Australia’s corporate regulator is suing National Australia Bank for allegedly allowing unlicensed brokers to refer customers for loans in breach of the country’s consumer protection law.
The action, which was initiated on Friday, marks the start of an expected onslaught of court proceedings flowing from a national inquiry into misconduct in the finance industry that criticised regulators for not being tough enough.
The Australian Securities and Investments Commission has said it is reviewing up to 50 potential legal actions, as part of a new “why not litigate?” strategy.
Asic said the Federal Court action related to the conduct of 16 bankers, who allegedly accepted loan information and documentation from 25 unlicensed introducers in relation to 297 loans in breach of the National Credit Act.
Each breach of the law is subject to a civil fine of up to A$1.8m ($1.2m), the corporate watchdog added.
The value of loans generated by the NAB ‘introducers’ programme’
“The imposition of a licensing regime was intended to address concerns that third-party referrers (including brokers and introducers) may misrepresent consumers’ financial details to ensure loans are approved, and their commissions are paid, in circumstances where the consumers’ true financial position means that the loan should not be made,” Asic said in a statement.
The suit relates to NAB’s “introducers programme”, which was criticised during the inquiry over how it generated A$24bn in loans and as much as A$150m in commissions for non-employees who referred customers to the bank.
The inquiry concluded such programmes needed to be better regulated to ensure introducers did not exceed their roles.
Sharon Cook, NAB’s chief legal and commercial counsel, said the bank was taking the allegations seriously and had taken on board the issues raised in the inquiry, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, and understood its actions needed to change to meet the expectations of customers and the community.
“That’s why in March this year we announced we would be ending referral payments to introducers,” Ms Cook said. “We also established a remediation programme in November 2017 to assist impacted customers.”
Public hearings heard how the introducers programme contributed to a fraud in western Sydney, where NAB employees accepted cash bribes in envelopes over the counter to facilitate loans they knew were based on false documentation to meet bonus targets.
In May a former NAB banker, Andrew Matthews, was jailed for eight months after being found guilty of defrauding NAB of A$640,000 by exploiting the introducers programme.
Mr Matthews, who bought a Ferrari with the proceeds of the crime, had an arrangement whereby he nominated a friend as the “introducer” for 129 loans. The friend, who the court found had never met the loan applicants, subsequently funnelled 90 per cent of the commissions he earned back to Mr Matthews.
Introducers under NAB’s programme were meant only to provide the bank with the potential customer’s name and contact details. In order for an introducer to provide NAB with further information or documents, the law required that the introducer be authorised under an Australian credit licence.
Asic alleges the NAB bankers cited in its legal action accepted information and documentation from the 25 unlicensed introducers, including completed home loan applications, payslips, copies of customer identification documents and more.
This behaviour can pose a serious risk to consumers, as in some instances the documents provided to NAB by the unlicensed introducers were false, according to Asic.
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