The banking royal commission has heard revelations that Bendigo and Adelaide Bank’s Rural Bank failed to investigate episodes of fraud and charged incorrect fees on overdrafts for farming customers.

It has also heard claims receivers have driven a “massive destruction of value” across Australia’s agricultural sector in recent years by repeatedly failing to sell repossessed farm assets for market value.

The controversial takeover by ANZ of Landmark’s farm clients in 2010 was also canvassed, with the matter receiving the largest number of submissions relating to farming finance in the royal commission.

The banking royal commission began its fourth round of hearings on Monday. It has turned its focus to farming finance, natural disaster insurance, and interactions between Aboriginal and Torres Strait Islander people and financial services entities.

The commission was told Australia’s farmers are subject to more revenue variability than almost any other farmers in the world due to huge variations in Australia’s weather patterns, making it extremely difficult to manage debts.

Senior counsel assisting the royal commission, Rowen Orr, said banks had been closing branches in regional communities, leaving farmers with fewer opportunities for face-to-face contact with bank managers.

But she told the commission she would not be investigating the process of receivership in rural lending because it was outside the commission’s terms of reference, prompting numerous witnesses to suggest she should consider receivership some other way, given it was a significant source of grievance among farmers.

On the weekend, the Nationals senator John Williams said he hoped the royal commission would use this fourth round of hearings to investigate the role receivers played in agricultural lending because their repeated failure to sell repossessed farm assets for market value was destroying farmers’ lives.

On Monday, Chris Wheatcroft from the Rural Financial Counselling Service Western Australia suggested the commission could still explore the process of receivership by considering why banks used receivers at all.

“The act of putting in a receiver never benefits a client, I absolutely categorically say that,” Wheatcroft said. “There is nowhere to go once the receiver’s in.”

“In terms of values, farmers see their hard-earned money [or] farm [or] asset disappear under a receiver like you’ve never seen. They would perceive the money is absolutely wasted. There’s a massive destruction of value, and that sits deeply with people.”

His criticism of receivers drew applause from members of the public, particularly from former One Nation senator Rod Culleton and his colleagues, prompting commissioner Kenneth Hayne to gently ask the public gallery to keep their “commentary” to themselves.

Warren Day, from the Australian Securities and Investments Commission (Asic), said regulators always preferred banks to use external dispute resolution, rather than calling in receivers.

Orr also told the commission Bendigo and Adelaide Bank has admitted in its submission to multiple examples of conduct falling below community expectations, underpayment of interest to customers, overcharging of fees, and irresponsible lending practices.

She said one case involved a customer who realised her signature had been forged by her husband, to increase the limit of their agricultural loan facilities, and that the document had been falsely witnessed by a bank employee – but the bank didn’t investigate it.

“Rural Bank had advised the customer to report the matter to police but did not investigate the matter itself, relying on the police investigation,” Orr told the commission.

In 2016, Rural Bank erroneously charged fees on season overdraft and agri-manager products, with the error affecting 2,164 customers. The overall financial impact was $163,461 and all customers were remediated. The bank also underpaid interest on term deposit accounts for a period of up to five years, with 81 customers affected. The total financial impact was $10,166, and all customers were remediated.

The commission also heard about ANZ’s controversial purchase of Landmark’s farm clients in 2010, where ANZ bought 7,124 loans worth $2.3bn.

Benjamin Steinberg, head of lending services at ANZ, was asked why ANZ had quickly jacked up prices for Landmark’s borrowers.

She read from an ANZ document that pointed to a potential $6m “annual revenue opportunity” that could result from re-pricing Landmark’s variable loan book of $1bn.

The commission heard how ANZ was aware that $273m of the Landmark’s $2.3bn loan book had high-risk gradings.

The hearing continues.