The Commonwealth Bank is changing its lending practices in remote indigenous
communities following an investigation by the Australian Securities &
Investments Commission and the South Australian Office of Consumer and Business
Affairs into broker-arranged personal loans for borrowers in Far North
Queensland, the Torres Strait, and South Australia.

This follows concerns about the eligibility criteria used by the bank to
assess loans, and discrepancies in loan applications submitted by the brokers,
which left some borrowers over-committed and unable to afford the
repayments.

ASIC’s acting executive director of consumer protection, Delia Rickard, said
the majority of loans were for $20,000 or less to purchase second-hand motor
vehicles, and many of the borrowers were dependent on Centrelink payments for
their incomes.

In a statement yesterday the bank expressed its concern that these
deficiencies occurred and apologised to any borrowers affected.

CBA has instigated a remedial plan of action for about 400 borrowers
affected, and has adopted new lending processes for these areas. It will also
fund a dedicated financial counsellor for remote communities for an initial
period of three years.

“Given the problems with financial literacy levels and budgeting experienced
in many remote indigenous communities, ASIC is especially supportive of the
Commonwealth Bank’s commitment to funding a dedicated financial counselling
position,” said Ms Rickard.

“There is a need for all financial institutions to adopt responsible lending
practices. ASIC encourages all lenders that haven’t already done so recently to
review their lending guidelines to ensure that they are fair and
effective.”