This article is from the Australian Property Journal archive
NATIONAL Australia Bank has been ordered by the Federal Court of Australia to pay a civil penalty of $15 million for breaching consumer credit protections.
The section 31(1) of the National Credit Act prohibits credit licensees from engaging in credit activity with persons who do not have an Australian credit license. This is the first time ASIC has brought proceedings against a party for contravening it.
“The penalty imposed by the Court reflects the serious contraventions by NAB and is an important result for ASIC’s first civil action alleging contraventions of s31(1) of the National Credit Act,” said ASIC deputy chair Daniel Crennan QC.
The National Credit Act was put into law to protect consumers from unaccredited third-parties, such as brokers and ‘introducers’, who may misrepresent the financial reality of a consumer in order to guarantee loans are approved.
Since 2000, NAB has run its ‘Introducer Program’ enabling third-party ‘introducers’ to ‘spot and refer’ potential customers for a commission, if the customer entered into a loan with the bank.
The Court found that NAB violated the National Credit Act a total of 260 times by working with these ‘introducers’ who, while unaccredited, enabled NAB customers to enter into home loans.
While these ‘introducers’ were only to provide NAB with basic information, such as their name, contact details and the reason the customer was seeking credit, they were required by law to be licensed under an ACL.
NAB however, obtained through these unauthorised ‘introducers’ customers information such as payslips, completed home loan applications and identification documents. These actions, according to ASIC, put customers at serious risk, especially in instances where ASIC uncovered that the information provided to NAB was falsified.
The judgement states that bankers could rely on this information, rather than directly deal with the customer, and found that bankers at NAB “would not take reasonable steps to assess the veracity of information and documents put forward in support of loan applications to determine whether loans were unsuitable.”
The investigation revealed that between September 3rd, 2013 and July 29th, 2016 16 NAB bankers accepted information and documents from 25 third party introducers. These documents were in support of at least 260 consumer loan applications.
The Court took into their deliberation NAB’s cooperation and admission of wrongdoing.
