It comes to this…


A little over two years down the track from the surge of activity in the initial stages of this blog…the final stage, I guess…

In those two years, I ditched the lawyers who could not follow instructions and got recommended to one who wanted to get into the fight. In November 2016, we submitted a detailed complaint to the Banking Ombudsman. It was about 20 pages, cross-referenced to all the supporting documents.

The response from the Banking Ombudsman was that it was the same as the original complaint from 2014. ???? How can that be when the new complaint refers to information, including the loan documents that we didn’t have in 2014? Howq can that be when the 2014 complaint only referred to ANZ’s statements that it did have an obligation to disclose information to guarantors under certain criteria (which we said existed)

Draw your own conclusions if you like. 2014 complaint. 2016 complaint

After three months of pushing the Banking Ombudsman finally deigned to consider the issues raised…kind of…she managed to squeeze a response to the dozen or so questions raised into a single page.

Well, actually, she didn’t…she only considered one small part of the problem and probably hoped that the rest would just somehow go away…feb 17 other.JPG

The use of the ‘ and/other’ construction is not confusing – except possibly for someone trying to weasel out from its common meaning. If we say “apples and other forms of fruit” are we including apples as forms of fruit? Yes, we are. Unsure about this? How about if we spin it around and say “apples and other forms of vegetable”. No? Doesn’t work for you either…?

The Code of Banking Practice is what it is and says what it says not what the ANZ would like it to say or what it might say to make life less challenging for the Banking Ombudsman. It’s in black and white.

What is interesting and totally overlooked by the Banking Ombudsman is that ANZ’s own documents list guarantees as forms of security:

guarantee security
from the guarantee
loan doc security
from one of the loan documents

As Al Gore might say, an inconvenient truth….

And this is the crux of it…by failing to disclose this information to me – as it was required to – ANZ denied me any opportunity to prevent further lending, and mitigate or repay existing debt…

Even after I raised my concerns with ANZ – after learning almost by accident of the debt in 2013 – it still refused to disclose this information…but that’s our next story…

A fictional take

Company Guarantees: A Banking Cautionary Tale

Names have been changed in this article to protect Tom and Kay. Tom is not Tom, and Kay is not Kay. I am me though and ANZ is ANZ: what follows is supported by its own documentation.

Not long ago, I caught up with an Army mate, Tom. I hadn’t seen him for years but with these sort of relationships, we can pick up where we left off a decade or so previously. I had no real reason for giving Tom a call. I just stumbled across his number while cleaning up the contacts list on my phone.

Our community is really concerned with the effects of post-traumatic stress injuries on soldiers and former soldiers. “Just Call” is one way we look out for each other. It’s a good way to catch up on old friends although it can seem a bit weird at first getting a random call from someone you may not have seen for fifteen or twenty years.

Hey, Bro, it’s Simon, long time no see, just stumbled across your number in my phone…thought I’d give you a call…have a catch up, mate…” “Nah, I’m good , mate, good…yeah” We chatted for a few minutes, swapping nuggets of information about people we knew, things we’d heard about who was where, who’s passed on…coz…we’re at that age…

Then Tom says “Actually, mate, things aren’t so good…Kay’s gone and I’m just finding now that there’s all this debt against her company.” “Sorry to hear that, Tom, hope that works out, I mean, how much could have racked up without you knowing?”Mmmm…getting onto 400k…”

What?!!” Can anyone rack up that much debt without her partner approving or sanctioning the loans? We talked and I learned. Tom lives a couple of hours away and I visited him on my next day off and learned some more…

Years ago, Tom signed a guarantee for Kay’s company. It wasn’t a business: she’d set it up, before her and Tom got together, for a house so her daughter could stay in Christchurch when Kay was posted back North – her and Tom were both in the Army. That property had been sold the following year and Tom had thought nothing more of the guarantee.

Like many of us, Tom was also married to his job. An exciting time as we struggled with the challenges of the post-911 world. Lots of projects, lots of building things, lots of travel, lots of work…lots of long but satisfying hours – professionally. Domestically, hmmm, sometimes that’s another story…Tom had thought Kay’s spending was from her pay – they lived off his salary – and his super which had been parked in the company accounts.

What Tom hadn’t known, had not even thought to ask about – you don’t know what you don’t know, right? – is that ANZ had been quietly loaning her money against her company. And not just here a hundy, there a hundy: hundreds of thousands of dollars against their home. Without a word to Tom.

A bit of background here. Kay deployed on many of the Army’s operations in the late nineties and early 2000s…Bougainville, East Timor and Afghanistan. She’d seen some pretty bad stuff and had been injured a few times – Tom had been supporting her with the effects of PTSI and the head injury she’d picked up just before she left the Army.

You know, mate, we all joke about chicks and retail therapy. Let me tell you: it’s a very real thing. If there was any spare money around the place, Kay would need to – not just want to, need to – spend it. And if we didn’t that it was sitting there would just grind away and grind away at her til eventually we’d spend it. I thought I was doing pretty good, weaning us off credit cards and finance cards, you know, Farmerscard, that sort of thing, so we could live within our means.”

When Tom and Kay separated, Tom began to learn just how bad things might be. ANZ sought Tom’s approval for a loan repayment holiday for Kay’s company. The interest was $36 a day – over $1000 a month – which seemed wrong for the one loan, for $91k, that Tom had signed in 2009.

He asked for more details but ANZ which had originally offered ‘full guarantor’s disclosure’ clammed up and said the Consumer Credit Control and Finance Act (CCCFA) prevented it disclosing details of the company’s finances. That was in November 2013. It took three months and an escalation to the regional manager for Tom to find out that Kay’s company was in the hole to the cool tune of $360k.

Here’s how this works. If you guarantee or otherwise secure a loan for a person, you are protected under the CCCFA and, since 2015, the Responsible Lending Code. If you guarantee a thing, like a company, then you have no such protection. The guarantee is what they call ‘all obligations’ and ‘unlimited’: the gift that keeps on giving taking. What that means is that ANZ can keep on lending against that guarantee. The really good bit is that ANZ feels that it doesn’t have to tell the guarantor about any of this until such time as it wants its money back and it hits him with a demand for the full amount of the outstanding debt. Yes, really.

ANZ is demanding the full amount, some $370k + expenses, from Tom. He doesn’t have anything like that amount and it’s unlikely that the two properties that he and Kay own will realise enough to cover this amount: on paper perhaps but not in the real world. Tom hasn’t gone down easily though. He’s engaged ANZ for two years, made some progress but nothing to really divert it from its implacable inevitable course. Can anyone spell ‘bully’?

Simon, could you do me a favour? Could you have a look at all of this,” he waves his hand at an inch of paper stacked on the dining table, “and see if I’ve missed something…maybe I’m too close to all of this and I’m missing something but no one will tell me what stops ANZ disclosing this information to me. Everyone I talk to tells me it can’t tell me this information but no one can tell me why, you know, like, cite some rule or law.”

He shook his head. “I feel so dumb, like I should be able to see what everyone else sees. What I want from you is to find just one reference that says ANZ didn’t have to tell me about the debt Kay was racking up. It’s probably real simple, staring right at me…I’m pretty much resigned to losing it all but I want to see what I’ve missed.”

Yeah, sure, Tom, happy to do that for you but, I’m no accountant or lawyer; I’ve had the same training in that you’ve had.” He smiled, “I know, but you know, fresh set of eyes and all that…”

So I left with a stack of paper, each document carefully collated and stapled, with a detailed summary sheet on top. Already I was preparing myself to break it to Tom that it was time to start packing. I had every expectation that this would be black and white, open and shut, and that Tom was simply denying what was there in front of him.

Tom’s position is that, had ANZ disclosed this lending to him at the time, or sought his approval for these loans, he would have been able to prevent them or arrange early repayment before the money was spent. In addition, had ANZ disclosed to him when the company was not meeting its repayment obligations he would have been in a position to take some action about that.

Tom wanted me to find the smoking gun that proved that the ANZ had a clear right not to disclose information about Kay’s lending to him as the guarantor for that lending. How hard could that be?

I’ve done a lot of this work, researching and critical analysis across a range of subjects: counterinsurgency strategy, policies for drone use, building a user requirement for the best Army boot every, on both sides of the lectern at university; I don’t Pollyanna and I had every expectation that I would quickly find a missing link that Tom had overlooked.

The first day, I scanned through everything to familiarise myself with it – about 60-70 pages of contracts and correspondence. Nothing leapt out at me. I went through again in more detail, downloading the documents and publications that Tom’s notes referred to: about the same quantity of paper again.

On the second day, I worked through each documents in detail, making notes as I read and cross-referencing each to others and the additional material that I had downloaded. Still nothing was leaping out at me and I was sharing Tom’s frustration. I don’t like failing and it narked me that what should be leaping out at me in big bold black and white print continued to elude me.

After a third day, I couldn’t run from the conclusion that what Tom sought did not exist: not in any of the loan or guarantee documents; not in his two years of correspondence with ANZ, not in his complaint to the Baking Ombudsman. Everything that follows is supported by documentation.

The guarantee that Tom signed in 2004 states that ANZ has no duty to disclose information to the guarantor. This doesn’t mean that it can’t disclose information relevant to Tom’s guarantee just that it doesn’t have to. In the same vein, there is nothing to stop ANZ disclosing details of company lending to the guarantor of that lending.

ANZ cites the CCCFA as prohibiting disclosure of company lending to affected guarantors. Tom asked ANZ on a number of occasions to cite the specific reference from the CCCFA that states this prohibition. That ANZ did not respond is not surprising: the CCCFA is about personal lending and it does not discuss company lending.

ANZ is a participating bank in the New Zealand Code of Banking Practice. The current edition of the Code is dated 2012, with previous editions in 2007 and 2003. The themes and content of each edition, in relation to this are largely similar. Under the Code, ANZ also undertakes to act fairly and reasonably towards its customers, in a consistent and ethical way. Fair. Reasonable. Consistent. Ethical. Remember those words as you read on.

The Banking Ombudsman’s guide on privacy and confidentiality establishes the Code as a key reference:

Confidentiality is a cornerstone of the bank-customer relationship. The Code of Banking Practice says banks “have a strict duty to protect the confidentiality of all our Customers’ and former Customers’ affairs”. This is known as a bank’s duty of confidence.

Section Five of the Code covers banks’ obligations when giving credit. A bank should inform any party providing security of a lender’s obligations. The definition of security in Tom’s guarantee is ‘a guarantee or indemnity, security interest, any interest in any land, mortgage, charge, lien or pledge’.

Section 5.2 refers to ‘a guarantee or other security’ underpinning that a guarantee is a form of security. In the same way, if I said ‘a potato or other vegetable’ you’d understand that a potato is a part of the group ‘vegetables’; if I said ‘a potato or other fruit’ you’d starting looking at me funny.

In Section Five, ANZ undertakes to make sure that people who have offered to give a guarantee or other security are made aware of their obligations. There is no caveat that a bank may not disclose details of the guaranteed lending to guarantors. The absence of non-disclosure from the list of cautions implies that disclosure is doable, possibly even desirable.

From Tom’s correspondence with the bank, ANZ has said that it can disclose details of lending to its guarantor. When it first approached Tom about his guarantee, it offered to provide full guarantor’s disclosure on approval of a loan repayment holiday.

A few months later, ANZ told Tom that it had an obligation to inform a guarantor of any material changes that could affect their obligations as guarantor. Two of the examples that ANZ provided are a change that is significant and reasonably and objectively likely to affect the guarantor‘s decision to give, or continue to give, the guarantee; and a significant increase or change in lending beyond what would be contemplated by the parties when the guarantee was given.

These are examples provided by ANZ. Tom says that they apply in his case. He never had any intention that his guarantee could be used for anything other than securing the loans for the house for Kay’s daughter. Any change to that would certainly have affected his decision to continue to give the guarantee, and was beyond what he envisaged at the time he gave the guarantee.

This year, ANZ finally conceded that best practice would have been for it to have disclosed details of Kay’s company lending to Tom as the guarantor of that lending. ANZ said that it accepted Tom’s position and offered to reduce his personal liability to $91k, the amount of the only loan that it did disclose, and require his approval for, in 2009.

Tom’s position has always been that, had ANZ disclosed this lending to him at the time, or sought his approval, he would have been in a position to prevent them or seek the earliest repayment before the money was spent. In addition, had ANZ disclosed to Tom that the company was not meeting its repayment obligations he would have been able to do something about it. So Tom asked ANZ to extend the offered reduction in liability to include the company’s total debt. Fair enough: ANZ had said that it accepted his position but not this far – apparently.

Had Tom just been an independent guarantor he would leapt at this offer. But while Tom and Kay work through the division of property for their separation, the company remains joint property. So long as that’s the case, Tom is liable for half its debt anyway. I really wonder if the offer from ANZ was made in good faith at all. However, for any guarantor not also liable under the joint property provisions of a relationship, ANZ’s concession sets an important precedent.

My review of all Tom’s documentation didn’t find any reason why ANZ could not have disclosed Kay’s company lending to Tom. The guarantee says it doesn’t have to but it doesn’t say it can’t.

The only legislation cited by ANZ is the CCCFA which does not, by definition, apply to or discuss company lending. ANZ cites the CCCFA in this context on a number of occasions and that is, at best, misleading; take it a little further and it becomes a little disturbing.

The Banking Ombudsman cites the Code of Banking Practice as a prime reference for a bank’s obligation of confidentiality to its customers. The Code offers no barrier to the disclosure of lending information by ANZ to a guarantor.

Under the Code, ANZ undertakes to act fairly and reasonably towards its customers, in a consistent and ethical way. Is it fair, reasonable and ethical for the ANZ to tell Tom that it is going to extend the loans he’s guaranteeing by some hundreds of thousands of dollars? I think so.

Although there had been no changes in Tom’s relationship with the company, and the company had not, according to ANZ, provided any formal authority to do so, ANZ did disclose and require Tom’s approval for a company loan of $91k in 2009.

ANZ has offered no good reason it could not have shared this information with Tom. As the guarantor of the company’s lending, he is clearly an interested party, what we would call a relevant stakeholder.  There has been no change in legislation to enable ANZ to now regard disclosure as best practice: it has always been able to do this.

ANZ is currently demanding payment in full of the $372k outstanding against Kay’s company. Tom’s position remains that the offered reduction in liability down to $91k should be applied across the entire company debt.

Tom also asked ANZ to reimburse him and Kay for interest, fees and penalties paid since the company began to default on its obligations. He says, and I think it’s a good point, that had he known that then he wouldn’t have opted to leave the Army for a lesser paid but more lifestyle-friendly job.

He’s asked for compensation for the stress that ANZ has placed on him, on Kay and on their marriage which is now. ANZ has not been able to cite any reason for not sharing this information with Tom, nor has it shown that he had no right to know. It has conceded that best practice would have been to share this information and said that it accepted Tom’s position. Why shouldn’t ANZ compensate Tom and Kay for the damage it has done to their lives?

If ANZ was smart, it would settle with Tom under a confidentiality agreement. ANZ has admitted that it should have shared this information with Tom, and it has been unable to justify not sharing it with him. ANZ’s offer to substantially reduce Tom’s liability under his guarantee sets a mighty precedent for other guarantors.

Is ANZ is too arrogant, or simply too big, too ponderous and too dumb to do the right thing by Tom and Kay?

The ball is in ANZ’s court. It’s already taken a big step in the right direction by conceded that it should have applied best practice to disclosing this lending and offered a major concession as a result. All it needs to do is take this just that little bit further.

ANZ. Time to do the right thing.

Building the community

Our case is getting to the point where we are confident enough of our position to start determining how many other New Zealanders may be in this same unenviable position…where they guaranteed a company only to later find that ANZ has extended credit far beyond what was ever envisaged at the time of giving the guarantee – that’s bad – and has not fulfilled its obligations to disclose that lending to the guarantor(s) of the lending – that’s worse….

We would be interested to hear from anyone who has given a guarantee to ANZ to guarantee company loans i.e. not personal loans that are covered by the Credit Control and Consumer Finance Act 2003 (CCCFA).

We would like to hear from anyone that ANZ did not disclosure details of the amounts lent, especially if changes to that lending were of a nature that is significant and reasonably and objectively likely to affect a guarantors’ decision to give, or continue to give, the guarantee; or a significant increase or change beyond what was contemplated when the guarantee was given.

We are also interested in any circumstances where ANZ has cited the CCCFA as reason to not disclosure information on company lending to the guarantor of that lending e.g. statements that, under the Credit Contracts and Consumer Finance Act (CCCFA), ANZ is not obliged to provide disclosure to a guarantor in respect of further lending when a business is involved; or that the CCCFA controls the level of information that ANZ is allowed to provide without overstepping the privacy of the company.

Legalling up

In July things go to the point where I felt I needed more to support to see this thing through to the end. I had to lawyer up partially to validate my position as being more robust than just my opinion; and also to introduce another voice into the conversation. I think that ANZ was getting the point where it was just tuning me out regardless of what I was saying.

So, legalling up…an interesting experience…my first big lesson was choose your law firm carefully….I went with a local firm that had some some minor work for us in the past…I mean, like, all lawyers are the same…right…? Well, no…the first firm I went to was absolutely useless…provided bad advice (based on the wrong legislation), did not follow my instructions (which they are obliged to do so long as those instructions are legal and ethical) and in the end decided it was all too hard…waster three months I could not afford to lose with those losers…

The new lawyers, recommended by a personal friend with some experience in these matters, appear a lot sharper, are asking all the right questions, and hopefully will be able to help bring this to a favourable resolution…watch this space…


Remember Venn diagrams

Venn diagrams are the shapes we used to draw in primary school maths to show ownership or membership relationships…

Venn diagram
 1. a diagram representing mathematical or logical sets pictorially as circles or closed curves within an enclosing rectangle (the universal set), common elements of the sets being represented by intersections of the circles.

Another sleepless night last night…in all fairness to ANZ’s cumbersome bullying, I popped a disc in my back a couple of weeks ago: while improving, it is not helping at the moment and I find that it disturbs my sleep less if I leave the ‘lectric blanket on…the flip side of that is that the extra heat keeps the rest of me awake…lots of time to think…

It occurred to me about 3AM that the definition of security in the Code of Banking Practice is consistent with the definition of security in the original guarantee. the root of my problem. That’s this definition which quite clearly includes a guarantee as a subset of security:

guarantee security

Similarly, under the Code’s definition, under the guarantee the bank still has security for the credit that it extended to my ex-partner’s company

security 3

I really don’t think that we need top split hairs over this one anymore. Even if we did, what would take precedence, noting that the Code is just that, a Code and not a law: what ANZ writes in its own documentation – we still assume that it is competent – or what is in the Code?

I would argue that ANZ’s wording indicates a higher standard than the Code requires – for which ANZ should be commended – and thus that higher standard, that it has set for itself, is the standard that we should expect ANZ to apply…would that be fair? Reasonable? Consistent?

Hmmm…those words again…

A long day…

…today, most of it on my feet and I am too knackered to do much work here tonight. Truth be known I was awake a lot of last night stressing about how all this might pan out as it wasn’t looking good…

I have these crises of confidence where I am so positive that I must be missing something, that there must be some law that bars ANZ disclosing information pertaining to company lending to the guarantor of that lending. Surely there must be..? Surely.

…and that legal obstacle is somehow consistent with the undertaking by participating banks in the Code of Banking Practice to treat customers fairly, reasonably, consistently and ethically…? Surely…

…especially when there are changes to that lending likely to affect my decision to continue to give the guarantee; or changes that are beyond what was contemplated at the time the guarantee was given…surely…

That would be the same Code under which ANZ feels it can misrepresent legislation like the Consumer Credit Control and Finance Act, or key definitions form that very Code…?

Tap dancing

For most people tap dancing may be Shirley Temple’s main claim to fame, but it also has a specific sense where someone is desperately trying to avoid being called on a subject. Having set the scene, let’s see what ANZ’s Customer Relations team had to say….

They start with two extracts from the Banking Ombudsman’s guide Guaranteeing Someone Else’s Debt:

custome rrelations 1

Nice but whatever…nothing there says that ANZ cannot disclose information on company lending to the guarantor of that lending. Remember, ANZ has already said that it has an obligation to disclose this information if it is likely to cause the guarantor to affect their decision to give or continue to give the guarantee; or if that lending is beyond what was contemplated at the time of the guarantee being given. This guide does not – not once, anywhere – say that a bank may not disclose information on a company’s lending to the guarantor of that lending. 

ANZ continues…

customer relations 2 Now, this sounds good but when you read it, it is actually only talking about disclosing if the guaranteed company has financial difficulties, and even then, it only says that the bank could be in breach if it does this. ‘Could’ not ‘would’! I’d argue that the circumstance of financial difficulty would also qualify as something likely to cause the guarantor to affect their decision to give or continue to give the guarantee. This does not say that a bank may not disclose information on a company’s lending to the guarantor of that lending.

Would you not think that if there was a clear legal obstacle to disclosure ANZ would have cited it by now?: Wouldn’t you…if such an obstacle existed..?

security 1

Now we’re starting to get into some nitty-gritty…ANZ may choose to believe that the separation of security and guarantees is intentional. It is certainly convenient for it to believe so however its guarantee defines security:

guarantee security

In other words, the guarantee, the root of this whole problem defines a guarantee as a subset of security. It is reasonable then to expect that anything that applies to security then, unless stated otherwise, to guarantees.

The Customer Relations team continues…

security 2

No, the Code’s glossary does’t say that. It doesn’t say that at all. It doesn’t even list ‘security providers‘ let alone offer a definition for that phrase. The 2012 Code of Banking Practice defines ‘security‘ as:

security 3

I have included the items above and below ‘security’ to show that there is no other listing for ‘security provider’ in the Code’s glossary. The glossaries for 2007 and 2002 versions of the Code have the same definition of ‘security’and no definition for ‘security providers’.

Just for the record, here is the Code’s definition of a guarantee:

security 4

This is also the same in the 2007 and 2002 versions.

I think it’s reasonable to assume that ANZ employs competent staff. If not, it’s up to ANZ to prove that its staff are not competent. What does it say to you when a staff member from a major banking institution like ANZ makes a statement that is so patently untrue..?

What didn’t they say?

Not one thing about their obligation to disclose material change in the lending to a guarantor. Not one word. Just tap danced right around that one…