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Royal commission unveils Aussie broker fraud

by Reporter4 minute read
Aussie broker fraud

An Aussie Home Loans broker had his contract terminated for submitting fraudulent documentation for a loan application.

Giving evidence to the royal commission on its third day of public hearings, Aussie general manager of people and culture Lynda Harris confirmed to the commission that the brokerage had terminated the contract of a broker who had fraudulently submitted an investment loan for an owner-occupier borrower.

The broker was said to have falsified the documents to bypass suitability requirements and settle the loan for his client.

The commission revealed that Aussie was unaware of the broker’s misconduct until it was informed of the fraud by Suncorp Bank on 8 August 2013.

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Aussie conducted an investigation on 9 February, and afterwards notified lenders on its panel that it had terminated the broker’s contract.

However, counsel assisting Rowena Orr QC questioned Aussie over its failure to disclose the reason for the broker’s termination in its letter to the lenders. Ms Orr accused Aussie of omitting the details in order to protect its trail commission.

“I want to put it to you that it’s not in Aussie’s interest to tell the lenders what had happened, because Aussie’s trail commission might be terminated by the lenders if Aussie tells the lenders that loans had been fraudulently obtained,” Ms Orr said.

The broker who was found to have engaged in fraudulent activity settled approximately $70 million while contracted with Aussie.

Further, Ms Harris was questioned over Aussie’s failure to inform the broker’s clients. Ms Harris noted that Aussie had directed clients to other brokers, but it did not formally advise clients of the fraudulent activity.

When asked why Aussie didn’t inform affected clients, Ms Harris said: “I don’t know, and my personal opinion is that we should be open about that.”

Moreover, the commission disclosed an email between two Aussie employees in which one employee described her interaction with a client affected by fraudulent activity.

In the email, the client claimed that she had been confronted by the Commonwealth Bank regarding an “incorrect statement” made in a loan application with Bankwest. The client was informed that she could be charged with “serious offences” if she had knowledge of the fraud.

CBA questioned the client over a $39,000 figure noted on a statement, which conflicted with a $25,000 figure on the client’s record. The Aussie Home Loans employee noted that the client was “extremely stressed” about the situation.

[Related: Major bank concedes brokers were ‘bypassing’ mortgage controls]

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