Disability support pensioner Carolyn Flanagan is the human face of the banking royal commission.

Carolyn Flanagan almost evicted for guaranteeing daughter’s loan

Shane WrightPerthNow

A NEAR-BLIND, disability support pensioner recovering from cancer will have to stay in her house until she dies or pay Westpac to cover a loan for her daughter’s failed business, the royal commission on the banking system has revealed.

Carolyn Flanagan, who has trouble remembering the day she guaranteed the loan, told the commission yesterday that she would “have signed anything” to help her daughter even though it almost led to being evicted from the family home.

The commission has started hearings into the treatment of small businesses by the nation’s banks, with a focus on borrowers using their parents to act as guarantors for loans.

One-third of small business loans are secured by residential property.

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Ms Flanagan, who had to have official loan documents read to her because of her poor eyesight, only became aware of the difficulties facing her daughter and her partner in relation to their western Sydney business when legal letters arrived from Westpac.

Westpac moved to repossess the house after the borrowers defaulted on the loan but, after Legal Aid NSW intervened, ultimately agreed to let Ms Flanagan remain in her home until she dies or chooses to sell it before taking its share of the proceeds.

Ms Flanagan said she wanted to help her daughter though believed she was only helping to the tune of $50,000. The loan she guaranteed, however, was for substantially more and she also became a shareholder in her daughter’s business.

“I’d have signed anything for her ... if you can’t help your children, who can you help?” she told the commission.

Legal Aid NSW solicitor Dana Beiglari said older Australians were coming under pressure to help their children but in many cases did not understand the ramifications if something went wrong.

“They might feel some pressure to do what their child asks them to do in order to preserve the relationship ... my clients might find it difficult to say no to a financial arrangement that’s being put forward to them,” she said.

Senior Westpac official Alastair Welsh said the bank had followed proper procedure in approving the loan with Ms Flanagan as guarantor but conceded after her evidence that something was amiss.

“It’s pretty confronting, isn’t it?” he admitted. The Westpac officer who oversaw the loan with Ms Flanagan as guarantor is no longer with the bank.

Mr Welsh admitted the bank did not have to take into account the situation facing a guarantor if the borrower was unable to cover the loan.

But he added the bank also had to be aware of vulnerability in the guarantor.

The royal commission continues today.