A personal carer and Centrelink recipient sold a secondhand Ford Focus with a Westpac loan, when the fortnightly repayments would eat up almost half her benefits. A young woman in hospital, dealing with the premature birth and likely death of her newborn, while Aussie Home Loans staff debate the potential reputational damage after realising one of their fraudulent brokers had promised her an unconditional loan on her first home that the bank would never actually approve. We can add to that list the other sensational evidence heard of outright bribery and fraud by NAB bankers and an industry-wide failure to act to fix conflicted remuneration arrangements for mortgage brokers which banks know produce “poor customer outcomes”. In a country in which bank bashing is almost a national sport, a new sporting hero has arisen. Senior counsel assisting the commission, Rowena Orr, has well and truly earned her new middle name “Shock and” for her forensic and meticulous grilling of bank executives. It’s not so much bank bashing, as a slow motion evisceration and disembowelment of the banks’ myriad failures, while their executives are forced to look on.

Banks must stop giving incentives to their workers to sell us home loans. Credit:Rob Homer The commission has ceased public hearings now until April 14, when it will apply the same blowtorch to the banks' scandal ridden financial planning arms. But for now, the examination of the banks' sales of consumer products, including home loans, credit cards, car loans and add-on insurance products is over. Leading to the obvious question: how to fix things? Orr concluded her examinations on Friday with a list of instances in which the commission may ultimately find the banks have breached both corporation and consumer credit law, including the requirement to act “efficiently, honestly and fairly” in their dealings with customers.

It’s an open question what penalties might now apply, not to mention where the corporate regulator, the Australian Securities and Investment Commission, has been while all this was going on. Loading But the most important question is what recommendations the commission may be able to make to ensure such conduct is stopped. Consumer groups say the commission’s sensational hearings have exposed deep problems with the incentives and sales culture rife in the banking industry. “Much of the problem lies in bank processes and systems that prioritise quick sales and short-term profits over responsible lending and compliance with the law,” says Gerard Brody, the chief executive of the Consumer Action Law Centre.

The Financial Rights Legal Centre argued in its submission to the commission that “media-grabbing scandals have been the extreme symptoms of an underlying malaise that has gripped the entire finance industry”, namely “a fundamental shift from an individual customer service-based industry to a profit-based sales culture which focuses on products and portfolios". All consumer groups want beefed up legal requirements that banks and mortgage brokers must provide advice and products that are in consumers' “best interests”, instead of advice and products that are “not unsuitable”, the current requirement. But the real issue at the heart of bank misconduct comes down to conflicted remuneration. It’s hard for bankers to act in consumers' best interests when they are paid in a way that incentivises them to reward themselves instead. Last week I wrote about the need to ban commissions for mortgage brokers.

Loading But the problems go much deeper than just third party channels. Bank staff themselves continue to collect bonuses and rewards based on maximising sales of home loans – most often the biggest debt an Australian will incur in their lifetime. Many Australians would be blissfully unaware that their friendly local banker would pocket a bonus for writing them a loan. While bank tellers have had their sales incentives for pushing products removed at many banks, most banks still reward other bank staff, such as home loan specialists, for writing loans. The assumption is that borrowers have a self-identified need, and all the bank does is help satisfy that need.

The idea that a borrower would be better off walking out of a branch without a home loan at all doesn’t seem to come into the equation. If the first two weeks of the royal commission have made anything clear, it’s that Aussies are a trusting lot - particularly the least financially literate among us. If a bank says you can have a loan, we’ll take it and assume it’s in our best interests, when in reality, that is often not the case. Since the industry’s own, self-initiated review of conflicted remuneration, sales incentives for bank staff are being rewritten and becoming more complex – moving to scoreboards with reduced weighting for selling loans. But the incentive remains for staff to write a loan and get more money from it. It’s time to finally eradicate all sales incentives for bank staff to push loans onto customers. It’s time to stop putting bank staff in the uncomfortable position of trying to maximise their own salary to feed their families at the potential risk of unsuspecting potential borrowers entering a bank branch trying to do the same for theirs.