Westpac NZ has apologised unreservedly for telling a customer he had three weeks to pay off his home loan and close all his accounts – and for refusing to tell him why.
“Over 40 years at that bank, not a problem, and they just shut the doors and said see ya later,” says Barry Stiles.
Westpac’s breakup letter came out of the blue. Barry Stiles had never missed a loan repayment on his modest Katikati home, nor had he been late with a bill.
Barry says that, at first, even the local Westpac branch didn’t think the letter was legitimate.
“They actually rang Christchurch to check themselves because they said this is a hoax.”
But it wasn’t, and Barry was left begging Westpac not to cancel the home loan. As a seasonal worker, he knew that no one else would re-finance him, and a quick sale could wipe out most of his equity.
This took a heavy toll on Barry.
“It puts you in some weird places. There's been quite a few sleepless nights, a lot of soul searching.”
Westpac did relent and let him keep the home loan – but insisted the transaction accounts must be closed.
That left Barry confused, and wary that the problem – whatever it was – hadn’t been resolved, and he might still face foreclosure at very short notice.
“Am I just on a lull? Have they quietened me down? Is there something coming?” he told Fair Go.
Barry could get no explanation from the major retail bank, despite making two requests under the Privacy Act for his information.
“I've done nothing wrong.”
Westpac’s actions meant that other banks were reluctant to take him on, leaving him facing financial exclusion and the possible loss of his home.
Banks can fire customers and legally, they don’t need to say why.
“The bank has to be able to say, ‘We no longer want you as a customer, perhaps because you’ve been abusive to our staff, you've breached our terms and conditions,’ or there are other reasons,” says Massey University banking expert Claire Matthews.
“It should be obvious but if it’s not, then it's reasonable to think that you would be told why.”
Fair Go investigated and found Barry had been the innocent victim of a system designed to trap sophisticated criminals - anti-money-laundering rules and procedures, or AML for short.
“There's software that financial service providers use to enable them to identify what might be suspicious,” says Dr Matthews.
“Cash transactions, money going in that is immediately followed by a similar amount going out. The standard practice would be that they would say to you, ‘There's something odd about this transaction, can you explain what's going on?’”.
But it is a highly secretive system. Good if you are chasing criminals, bad if you are innocent, like Barry.
It is an offence to divulge any information about what’s called a suspicious activity report (or SAR) – it’s even an offence to acknowledge, to the subject of the SAR, that one exists.
If the SAR results in charges and goes to court, it can be tested. But if the subject of the report is innocent, they have no way of investigating what’s been said about them, even if it might be hurting their chances of borrowing or doing business with a bank.
Dr Matthews says it’s a problem with the SAR system.
“If there's a suspicion or a belief that there's been a mistake made and a judgement made that's not correct then there needs to be some ability to revisit that and at the moment it's not obvious how that would happen.”
Once Fair Go was involved, Westpac escalated the matter to its Head of Risk, Regan Yarrow, who admitted the bank was at fault entirely.
“The way we went about this process fell well short of our own standards. We should have communicated about these matters to Mr Stiles before taking action, and we missed several chances to engage with him when he approached us.”
In his statement to Fair Go, Mr Yarrow adds: “I acknowledge the stress this has placed on Mr Stiles and understand why he is unhappy.”
A Westpac NZ manager has since checked three years of Barry’s banking history before declaring that Barry’s account was operated in compliance with bank terms and conditions - clearing him completely.
That process took just over an hour on the phone, after more than three months of hell.
“My life was turned upside down literally overnight,” Barry says.
The case has attracted the attention of regulators at the Reserve Bank. It’s also revealed a gap in the Banking Ombudsman Scheme, an arbitration system set up by retail banks.
“We intend to raise this with the New Zealand Bankers' Association,” says Banking Ombudsman Nicola Sladden.
Public settlements for “inconvenience” seldom go over $9000 when settled by the Ombudsman.
Westpac and Barry have reached a private settlement. But Barry is most happy that he has simply been able to clear his name – and keep his home.
If you have been dumped by your bank for no good reason, Fair Go would like to hear from you. Send us a message at firstname.lastname@example.org.