Bank of Queensland under fire over 'no win' loan to Wendy's franchisee
"I was in a no win situation," former Wendy's franchisee Suzanne Riches told the royal commission.
The primary school teacher got a loan from the Bank of Queensland for two Wendy’s ice-cream franchises but immediately defaulted on the loan and never made a repayment in full.
The commission heard on Thursday morning of a litany of errors in the way Bank of Queensland issued and administered the loan.
Between the conditional offer and the final loan offer, the bank almost doubled the size of repayments for the loan and miscalculated the interest so that it soared from $4000 to $8000 a month.
Bank of Queensland took possession of the franchise, releasing it back to Ms Riches to sell and the company Ms Riches had set up to run the franchise ultimately went into liquidation.
The business loan was made by one of Bank of Queensland’s "owner/operator" bank managers who ran the branch in Pirie Street, Adelaide as a franchise. The commission heard the branch manager was terminated by Bank of Queensland in 2013 over separate issues after misappropriating $160,000 in customer funds from two customer accounts.
The branch manager had no authority to make the loan offer to Ms Riches and the original loan offer was made on a term longer than the term of the franchise lease, another breach of policy.
At one stage, the branch manager contacted the Wendy’s franchisor without the permission of Ms Riches.
Douglas Snell, general manager of product, performance and governance at Bank of Queensland, said mistakes had been made. The bank admitted to maladministration of the loan following an application by Ms Riches to the Financial Ombudsman Service.
Counsel assisting the commission, Michael Hodge, QC, put to Mr Snell that the branch manager had overstepped the mark.
“The danger is that the banker is taking on some role beyond being merely a banker, he is starting to act as an adviser or an assistant to the client,” Mr Hodge said. “Whatever the advertising campaigns may be, the bank is not the friend of the small business owner - it is there to provide a commercial transaction.”
“You are correct,” said Mr Snell. “There is a line and the relationship of adviser and banker are definitely separate.”
The commission heard at the time the loan was made, the Bank of Queensland wanted to increase its business lending to "diversify exposures by geography and asset class”.
This resulted in a large increase in loan approvals with 3309 loans approved in 2012 - amounting to 78 per cent of applications - with an average value of $878,414. By 2017, despite only 1981 loan applications being made, 83 per cent were approved with an average value of $1,330,811.
The hearing continues.