Aussie class action probe hinges on BID

Speaking to Mortgage Business, Shine Lawyers class actions practice leader, Rebecca Jancauskas, confirmed that the law firm is currently considering if a class action is possible.

“The investigation phase is where we explore whether a class action is warranted and viable,” she said.

Ms Jancauskas said the investigation aims to determine whether:

"People who were sold a Mortgage Protection Plan policy were sold a product that was of low or very limited value to them;

"Aussie Home Loans brokers who sold the Mortgage Protect Plan policy products breached their duty to act in their clients’ best interests by failing to give priority to their clients’ interests over their own personal interest;

"Aussie Home Loan brokers engaged in misleading or deceptive conduct and unconscionable conduct."

Ms Jancauskas clarified that: “In this particular case, we learned that people were being sold a mortgage protection policy that was allegedly of limited value, and that brokers were not considering the best interests of their clients when recommending they take out this policy,” she said.

ASIC Regulatory Guide 272 (RG273) states that as a mortgage broker, the best interests duty applies to any credit assistance you provide.

“This includes credit assistance on products that are packaged with a mortgage, as well as any standalone credit products on which you provide credit assistance,” it states.

“The duty does not apply in relation to non-credit products, such as insurance products. If you offer these products or other services to a consumer, you must not imply that the best interests duty applies in this situation. Doing so may be misleading or deceptive conduct.”

The insurance product at the centre of Shine’s class action investigation is issued by Zurich and distributed by brokers for ALI Group.

ALI’s AFS licence authorises the provision of general financial product advice only. This means that any advice provided to consumers by ALI and accredited mortgage brokers in relation to the product does not take into consideration a consumer’s personal objectives, financial situation and needs, or any information held as a result of the provision of credit assistance by their mortgage broker relating to their home loan or other loans.

“I am very disappointed that such fundamentally inaccurate and unfounded allegations receive such media coverage as it causes unnecessary concern with consumers and our broker partners,” ALI Group CEO Huy Truong told Mortgage Business on 15 September.

Mortgage Business contacted ALI Group again on Friday (23 September), but they declined to comment further on the matter.

While ALI Group and Aussie Home Loans have looked to distance themselves from the class action investigation, other industry figures have previously warned that brokers are at risk of legal action over selling practices.

Industry veteran Steve Weston told brokers at an FBAA event in Sydney in June 2016 that regulatory changes in the UK had reshaped the banking and mortgage markets, and spawned a new industry of firms eager to profit off banks and brokers paying redress to customers in relation to past selling practices.

Mr Weston, who most recently was CEO of failed neobank Volt, has spent time in the UK as the head of mortgages at Barclays Bank.

“The most frustrating thing for the UK market, and I suspect we are going to face it here, is there are things that the industry had been doing for years and that were once viewed as acceptable could be viewed in five or 10 years from now as unacceptable,” Mr Weston told brokers six years ago.

“There will then be a retrospective view, which could be painful for advisers and lenders as occurred in the UK,” he said.

“We could see a new industry of ‘ambulance chaser’ lawyers as they are referred to in the UK, who receive 25 per cent on whatever they can get back from banks and brokers on behalf of their customers for mis-selling or poor advice. There is a real risk we will see this in Australia, so it is very important brokers and lenders are taking steps to safeguard themselves against this.”

Lendi, the parent company of Aussie Home Loans, has previously stated that it has not received any legal correspondence relating to these particular claims.

Established in 2013, Lendi merged with Aussie Home Loans in 2021, with Lendi retaining a 55 per cent stake in the combined Lendi Group. At the time of the merger, Lendi’s loan book was approximately $8 billion. Aussie’s loan book was $70 billion.

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