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Slater and Gordon hopes the deal struck between the Commonwealth Bank of Australia (CBA) and its clients registered with the Storm Resolution Scheme will encourage other banks to behave responsibly.
Slater and Gordon practice group leader, Ken Fowlie, said he is pleased with the outcome. The Storm Resolution Scheme, which comprises of about 2,000 former Storm Financial clients, was formed seven months ago.
As part of the deal, Fowlie said if the clients had a margin loan with Colonial Geared Investments and that margin loan went into margin call in the second half of 2008, then those customers will receive very close to 90 per cent of the equity they had in their portfolio on the date they went into margin call.
“Effectively that returns the clients to the position they would have been in had all of the criticisms that have been made of the management of the margin loans been eliminated,” said Fowlie.
He said on the home lending side of things, the CBA has agreed that it will examine every home loan it extended to clients. The bank will assess whether each loan was properly extended, applying prudent lending principles that have been agreed on by the CBA, Slater and Gordon and the clients affected.
Fowlie said that if the assessment reveals that a client was lent too much money, the bank would write off that portion of the client’s debt, effectively reducing the existing loan. If a client no longer has a loan with the bank, the CBA will pay them a cash lump sum.
The deal also includes additional hardships measures that will address any difficulties clients currently find themselves in. “The proposal addresses not only legal liability but deals in a practical way with hardship,” he said.
Fowlie said Slater and Gordon will not comment on the expected amount CBA will pay out, as it is dependent on each individual case. He said the CBA is expected to extend the first round of offers to clients within the next few days, with the last lot expected to be offered by May.
