Major banks are working to settle disputes with former clients of Storm Financial following a landmark deal between the Commonwealth Bank and devastated investors.
CBA on Tuesday agreed to a deal with lawyers for more than 2000 former Storm clients which will see cash payouts and mortgage reductions given to customers affected by bad lending practices and a failure to call in margin loans.
Storm Investors Consumer Action Group chairman Noel O’Brien said pressure would now be put on other lenders to follow CBA’s lead.
He said the group would target ANZ, Bank of Queensland (BoQ), Westpac and National Australia Bank to secure similar outcomes for clients.
‘‘There is no doubt there was a feeding frenzy to get our business and it wasn’t just CBA,’’ Mr O’Brien said today.
An ANZ spokesman said the lender was preparing to announce a customer resolution scheme relating to former Storm clients shortly.
A Bank of Queensland spokeswoman said the bank was dealing directly with the 260 Storm-affected clients.
‘‘We believe this personal approach is the most appropriate and is in keeping with our focus on our customers as individuals,’’ the spokeswoman said.
She said 90 customers had been provided with hardship assistance and the bank was committed to ensuring clients did not face foreclosure on loans.However, unlike CBA, BoQ had not been involved in margin lending and had only provided mortgages to provide customers with equity to secure margin loans.
National Australia Bank and Westpac did not return calls.
Thousands of Storm Financial investors were left financially destitute by the global financial crisis in late 2008 after having been urged to go heavily into debt, including mortgaging their homes, to invest in the stock market.
It has since been found that many clients were given mortgages well above the value of their homes and CBA has promised to address the shortfall by reducing the total value of loans in relevant cases.
Customers who took out margin loans to invest with Storm would be remunerated for 90 per cent of the funds they used as security on the loan, provided the value of their investment slipped below the margin call level in the second half of 2008.
In practical terms, it means a client with $500,000 worth of investments, including a $450,000 loan and $50,000 of equity, would receive a $45,000 payout.
However, Mr O’Brien said the payout would not be enough for some investors.
‘'We were disappointed because it didn’t go as far as we would have wanted it to go but we were always going to be disappointed,’’ he said. ‘‘Some people will get nothing, some will get a lifeline, some people will get some sort of relief.’’
AAP
