By Byron Kaye
SYDNEY, May 22 (Reuters) - Australia's Westpac Banking Corp WBC.AX repeatedly phoned and texted the owner of a failed pie shop to demand repayment of a loan, the shop owner said on Tuesday, as a financial inquiry focused on abuses in small business lending.
The testimony by former Pie Face kiosk owner Marion Messih was the second time this week Westpac faced criticism at the inquiry over how it approved loans to small businesses.
Australia's "big four" lenders have already admitted to misconduct in their submissions to the inquiry's third round of public hearings, which focus on small business lending.
Messih, a bookkeeper by trade, told the inquiry she wanted to change jobs and decided to buy a Pie Face store in 2012.
She said the franchisee offered her a kiosk in a shopping mall complete with sales projections, and told her to move her home and investment property mortgages to Westpac "as a requirement with Pie Face".
Messih said she shared the loan with her brother's wife.
When the 80-store Pie Face chain collapsed in 2015, Westpac sent her weekly text messages and phoned to demand repayment of the A$362,500 loan, Messih said.
With no income, Messih sold her investment property and expected the bank to put the proceeds into her savings account.
"The day before settlement, I get an email saying 'no, we are not going to do that, we are going to take 100 percent owing on the business loan from the sale of the property," Messih said, pausing at times with emotion.
The bank recouped the entire loan from the property sale and Messih's sister-in-law was now paying her back in weekly instalments, she said.
"To continually get phone calls from institutions about 'where's your payment' was something that I'm not used to," Messih said.
"I still owe money when I should be retired by now. But I still owe money," she said, without explaining further.
"MORE FORM THAN SUBSTANCE"
Kenneth Hayne, a retired judge, is leading the year-long Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
Hayne said he has been deluged with public submissions and wants to use case studies to highlight broader problems in the financial sector, which contributes $100 billion a year to Australia's economy.
Speaking before Messih's testimony, Westpac's head of commercial banking, Alastair Welsh, said he agreed with Hayne's comment that the bank's procedure for approving business loans was "more form than substance".
The big four banks - Westpac, Australia and New Zealand Banking Group, Commonwealth Bank of Australia and National Australia Bank - have admitted to other transgressions, including fraudulent loans and overcharging customers.
On Monday, the inquiry heard from a woman who said Westpac ordered her to sell her house because she had guaranteed her daughter's business loan without knowing she was risking her home. than halfway into its year-long investigation, the Royal Commission has prompted the banks to impose stricter lending conditions on borrowers, triggering fears the economy will experience a new era of subdued credit growth.
Several senior executives at wealth manager AMP and Commonwealth Bank have lost their jobs as boards across the industry attempt to rebuild public trust.
The government has also pledged to boost the powers of the corporate watchdog, double maximum prison terms and boost fines for corporate crime.
Shares in the big four banks and AMP have lost a combined
A$41 billion ($31 billion) in market value since the hearings began in February. ($1=1.3163 Australian dollars)