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NAB to ‘carefully assess’ ASIC allegations

by Annie Kane13 minute read

The major bank has said that it is taking ASIC’s legal action “seriously” and will now “carefully assess” the allegations made regarding breaches of the law arising from failures within its introducer program.

On Friday (23 August), ASIC revealed that it had commenced a court case against NAB over allegations that 16 bankers accepted loan information and documentation from 25 unlicensed introducers in relation to 297 mortgages.

It is alleged that between 3 September 2013 and 29 July 2016, NAB accepted information and documents in support of consumer loan applications from some third-party introducers who were not licensed to engage in credit activity.

During the period in question, more than 46,000 loans, totalling more than $24 billion were brought in through this program.


Introducers referring customers through NAB’s introducer program are only to provide NAB with the potential customer’s name and contact details. In order for an introducer to provide NAB with further information or documents, the law required that the introducer be authorised under an Australian credit licence.

However, ASIC’s investigation uncovered that NAB bankers overstepped the “spot and refer” requirement by accepting information and documentation from some unlicensed introducers, including completed home loan applications, payslips, copies of customer identification documents and more. 

This therefore exposed the customers and NAB to the risk of wrongful conduct and possible fraud and may have exposed customers to a risk that unsuitable loans were given to them, ASIC said.

The allegations brought against NAB

Specifically, the proceedings relate to the conduct of 16 bankers accepting loan information and documentation from 25 unlicensed introducers in relation to 297 loans.

As a result, ASIC alleged, NAB breached s31(1) of the National Consumer Credit Protection Act 2009which prohibits credit licensees from conducting business with parties engaging in credit activity without an Australian credit licence.

ASIC also alleged that NAB breached its obligations under s47 of the National Credit Act requiring it to engage in credit activities “efficiently, honestly and fairly” and to comply with the act.

ASIC is asking the court to find that NAB breached the National Credit Act and to impose a civil penalty on NAB for doing so.

The maximum penalty for one breach of s31(1) of the National Credit Act, during the time of contravention, was 10,000 penalty units, or $1.7 million to $1.8 million.

This means that should NAB be found guilty of each breach and fined the maximum amount for every loan in question, it could be required to pay more than $534 million.

The proceeding will be listed for directions on a date to be determined by the court.

NAB to ‘carefully assess the allegations’

Noting the civil proceedings, NAB’s chief legal and commercial counsel, Sharon Cook, commented: “ASIC’s civil proceedings against NAB allege contraventions of section 31 of the National Consumer Credit Protection Act (Credit Act) in relation to 297 loan applications between 2013 and 2016.

“ASIC claims that by receiving information from introducers that went beyond their limited remit of ‘spot and refer’, NAB breached the Credit Act.

We take this legal action seriously and will now carefully assess the allegations.”

Ms Counsel added that, during the banking royal commission, the bank had “heard clearly that its actions needed to change in order to meet the expectations of its customers and the community.

That’s why in March this year we announced we would be ending referral payments to introducers.

We also established a remediation program in November 2017 to assist impacted customers, she added.

Introducer program background

While NAB has been operating a “spot and refer” introducer program since 2000, it announced in March of this year that it would be terminating payments to this program as of 1 October this year.

The decision follows on from NAB overhauling its introducer program last year, when it reduced its introducer network from 8,000 to just over 1,000

NAB last year also ceased accepting referrals from introducers who operate outside the professional services industries.

This came after NAB reported to ASIC that it had uncovered that several of its bankers were engaged in fraudulent misconduct in Greater Western Sydney.

The misconduct was later featured in the first case study before the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

The role of introducers in mortgage lending was referred to repeatedly over the royal commission, as it looked at intermediated relationships and its impact on lending. 

During the royal commission, NAB identified that misconduct in their introducer program went undetected until 2015 for reasons including:

  • no head of the introducer program, with a general manager only being appointed in October 2016
  • a lack of systems to monitor or review introducers
  • controls over the introducer program relied heavily on banker

Former NAB manager pleads guilty to fraud

The news of the ASIC case came just days after a former NAB branch manager pleaded guilty to one count of “intention to defraud by false or misleading statement” in relation to 24 mortgage applications.

Mathew Alwan pleaded guilty in the Local Court of NSW to one count of “intention to defraud by false or misleading statement”, which is an offence under the NSW Crimes Act.

According to an ASIC investigation, between 23 October 2013 and 19 September 2015, Mr Alwan dishonestly made false and misleading statements to NAB in relation to 24 mortgage applications.

Mr Alwan, who was permanently banned from engaging in credit activities and providing financial services last year, told the bank that a NAB introducer had referred the 24 borrowers under the loan applications to NAB when he knew that this was not true.

Earlier this year, The Adviser asked the remaining big three banks what their plans were for their introducer progams, with the majority stating that they would continue to monitor the performance of the channel.

However, ANZ revealed in March that it had halved its network of introducers but had no immediate plans to disband the program.

[Related: Former NAB branch manager pleads guilty to fraud] 

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