By Robb M. Stewart
MELBOURNE, Australia--Australia's corporate regulator has sued one of the country's biggest banks over a program that paid fees to unlicensed individuals who pushed prospective borrowers its way.
The Australian Securities and Investments Commission said proceedings against National Australia Bank Ltd. (NAB.AU) have begun in the Federal Court. It alleges that between September 2013 and July 2016 the bank accepted information and documents to support consumer-loan applications from third-party introducers who weren't licensed to engage in credit activity. If found guilty, NAB could face a maximum fine of over 500 million Australian dollars (US$337.8 million).
Sharon Cook, chief legal and commercial counsel for the Melbourne-based bank, said NAB took the legal action seriously and would carefully assess the allegations.
The suit comes in the wake of evidence revealed as part of a case study presented during last year's sweeping royal-commission probe of misconduct in the country's financial industry. Since the commission released its final report in February, regulators have pledged to step up legal action against financial-services providers.
"Throughout the royal commission we heard clearly that our actions need to change to meet the expectations of our customers and the community," Cook said, adding that was why the bank in March said it would end referral payments to "introducers" and in November 2017 established a compensation program to help impacted customers.
The regulator said its allegations relate to the conduct of 16 bankers who accepted loan information and documents from 25 unlicensed introducers involving 297 loans. It has asked the court to impose a civil penalty, which carries a maximum penalty of A$1.7 million to A$1.8 million for each breach.
ASIC claims that by receiving information from introducers that went beyond a limited remit of "spot and refer," NAB breached Australia's National Credit Act. Under the bank's program, introducers were only meant to provide the bank with the name and contact details of potential customers.
The bank operated one of the country's largest such referral programs, and the regulator in its court filing said the program was profitable, involving almost 46,000 loans totaling more than A$24 billion between 2013 and 2016.
"This conduct exposed customers and NAB to the risk of wrongful conduct by the introducer, including possible fraud. It also exposed customers to a risk that loans would be advanced to them that were unsuitable," the regulator said.
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