The Australian Securities and Investments Commission brought a case against National Australian Bank. It was accused by accepting home-loan applications from unlicensed agents via its Introducer program.

ASIC reported that 16 banks received documentation and information about 297 home loan requests from 25 unlicensed lenders, between 3 September 2013 and 29 July 2016. This was in clear violation of the National Consumer Credit Protection Act 2009, according to ASIC. (National Credit Act).

National Credit Act’s licensing program is focused on protecting consumers. To address concerns that third party introducers (brokers or introducers) might misrepresent consumer financial information in order to obtain loans approved, a licensing program was established. If the circumstances are not right for the loan, commissions will be paid.

NAB’s Introducer Program

NAB’s Introducer Program, which was launched in 2000, was deemed the largest referral program in the credit industry. Third parties were able to “spot” potential customers for NAB in exchange for a commission. It generated home loans worth $24 billion between 2013 and 2016.

To participate in the scheme, the “introducers”, will need to provide the bank with the names and contact information of potential customers. To provide NAB additional information and documents, the “introducers”, will need to get a credit license.

ASIC investigations discovered that NAB bankers accepted documents such as payslips and home-loan application forms, as well copies of customer ID documents.

ASIC stated, “This behavior can pose grave risks to consumers. ASIC also found instances where documents supplied to NAB by unlicensed introducers were false.

ASIC’s case against NAB

ASIC brought proceedings against NAB at the Federal Court for violating Section 31 (National Credit Act). This section bans credit licensees from doing business with credit users without an Australian credit licence. The maximum penalty for one violation of the law was 10,000 penalty units, or $1.7-$1.8m. The bank could face a $500m penalty if found guilty of violating this law.

Royal banking commission investigated late last year. They found that some of the introducers could falsify documents and accept cash bribes in return for home loan approvals.

Mathew Alwan, a branch manager at NAB, was prohibited by ASIC for providing financial services or engaging in credit activities for seven year. He was one of the bankers who accepted documents that were not from licensed agents.

NAB ended the scheme.

NAB declared in early 2015 that it would cease its home loan referral program to improve its image and regain trust with borrowers.

“That is why we made the March announcement that we would cease paying referral fees for introducers. Sharon Cook (NAB’s chief commercial-legal counsel) stated that NAB also developed a remedy plan for customers who were impacted in November 2017. “We take legal action seriously and will now carefully examine the allegations.”