Banks are effectively immune from liability for past misconduct occurring from matters arising after 1 January 2008 in relation to facilities exceeding $5 million, and the federal government needs to fix this gap, according to a law firm.
Creevey Russell Lawyers principal, Dan Creevey, said there needed to be urgent gaps fixed in the reforms made to the Australian Financial Complaints Authority (AFCA), given the continuing revelations of serious misconduct by Australian banks.
As part of the post-Hayne Royal Commission reforms, changes were made to the jurisdiction of AFCA to extend the normal six-year limitation period to commence litigation by permitting AFCA to deal with matters arising after 1 January 2008. However, the jurisdiction was limited to credit facilities not exceeding $5 million, which meant that businesses and farmers with facilities greater than $5 million were now worse off.
While the Department of Treasury told Creevey a review of the AFCA scheme was scheduled for after May, 2020, Creevey said this was a matter that needed to be addressed immediately.
“Given the continuing revelations of serious misconduct by Australian banks, our firm and a prominent client from the rural sector are concerned Australian banks may have misled the government into agreeing to a monetary cap of $5 million and to the waiver of time limits being limited to matters arising after 1 June 2008 in relation to AFCA’s jurisdiction,” he said.
“These limitations are very attractive and convenient to banks. They mean banks are effectively immune from liability in relation to past misconduct occurring before the normal limitation period of six years in relation to facilities exceeding $5 million.”
Creevey noted that there were many other parties, particularly in the rural sector, who had suffered considerable losses as a result of bank misconduct and were unable to pursue their rights as a result of this gap.
“Common sense suggests there are likely to be many potential claims in this category and there is no good reason why banks should avoid liability for their misconduct in relation to these claims,” he said.
“Given the serious nature of bank misconduct there does not appear to be any logical or moral reason for not waving the usual limitation periods where serious misconduct by the bank can be demonstrated.”