan to buy the property
outright.
But while business had previously been booming, the global financial crisis combined with
ill-timed council works out the front meant it started bleeding money.
Yet the bank determined that the couple could afford repayments of $7000 a month, and
signed them up for a 15-year loan, secured against the property.

Suzi Burge has lost her the property where she ran her business after taking on an
unaffordable loan.Source:News Limited
Ms Burge said she was initially led to believe that she would be eligible for an investment
loan at a lower rate of interest, to be repaid over 30 years.
Thats why we put the application in our names and not the business, she said.
But when they brought the documents around, they said it had to be over 15 years at a
higher interest rate.
She said that while at that point we did have the choice not to sign it, the couple took an
optimistic view and figured that if the bank thought the loan was right for them, they could
make it work.
Ms Burge hoped, optimistically, improving the property and adding a cafe income stream
could help turn her financial situation around.
Wed already gone so far with the planning and the application fees, Ms Burge said.
We looked at each other and asked can we do it?

Unfortunately, they couldnt, and the bank foreclosed on the commercial building which
passed in at auction and finally sold for $400,000, almost 40 per cent below the banks
previous valuation.
This cleared the loan for the renovations but it left Ms Burge without premises to run her
business, and a big debt for the property that was sold out from under her.
Now the bank has taken possession of her investment property, along with the stock in trade
of her craft business, which she had stashed inside.
And Ms Burge is waiting for the knock on the door of the home she raised her family in, as
the bank is about to take possession of that, too.
Its a pertinent illustration of what can happen when banks lend people money beyond their
capacity to repay and why we have responsible lending guidelines enshrined in our
banking codes of practice.
OMBUDSMAN FINDS MALADMINISTRATION
The Ombudsman determined the bank should not have lent Ms Burge and her ex-husband the
money, and that CBA had engaged in maladministration in lending, by failing to adhere to
best practice, overstating the business income, understating the couples living expenses and
wrongly factoring in Ms Burges ex-husbands full income despite the fact he was on
probation.
Maladministration means conduct that is contrary to law or unreasonable, unjust, oppressive,
improperly discriminatory or based on improper motives.
The Ombudsman ordered the bank to deduct $144,000 from the debt as compensation, but
this still left Ms Burge with a six-figure debt she has no hope of paying.
Internal CBA emails seen by news.com.au reveal concerns were raised by the banks
assessors about the couples ability to repay the business loan.
I need to get some clarification around this paper prior to being able to decision this
application, one of the banks risk associates wrote.
The company balance sheet reflects an extremely poor position with major deficit (retained
losses) ... In comparison to past performances, the projected income seems optimistic. Please
comment.
The risk associate also wrote that the loan application had merit based on reasonably strong
personal balance sheets of the director and guarantor.
Ms Burge said these balance sheets had gone missing, and were not in the copies of her loan
documents that the bank submitted to the Ombudsman.
I certainly dont think it responsible lending to write that we have plenty of non sensitive
assets that can be sold to reduce or clear the debt, she said.

I believe the documents show that CBA knew I was not going to be able to afford these
loans, and yet went ahead loaning the money anyway, because they knew there were plenty
of assets to sell.
Ms Burge also argued the bank had failed to secure an appropriate price, having valued the
building at $650,000 in 2010, but the Ombudsman found that CBA did make all reasonable
attempts to obtain the best available price for the property in the circumstances and at the
time that the property was sold.
The value of the ... property had dropped significantly at the time of the sale and market
conditions were very soft, the Ombudsmans determination said.
The potential sale price of the property was also adversely affected by uncertainty over the
council zoning of the property.
COMMONWEALTH BANK DENIES WRONGDOING
A spokesman for CBA said it was not appropriate for the bank to comment on the
circumstances of individual customers.
Banks have no incentive to foreclose on loans everyone loses under this scenario, the
spokesman said.
The best outcome for the customer and the bank is when the loan is repaid in full, and that
often means coming up with a plan that will give the customer every opportunity to ride out
their difficulties. But, regrettably in some cases, these options simply wont avert an
inevitable fact if there is no realistic way that the loan can be repaid.
He said the bank welcomed scrutiny and had actively participated in all inquiries since 2008.
CBA is battling to salvage its reputation amid the controversy over its acquisition of
BankWest, which led to its foreclosing on more than 182 commercial loans worth more than
$8.2 billion.
A number of small business owners have accused the bank of deliberately impairing their
loans by deflating the value of their assets, in order to take advantage of a discount clause in
their contract to take over BankWest.
The banks submission to the Parliamentary Inquiry into the impairment of customer loans is
available online.
dana.mccauley@news.com.au