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ASIC sues NAB over unlicensed introducers

The Australian Securities and Investments Commission has commenced a court case against NAB over allegations that 16 bankers accepted loan information and documentation from 25 unlicensed introducers in relation to 297 mortgages.

On Friday (23 August), ASIC revealed that it has commenced proceedings in the Federal Court against National Australia Bank (NAB) for breaches of the law arising from failures with its introducer program, as flagged during the banking royal commission.

ASIC alleged that between 3 September 2013 and 29 July 2016, NAB accepted information and documents in support of 297 consumer loan applications from third-party introducers who were not licensed to engage in credit activity.

While NAB has already made changes to its introducer program and reduced its introducer numbers by almost 90 per cent, it still operates one of the credit industry’s largest referral program, which pays third-party introducers a commission should the referred customer enter into a loan with NAB.

However, NAB has already committed to ceasing referral payments to this channel from 1 October 2019.

ASIC court case details

Under the “spot and refer” introducer program, introducers referring customers through the introducer program are meant to only provide NAB with the potential customer’s name and contact details. 

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In order for an introducer to provide NAB with further information or documents, the law requires that the introducer be authorised under an Australian credit licence.

Specifically, the National Consumer Credit Protection Act 2009 (National Credit Act) prohibits credit licensees from conducting business with parties engaging in credit activity without an Australian credit licence.

However, ASIC’s investigation reportedly found that 16 bankers overstepped the “spot and refer” requirement by accepting information and documentation from 25 unlicensed introducers, including completed home loan applications, payslips, copies of customer identification documents and more. 

ASIC said that this behaviour “can pose a serious risk to consumers, as ASIC also identified that in some instances the documents provided to NAB by the unlicensed introducers were false”. 

ASIC is therefore asking the court to find that NAB breached the National Credit Act and to impose a civil penalty on NAB for doing so.  

The maximum penalty for one breach of s31(1) of the National Credit Act, during the time of contravention, was 10,000 penalty units, or $1.7 to $1.8 million. 

The proceeding will be listed for directions on a date to be determined by the court.

NAB comments on ASIC proceedings

Noting the civil proceedings, NAB’s chief legal and commercial counsel, Sharon Cook, stated: “ASIC’s civil proceedings against NAB allege contraventions of section 31 of the National Consumer Credit Protection Act (Credit Act) in relation to 297 loan applications between 2013 and 2016.

“ASIC claims that by receiving information from introducers that went beyond their limited remit of ‘spot and refer’, NAB breached the Credit Act.

“We take this legal action seriously and will now 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.

“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.”

During the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, NAB identified that misconduct in their introducer program went undetected until 2015 for reasons including:

The news of the court case came just just days after a former NAB branch manager pleaded guilty to one count of “intention to defraud by false or misleading statement” in relation to 24 mortgage applications.

Mathew Alwan pleaded guilty in the Local Court of NSW to one count of “intention to defraud by false or misleading statement”, which is an offence under the NSW Crimes Act.

According to an ASIC investigation, between 23 October 2013 and 19 September 2015, Mr Alwan dishonestly made false and misleading statements to NAB in relation to 24 mortgage applications.

Mr Alwan, who was permanently banned from engaging in credit activities and providing financial services last year, told the bank that a NAB introducer had referred the 24 borrowers under the loan applications to NAB when he knew that this was not true. 

While the alleged contraventions took place more than three years ago, the chairman of the financial services regulator has already previously conceded that it was “far too late”, if not years too late, in taking formal action against introducer loan fraud at the major bank.

[Related: Action on introducer loan fraud taken ‘far too late’: ASIC]

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