The Parliamentary Joint Committee on Corporations and Financial Services, holding an inquiry into the impairment of customer loans, sat in Brisbane late last week and shone the spotlight on a few interesting aspects of the administration of some loans.Denis McMahon, senior lawyer with Legal Aid Queensland's Farm and Rural Legal Service, told the committee that conflict between the operations of the Financial Ombudsman Service and the Code of Banking Practice meant a bank customer with a serious grievance had limited options to resolve their grievance if mediation was chosen as the first course of action to resolve an appeal.The Committee suggested that this could be a future recommendation.Another problem highlighted by McMahon was that, in many cases, the amount in dispute over a relatively small farm loan would exceed the current A$500,000 cap on cases able to be referred to FOS.Committee members agreed, with one noting that the current cap would barely cover the average suburban mortgage, far less a multimillion dollar farm loan. "We will be seeking information on where that cap should now be set and whether it should be indexed," the committee concluded.The submission from Legal Aid Queensland outlined a series of actions apparently taken in bad faith by bankers.Its Farm and Rural Legal Services unit recently had a client whose original application was declined by one branch but accepted by another branch within the same bank. "Within one month of the loan being granted, the facility was in default. This is in our view an example of non-prudent lending," the submission said.LAQ reported that its Farm and Rural Legal Service was involved in a case where an agribusiness banker engaged a particular valuation firm to conduct valuations in both 2011 and 2012, and approved increases in loan facilities based on a farm worth $7.5 million dollars, including $1.9 million in improvements. However, when the farm ran into cash flow difficulties in 2013, the bank's "asset management" unit, (called in when customers "trade outside their limits") engaged a different firm of valuers. This new firm re-valued the farm's assets at just $3.4 million, including improvements at $340,000. LAQ said the reduced valuation "provided the bank with justification to encourage the farmer to sell the property at the greatly reduced price to 'meet the market'." The committee questioned McMahon about this example from LAQ's submission. McMahon conceded the bank's actions were not typical of an across-the-board approach. "Some banks are more interested in the business's capacity to meet repayments than the LVR," he said.Nationals Senator John Williams asked if farm debt mediation should be made compulsory right across Australia and McMahon agreed, noting that it was mandatory in New South Wales and Victoria, but in Queensland was a voluntary process. This can add complexity to negotiating farm debt, as some farmers have properties in both New South Wales and Queensland, for instance.Senator Williams observed that there was an inherent conflict as the Corporations Act required receivers to sell at the best price they could get, which could lead