National Australia Bank has used “gymnasiums and tailors” as introducers who were paid commissions on home loans to customers, the financial services royal commission has heard.
Under questioning, NAB executive Anthony Waldron revealed that just four introducer groups had put through $139.78 million worth of business in one year.
Some introducers, in collusion with bank officers, were said to have acted with misconduct and fraudulently in making loans to people who sometimes could not meet payments.
One introducer alone received $488,000 in fees in one year for steering business to the bank.
The commission heard that in one instance an introducer attended a meeting with a customer and the banker.
“The introducer did most of the talking”, which was against bank rules, and the introducer transferred his own funds to the customer in advance of the loan being approved, Mr Waldron said.
Some introducers “issued customers with false pay slips” to ensure they complied with loan requirements, the commission was told.
NAB has slashed its introducer numbers from 8000 to about 1400 to rein in the industry after the problems came to light. Eight of the 10 most profitable introducers had their relationships with NAB severed, Mr Waldron said.
The commission also heard that loan document falsification in collusion with bank staff, often managers and regional lending executives, who were seeking commissions, had occurred in a number of cases.
In one such example a customer claimed income of $2200 a fortnight from two casual jobs, was paying $900 a fortnight in rent. When the loan was approved was approved the customer had to pay $5000 to a mortgage broker, $29,000 in stamp duty, $73,000 to NAB and was unclear of the overall debt or purchase price.
“She’s now in arrears, had payments reduced significantly” and “she’s being reviewed before being made an offer” by the bank to cut the debt, Mr Waldron said.
Investigations by NAB and KPMG had resulted in six bank staff being dismissed, five resigning and eight receiving penalties that cut their annual bonuses. The introducer program was frozen for four months during 2016 but has been reinstated in a modified form.
NAB has identified around 1360 customers who might have been affected by misconduct and 71 per cent of affected have been contacted about potential remediation of their loans but no rectifations have been completed yet.
There were 60 individual bankers involved in the questionable transactions.
Despite the revelations and internal bank reviews bankers are still being paid volume incentives on lending.
The bank’s staff score card gives senior lending staff a target of $13 million per quarter in home loans and gives a weighting of 25 per cent to volume targets in its staff assessment targets.