As the into misconduct in the banking, superannuation and financial services industry gears up to hear from its first witnesses in Melbourne on Tuesday, advocates have warned it will miss out on testimony from “hundreds” of victims afraid of breaching confidential settlements they signed with their banks.
Denise Brailey, president of the Banking and Finance Consumers Support Association, said there were “hundreds” of potential witnesses who would have wanted to give public testimony but were afraid of legal retribution, especially when many had endured years of financial stress before securing a settlement.
“I know darn well they’re not going to come forward,” Ms Brailey, who helps victims negotiate out-of-court agreements with their banks, told SBS News.
She said she was advising members not to breach confidentiality clauses by appearing at the hearing, warning of an ongoing legal “grey area”.
'I nearly lost my life'
One alleged victim who signed a private settlement with her bank spoke to SBS News on the condition of anonymity.
The retiree told SBS News she wished she could testify at the royal commission but was “too scared” her bank would sue her for breaching the confidentiality deal.
“I’d be in the front row if I could,” she said. “[But] I couldn’t possibly live like that again for fear that there would be retribution.”
Others who lost money but were yet to sign a settlement would also be afraid to testify for fear of angering the bank and jeopardising their chances of a payout, she said.
"I've been trying to encourage other people to keep fighting, keep going to the media. But some of them are just too scared, because they think then that the bank will never settle with them."
The woman said she and her husband were convinced to take out an interest-only loan to purchase an investment property that was actually beyond what they could afford.
She alleged the bank first approached her about the investment via a door-to-door salesman and claimed the loan was approved based on inflated “projected income”, using her existing residence as a guarantee on the loan. When the repayments became too much, the couple was allegedly forced to sell the investment at a significant loss.
The terms of her confidentiality agreement mean she cannot identify the name of the bank, or the sum she received.
Securing the settlement was an enormous relief, she said, but years of financial strain took an enormous toll on her mental health and her relationship with her husband.
“I nearly lost my life," she said.
“Nothing will make up for the four years of stress and torment and illnesses that we had to put up with."
Promises of protection
The concerns persist despite recent reassurances from the judge leading the investigation, , who told would-be witnesses there were already some laws in place to protect them from lawsuits.
He also said any bank that took legal action against a witness would only attract more attention from investigators and invite questions about their “motives”.
It was a change of tone from a previous statement in early February when Justice Hayne told customers and whistleblowers that breached non-disclosure agreements.
Those comments prompted Nationals senator John Williams – a key Coalition backer of the commission – to threaten a last-minute intervention. He offered to set up a Senate inquiry that would take submissions from witnesses under parliamentary privilege then forward them to the commission.
But on Monday, the day before hearings begin, Senator Williams told SBS News he no longer considered the move necessary.
The Commissioner’s recent shift in language made him “confident” that banks would not try to sue their former customers, he said. But the NSW senator said if a bank proved him wrong and brought a case against a witness, he would push the parliament to pass “retrospective” laws that gave Royal Commission witnesses complete protection.
“The parliament could always legislate that if you give information to a Royal Commission you can't be sued, and make it retrospective, say back to January 1 this year,” Senator Williams said.
“No doubt [financial] institutions would be well aware of that.”
The Big Four banks have all promised not to sue anyone who gives evidence, but not every financial institution has matched the commitment.
'I don’t know who to trust'
The alleged victim who spoke to SBS News said promises of potential laws like those floated by Senator Williams were not a strong enough guarantee to take on the risk of litigation.
“I would have to see something in writing and I would have to see that law passed first before I had the courage,” she said.
“I don’t know who to trust anymore.”
Ms Brailey repeated calls for the Commissioner to use his powers to waive past confidentiality agreements, as was done in the recent child sex abuse inquiry. She also criticised the short time-frame of the investigation, which is due to present a final report in less than 12 months.
The Melbourne hearings are open to the public. They will focus on customer loans in March then move on to the financial planning and wealth management industry in April.
