RAMS sued for systemic misconduct in home loans

RAMS, which operated as a franchise-based lender targeting first home buyers and self-employed borrowers and had a total of 73 franchisees, is accused of breaching its obligations under the National Consumer Credit Protection Act 2009.

The alleged misconduct spans nearly four years, from June 2019 to April 2023.

RAMS has admitted to the allegations, including substantiated findings of misconduct from RAMS franchisees and loan writers, at 12 RAMS franchises:

1. St.George
2. South Melbourne
3. Liverpool
4. Sydney CBD
5. Melbourne North East
6. Norwest
7. Alphington
8. Ryde
9. Fairfield
10. Inner West
11. Auburn-Granville
12. Marrickville

Unlicensed conduct and organisational failures

According to ASIC, RAMS conducted business through unlicensed individuals, failed to adequately supervise its representatives, and did not have sufficient policies or procedures in place to ensure legal compliance.

These failures allegedly enabled misconduct across its franchise network, which included franchisees providing false documentation such as fake pay slips and bank statements to support loan applications, “presumably in order to increase the prospects of the loan application being approved”.

However, in some cases, it could not be determined whether the applicant, referrer, or franchisee knowingly supplied the false documents, so only cases with clear involvement by franchisees or their staff were classified as misconduct.

The breaches alleged by ASIC include:

• Conducting business with unlicensed referrers (who did not hold an ACL or were not an authorised representative of an ACL).
• Failing to manage conflicts of interest (including examples where franchisees personally received money from referrers and another where a franchise principal was the sole signatory on bank accounts of a company that referred loan applications to the franchise [and who received commissions from those referrals]).
• Failing to comply with credit laws.
• Inadequate supervision of franchisees and staff.
• Not ensuring that credit activities were conducted efficiently, honestly, and fairly.

RAMS has admitted liability for these contraventions and has begun remediating customers affected by the misconduct.

The regulator is seeking declarations and financial penalties in the Federal Court. A date for the first case management hearing has not yet been set.

RAMS operated as a stand-alone business within the Westpac Group and provided credit assistance under its own brand, though loans were funded by Westpac.

On 6 August 2024, Westpac closed local RAMS centres last August (which included the termination of all remaining franchise agreements and the termination of the remaining credit representative agreements) and no longer accepts new applications for home financing. It

Following the filing of the court case, ASIC deputy chair Sarah Court said: “This is a systemic organisational governance failure by RAMS who did not adequately supervise its franchise network.

“RAMS allowed years of unlawful conduct to occur across its franchises, creating the opportunity for loans to be provided to customers who otherwise may not have qualified for those loans, and thereby increasing commissions earned by RAMS franchisees.

“RAMS franchise staff were found to have submitted false pay slips from non-existent employers and altered customers’ liabilities and expenses to enable them to meet serviceability requirements to get the loan application over the line, while in another example a RAMS franchise employee was found to be involved in manufacturing a fake contract of sale for a home.”

In a statement, Westpac confirmed it had reached an agreement with ASIC to resolve ASIC’s investigation into the RAMS business through agreed civil penalty proceedings filed in the Federal Court.

It added that it would “continue to work cooperatively with ASIC to resolve the proceedings as quickly as possible”.

The statement said: “Westpac expects existing provisions should be sufficient to meet the financial outcome of the proceedings, subject to court approval.

“Following a review of the RAMS business, RFG completed a remediation program.

“RFG closed the RAMS business to new home loan applications from 6 August 2024. RAMS customers continue to access services through the RAMS app, website and call centre.”

Ongoing headaches for Westpac

The ASIC action comes in parallel with a separate case involving Samantha Aitken, Westpac’s head of audit, risk, and compliance.

Aitken has filed her own Federal Court claim, alleging that Westpac executives failed to act on her repeated warnings about fraud within RAMS franchises between mid-2022 and early 2023.

While serving as Westpac’s head of mortgages BCM, Aitken initiated a review of all loan applications from RAMS franchises. This internal audit reportedly led to an 85 per cent rejection rate on new applications and flagged numerous past approvals that should have been investigated or declined due to suspected fraud.

Aitken alleged that she identified 18 high-risk RAMS franchises and raised serious concerns with senior executives, including the then-managing director of RAMS, Jake Bromwich, and group head of accountability, David Ninnes.

However, she claimed her efforts to escalate these issues, terminate certain franchises, or pursue an independent review were dismissed or ignored.

Westpac has rejected Aitken’s version of events, saying in its defence that “appropriate steps were taken” in response to issues arising with RAMS franchises and that the concerns were “dealt with and escalated appropriately.”

The bank also denied Aitken’s claims that she was sidelined or dismissed for raising red flags about misconduct, saying instead that the bulk of her court case relates to employment-related matters.

The group was also hit with a class action from RAMS franchisees in 2024, who contended they were let go without basis.

[Related: Westpac denies it ignored suspected RAMS home loan fraud]