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Westpac criticised for enforcing guarantee

BIScom Subsection: 
Editorial Staff

In Australia at present, there is a culture of attacking banks no matter what. Any handy stick can be used to beat them with. A case involving Westpac and a seriously ill disabled woman demonstrates that the craze has gone too far.

The facts, as reported in Australian media are simple. A disabled, elderly woman offered to stand as guarantor for a loan to her daughter and put her home as security. The loan went bad, the bank enforced and now there's widespread criticism of Westpac, the bank concerned.

So, let's be clear. What Westpac did was entertain a loan application from this woman's daughter only if additional security was made available. Nothing wrong there.

The woman willingly (on the facts, perhaps even enthusiastically - she has admitted in media reports that the nature of the contract did not concern her and she would have signed anything in the circumstances) helped out her daughter by entering into a contract of guarantee, using her home as security. Nothing wrong there.

The woman's daughter's business failed, she defaulted on the loan and the bank sought to enforce its security. Nothing wrong there.

The consequences were that the elderly woman, who is blind and suffering from serious illness, was faced with eviction and the sale of her home. So, bluntly, this is not a legal problem, it's a social problem.

What did Westpac do wrong? Actually, only one thing: it failed to ensure that she had independent legal representation - not only for her protection, but as the case shows, for their own.

The case has been resolved. Some would argue that Westpac were unco-operative but the fact is there is no legal obligation on them to be so. Socially, though, it did as many companies do and followed its processes blindly when, as companies the world over are learning, a bit of humanity goes a long way.

There's all kinds of social-worker jargon floating around but what the bank, once someone with authority got hold of the problem, did was logical and protects everyone: in effect they converted the debt to an equity-release mortgage, repayable on death or if she sells the property.

So the media is hammering Westpac, keyboard warriors are jumping on the bandwagon with single word, disparaging criticisms often based on misleading headlines. One social media commentator said that, despite all her illnesses "Westpac gave her a loan." Actually, they did nothing of the sort. They gave a risk-assessed loan to her daughter on condition additional security was provided which is not the same at all.

Australian banks are subject to much justifiable criticism, but they should not be subjected to being harangued where they have not only done nothing wrong but have actually resolved the problem, albeit after the situation was made worse by automated decisions and decisions made at low levels when senior, human, review is required because people, and banks, aren't machines.