ANZ halts sales of car loans ahead of royal commission hearings

Explicit details on loan fraud are expected to be revealed during the hearings.

  • ANZ halts secured car loan sales
  • Will front the royal commission next week
  • Hearings will focus on its history of car loan fraud

ANZ will suspend sales of its secured personal loans for cars, boats and caravans, both directly and through its broker channels, as it undertakes a detailed review of the business.

The announcement comes after Australia's fourth largest bank was ordered to pay $10 million to cover hundreds of cases of loan fraud written by Esanda, a finance company it owned until 2015.

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The review will determine if it's still worth competing in the market due to increasing technology costs, says Catriona Noble, managing director of ANZ's retail distribution.

"[It] represents less than one percent of revenue within our broader Australian business, so we need to assess if it is better for our customers, shareholders and employees if we focus our investment on areas of our business that are core to what we do," she says.

Secured personal loans hold the car, boat or caravan as security, so that they can be sold to recover debts in the event the borrower defaults on the loan.

The move to suspend sales comes days before ANZ will face questioning before the banking royal commission on its issuing of 320 fraudulent car loans, which were written by its then subsidiary.

The Australian Securities and Investment Commission (ASIC) took Federal Court action against ANZ over 12 of the 320 loans, claiming ANZ failed to meet its own responsible lending obligations.

The loans, sold to customers by Esanda for two years until 2015, were likely based on fudged paperwork and fraudulent payslips, the corporate watchdog says.

A $5 million settlement was agreed for contravening 24 provisions of the credit code, and another $5 million is to be refunded.

ANZ will pause sales of secured personal loans from 30 April until 30 September 2018, which is when it expects to complete its review.

The bank will continue to support its existing secured loans and sell them to businesses.