This article is more than 1 year old

This article is more than 1 year old

Labor has identified one of the biggest blindspots of the banking royal commission as being its lack of interrogation of the way banks are using the legal system to crush customers.

In its submission to the commission, Labor says Australians who have disputes with their banks are being forced into ruthless and lengthy court processes, by corporations with deep pockets, and there is a significant gap in community legal services for small business customers.

After holding more than a dozen roundtables with bank victims who were not invited to give evidence at the hearings, Labor says it has heard bank victims explain what it is like being issued with default notices and having to face off against QCs and top-tier solicitors in court.

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It says many bank victims have described significant difficulty obtaining their own legal counsel due to legal firms being conflicted because of their work for the banks, and other smaller solicitors being unwilling to commit actions against the big four banks.

“Many people ended up representing themselves in court proceedings they could barely understand, fronting up against a team of partners and lawyers from major law firms.”

Labor says it has also heard how bank victims are struggling with the long-term impacts of banking misconduct stretching back years, and are not receiving adequate compensation.

Its views can be read in its submission to the banking royal commission, which it is releasing on Friday.

Labor has already called to extend the commission, which is due to hand down its final findings in February next year. An interim report released last month found a culture of “greed” had led to misconduct.

The government has maintained it will consider extending the inquiry at the request of the commissioner, Kenneth Hayne, who has so far not indicated a desire for a later deadline.

But Labor has called for more victims to be given a platform to tell their story, with just 27 customers appearing in person at the commission, from the more than 10,000 who made written submissions.

Clare O’Neil, the shadow minister for financial services, said the stories she heard in recent weeks had been “harrowing.”

“I’ve spoken with people who have had their families torn apart, lost their homes, lost farms that have been in their family for more than 100 years, developed physical and mental illnesses, or attempted suicide,” she said.

“One of the clearest messages from our roundtables was that victims who are mistreated by their banks have the odds stacked against them if they make a complaint.

“In some instances, I believe the way the banks have used the legal system against customers is an abuse of the law.

“The legal system is inaccessible to victims when they have to face up, often representing themselves, against banks with deep pockets and teams of highly paid lawyers at the ready.

“These stories must be a part of our national conversation when we consider what our banks must do to regain the trust of the Australian people.”