The corporate regulator is suing National Australia Bank over failures with its home loan “introducer” program.
The Australian Securities and Investments Commission alleges NAB accepted information and documents, some of which were false, from third party introducers who were not licensed to engage in credit activity.
ASIC on Friday said it has commenced Federal Court proceedings against NAB over its introducer program, which paid “spotters” for successful lending referrals.
The proceedings related to the conduct of 16 bankers who accepted loan information and documentation from 25 unlicensed introducers in relation to 297 loans, between September 2013 and July 2016.
NAB’s introducer program, which is being shut down, paid commissions to people outside the bank such as accountants and real estate agents for successful lending referrals.
In a court document, ASIC said the program was profitable for NAB, bringing in almost 46,000 loans worth more than $24 billion from 2013 to 2016.
Introducers were only to provide the bank with a potential customer’s name and contact details, but ASIC alleged introducers who did not hold a credit licence gave NAB employees information and documents that went beyond that ‘spot-and-refer’ remit.
They allegedly provided completed home loan applications, tax returns, payslips and letters of employment and other material, the court document said.
“In some cases, information or documents provided by introducers to bank officers was false,” it said.
ASIC said the conduct exposed the customers and NAB to the risk of wrongful conduct by the introducer, including possible fraud.
“It also exposed customers to a risk that loans would be advanced to them that were unsuitable.”
The banking royal commission examined fraud and misconduct involving NAB’s introducer program by 60 bankers, including branch managers.
NAB announced in March it was ending referral payments to introducers effective October 1.
Its chief legal and commercial counsel Sharon Cook on Friday said the bank took the legal action seriously and will carefully assess the allegations.
“Throughout the royal commission we heard clearly that our actions need to change to meet the expectations of our customers and the community,” she said.
“That’s why in March this year we announced we would be ending referral payments to introducers. We also established a remediation program in November 2017 to assist impacted customers.”
ASIC wants the court to find NAB breached the national credit act and impose civil penalties.
The maximum penalty for one breach of the section prohibiting banks from conducting business with unlicensed parties was $1.7 to $1.8 million.