Banking Royal Commission: Duplicitous Banks, Foolish Borrowers

Written by:
8 February 2019
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The funniest thing to come out of the Hayne royal commission is a story that appeared in The Sydney Morning Herald on Monday.

Titled “I’m amazed they approved me: CBA lashed for lending to the naive”, the article began as follows.

“One victim of irresponsible lending, 24-year-old Georgia Clark, believes the banking royal commission’s recommendations are a missed opportunity to protect the vulnerable from systems designed to reward bankers’ greed. The Sydney journalist walked into a Commonwealth Bank branch when she was 19 to ask for a loan to pay for a holiday to Europe and pay some other expenses. Though she was a full-time student who was working casually in hospitality, she was given an unsecured personal loan of $18,500 with an interest rate of 16.9 per cent. She fell behind on the repayments and talked to the bank about getting back on track, but at ‘no stage would they lower the rate, even despite my financial troubles.”

Georgia went to on say that she felt “the bank took advantage of her naivety and she was the victim of irresponsible lending”. She said she finished up paying almost $9000 in interest on her original $18,500 loan, with her “ordeal” ending a year ago when her parents paid off the loan, and she is now paying them back.

The article concluded with Georgia claiming “I am amazed that they approved me for the loan and my parents felt the same. I was fortunate to have my stepdad and mother back the loan, but a lot of other young people would not be as fortunate.”

There’s so much wrong about a 20-something complaining a bank gave them money to go on a holiday it’s difficult to know where to begin.

As far as we can tell no one forced Georgia to go on a holiday to Europe. She chose to borrow the money and she knew what the interest rate was.

The royal commission uncovered plenty of instances of bad behaviour by the banks, but from what we know, what happened to Georgia doesn’t have much to do with “bankers’ greed”.

Certainly a bank loan loan for $18,500 is a not insignificant obligation on a 19-year-old, and maybe the CBA could have asked Georgia whether she’d thought of going on a cheaper holiday to Byron Bay instead of Europe. But that’s also a question Georgia could have asked of herself.

What’s been lost in much of the discussion about the banks is that lending money is a two-way street. Banks choose to lend money and borrowers choose to borrow that money. Just as lenders sometimes make bad decisions, so too do borrowers – that’s a consequence of a free-enterprise economy – and it is a point that perhaps the royal commission could have done more to acknowledge. Not every bad loan is the bank’s fault.

Two-way street

The Comments section from SMH readers under the original article provides an interesting perspective from mainstream Australians about what occurred to Georgia.

One reader asked: “So you got a loan you asked for?”

Another remarked: “Do people ever take responsibility for their own actions? She was 19. An adult by law. Can drive, get a loan, get married, go to an adult prison, yet they feign stupidity when they get themselves into this.”

A number of readers recounted their own personal experiences about borrowing to go on a holiday or to buy a car. “When I was in my early 20s I decided to go on a 6-week trip to Europe. I saved for months so I could afford it. I would never have dreamed of borrowing the money.”

One reader, Jo, used Georgia’s case study to venture into a broader social commentary: “Talking on a mobile phone whilst driving is someone else’s fault because they didn’t stop me. Taking illegal drugs is someone else’s fault because they didn’t stop me. Speeding is someone else’s fault because speed cameras only raise revenue.”

Perhaps the final word on this should go to a reader rejoicing in the pseudonym of “Sir T”: “Genuinely encouraged by the common sense responses here … Taking responsibility for one’s actions may become a new trend.”

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