Thursday, March 29, 2018 - Posted by Michael McCulloch
The Federal Court has recently published their reasons and finding for ordering Australian and New Zealand Banking Group Ltd ("ANZ") to pay $5 million for breaches of responsible lending provisions.
ANZ has agreed to pay the fine as part of settlement of the case which also saw them admitting to 24 breaches of responsible lending provisions of the National Consumer Credit Protection Act 2009 (Cth) for car loans approved by Esanda from 3 finance brokers. We covered the successful prosecution of 1 broker in our May 2017 edition. ASIC alleged that between July 2013 and May 2015 that ANZ failed to meet their obligations when it relied on payslips only included in 12 car loan applications to verify the consumer's income. ANZ claimed to have detected and reported the suspected fraudulent conduct by the brokers and that it disaccredited the individuals involved and no longer accepts applications from them.
In relation to the civil penalty proceedings the Federal Court found ANZ:
- knew that payslips were a type of document that was easily falsified;
- received the document from a broker who sent the loan application to Esanda; and
- had reason to doubt the reliability of information received from that broker;
- income is one of the most important parts of information about the consumer’s financial situation in the assessment of unsuitability, as it will govern the consumer’s ability to repay the loan;
- while ANZ did not completely fail to take steps to verify the consumers’ financial situation, it inappropriately relied entirely on payslips received from these brokers; and
- ANZ management did not ensure that relevant policies were complied with and, in the case of the contraventions involving one broker, no action was taken despite management personnel having become aware of the issues about the broker.
ASIC Deputy Chiarman, Peter Kell, said, "A consumer's income is an essential component in determining their ability to repay a loan. Lenders must take reasonable steps to verify a consumer's financial situation, and this includes checking the reliability of documentation that is provided to them. Lenders must be alert to the potential for documents to be falsified and ensure that their controls are sufficiently robust."
The Court has ordered ANZ remidiate approximately 320 car loan customers for loans taken out through the 3 broker businesses from 2013 to 2015 with ANZ:
- offering eligible customers the option of entering into a new loan on mare favourable terms than the existing loan;
- providing refunds to some customers who have paid out their loan or had cars repossessed; and
- removing any default listings result from the loan.