Massive fine for home loan compliance failures
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RAMS Financial Group has been hit with a $20 million fine after admitting widespread compliance failures in the way it arranged home loans.
The Federal Court has ordered the lender, a wholly-owned subsidiary of Australia’s oldest bank Westpac, to pay the penalty, finding that it dealt with unlicensed referrers and failed to ensure customers were not disadvantaged by conflicts of interest.
The court also determined that RAMS representatives weren’t properly supervised, leading to failures in creating and enforcing policies and procedures and investigating misconduct.
Safeguards around the efficient, honest and fair engagement of credit activities were also found lacking.
The multiple contraventions of the Australian Credit Act happened between June 2019 and April 2023.
Amid systemic misconduct, the Federal Court found RAMS had no effective controls in place in the wake of internal findings of possible misconduct.
That included instances of franchise staff submitting false pay slips from non-existent employers and altering customers’ liabilities and expenses to ensure loan applications were approved.
The Australian Securities and Investments Commission announced it was suing Westpac in June.
The watchdog alleged RAMS had accumulated multiple breaches of consumer credit laws, including the fabrication of pay slips and fudging of customer eligibility for loans in the hunt for commissions.
“Financial entities must adhere to their obligations under the law and consumers must be protected from lending practices which can expose them to harm,” ASIC Deputy Chair Sarah Court said in a statement issued late on Friday following the court’s ruling.
“ASIC will continue to scrutinise those involved in the whole home lending process and will hold financial institutions accountable for misconduct.”
Ms Court noted that in his decision, Federal Court Justice Yaseen Shariff found, the contraventions to be “serious in that they pertained to obligations that are designed to proscribe unlicensed and other related conduct that is essential to protect consumers”.
RAMS admitted to misconduct earlier this year but its franchisees launched a class action in May challenging the claims and Westpac’s resulting termination of franchise agreements.
“These terminations were based on unsubstantiated allegations that franchisees failed to detect ‘suspected anomalies’ in loan documentation submitted by customers – anomalies that either never existed or resulted directly from systemic failures in RAMS’ own business infrastructure,” a spokesman for the franchisees said at the time.
“Franchisees operated strictly within RAMS-designed processes.”
Westpac commenced a sale process for RAMS in early 2024 but quickly terminated the idea and opted to wind the business down in August.
Westpac and RAMS continue to support existing customers who entered into RAMS-branded home loans.
AAP
