Loan fraud lands ANZ in trouble

The bank will pay approximately $10 million for fraudulent car loans.

  • ANZ failed to properly verify hundreds of car loans
  • Taken to Federal Court by regulator
  • Will have to pay around $10m in refunds and penalties

A package of actions has been taken by the corporate regulator against ANZ bank over hundreds of car finance contracts that were likely "affected by fraud".

The Australian Securities and Investment Commission (ASIC) has brought regulatory action against ANZ over 320 finance loans that were sold to customers over two years until 2015. 

The loans were provided by three brokers to Esanda, a finance company that ANZ sold in 2015 for $8.23 billion, and were likely based on fudged paperwork and fraudulent payslips.

Twelve of the 320 contracts form the basis of ASIC's civil court proceedings against ANZ.

"[ANZ] knew that payslips could be easily falsified and it had reason to doubt the reliability of information from the particular broker businesses," says the watchdog. 

"This action relates to ANZ's own responsible lending obligations, which require lenders to take reasonable steps to verify the information provided by borrowers."

The bank has since proposed a $5m settlement, where it admits to contravening 24 provisions under the National Consumer Credit Protection Act 2009.

If approved by the Federal Court, the $5m penalty will be in addition to another $5m the bank will have to issue in refunds to the 320 affected customers.

The bank has significantly increased its supervision and training of asset finance brokers, says Fred Ohlsson, group executive at ANZ.

"We take our responsible lending obligations seriously and we have since taken steps to strengthen our ability to prevent and detect fraud by third parties," he says.

The loans were referred to Esanda by three brokerage firms that fraudulently filed applications by using fake payslips and by inflating the value of assets. 

United Financial Services, Motorcycle Finance and Insurance and Combined Motor Traders were suspected of writing the fraudulent loans to ANZ's Esanda at varying times over the two year period.

ASIC has taken a range of actions against the brokers, including fines, bans and, in one case, a yearlong prison sentence.

A variety of remedies will be offered to the 320 people affected. Some will be offered better loan contracts, while others will receive refunds if they paid their loan off or had their car repossessed.

Those who received a default listing because of the loan will have it removed.

The bank has not yet contacted the customers who are affected. It plans to do so in February 2018.