Commonwealth Bank, one of the main lenders to customers of collapsed financial planning group Storm Financial, has admitted there were shortcomings in the way it dealt with some Storm customers.
“The Bank acknowledges that the position in which some Storm Financial clients find themselves, while not caused directly by the Bank, involves the Bank to some degree,” it said in a statement.
The bank is now likely to try to come to settlements with 2500 Storm clients who borrowed money through CBA. The bank has suspended repayment obligations until 31 August on all loans made to customers in relation to Storm and has pledged to pay for independent legal and financial advice to its Storm customers.
“In some cases we have identified shortcomings in how we lent money to our customers involved with Storm Financial,” chief executive Ralph Norris said. “We are not proud of our involvement in some of these issues and we are working toward a fair and equitable outcome for our affected customers.”
“Our customers can be assured that where we have done wrong, we will put it right. I am committed to the identification and resolution of all issues relating to the bank’s involvement with Storm Financial,” he said.
Norris says any settlements will not prevent the Storm customers from taking action against the bank in the future.
But despite his admission, Norris has made it very clear that CBA was not responsible for the financial advice provided to Storm clients.
“The bank is not responsible for the financial advice provided independently by Storm Financial to the bank’s customers. That was clearly the responsibility of Storm Financial, a licensed financial advisory company.”
Despite CBA’s mea culpa, Townsville-based economist Carey Ramm says CBA should simply write off the debts of the 250 clients.
“Certainly I haven’t seen all 2500 clients of Storm that are held by the Commonwealth Bank but in the vast majority of the loan documents I have seen out of the Commonwealth Bank, I have been amazed at just how bad the loan documentation has been and a vast majority of those will have to be written off,” he told ABC radio.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
