ASIC slammed for ‘persecuting’ brokers over customer fraud

“We are getting quite a few reports from the lenders themselves when they see loan fraud, and that’s positive – that’s what we like to happen, and we’ve taken quite a lot of actions to ban brokers from the industry and in some cases undertake criminal prosecutions in relation to loan fraud but what we also want to do is shift some of that responsibility back over to the lenders as well. That’s quite critical,” he said.

However, Matthew Bransgrove of Bransgroves Lawyers said putting the onus on lenders was “absurd”, as they are currently doing everything in their power to avoid fraud.

“Brokers are also doing everything they can to avoid fraud,” he said. “If a broker puts in a deal that has some sort of marker that indicates it is fraudulent, it is picked up by the Veda’s Shared Fraud Database.”

Mr Bransgrove explained that most of the fraud that comes through the third-party channel is perpetrated by the customer – not the broker – but that brokers are persecuted for not picking up on a fraudulent application.

“In my opinion, a broker’s job is a gatekeeper for the lenders to stop fraudulent loans going through. You basically are going through doing check after check after check. Most frauds that do get past brokers and are detected by lenders are detected by the Veda fraud database, not because there is anything on the face of the loan that would give away the fraud,” he explained.

“Say the mobile telephone number given by the borrower has been used in a suspected fraud transaction four months ago, with a different lender and a different broker. Veda’s database will pick that up. But how is the broker supposed to know that?”

Mr Bransgrove said ASIC should create an online database where brokers can report a fraudulent application.

“If brokers could report a fraudulent application, then ASIC would have a much better chance of catching fraudsters. ASIC are talking about organised fraud. It seems to me that going around persecuting brokers is a little bit like dealing with burglary by finding people who don’t lock their back door. They need to be going after the burglars. What ASIC need to do — if they really want to help this industry combat fraud — is set up a fraud database where brokers can report fraud.”

ASIC’s senior executive leader for deposit takers, credit and insurers, Michael Saadat, told the Senate committee last week that the regulator has “limited resources” and “can’t take action for every single allegation that is made about loan fraud”.

According to Mr Bransgrove, this is even more reason for ASIC to provide brokers with a platform to report fraud themselves.

“They are smashing brokers for fraud slipping through. How about giving brokers the tools to do the job?”

[Related: Broker sued by aggregator in loan fraud case]