Massive fine for home loan compliance failures
RAMS Financial Group has been fined $20 million after admitting widespread compliance errors in the way it arranged home loans.
The Federal Court has ordered the lender, a wholly owned subsidiary of Australia’s oldest bank Westpac, to pay the penalty, finding it dealt with unlicensed referrers and failed to ensure customers were not disadvantaged by conflicts of interest.
The court also found that RAMS representatives were not properly supervised, resulting in a failure to establish and implement policies and procedures and investigate abuses.
It was also found that assurances regarding the efficient, honest and fair conduct of credit activities were lacking.
Many breaches of the Australian Credit Act occurred between June 2019 and April 2023.
Amid systemic abuses, the Federal Court ruled that RAMS lacked effective controls following internal findings of possible abuses.
These include franchise staff submitting fake pay stubs from non-existent employers and manipulating customers’ obligations and expenses to get loan applications approved.
The Australian Securities and Investments Commission announced in June that it would sue Westpac.
The watchdog alleged that RAMS committed numerous violations of consumer credit laws, including issuing payrolls and dishonoring customers’ credit eligibility in search of kickbacks.
“Financial institutions must comply with their obligations under the law and consumers must be protected from lending practices that could expose them to harm,” ASIC Deputy Chief Executive Sarah Court said in a statement released late on Friday following the court ruling. he said.
“ASIC will continue to investigate those involved in the entire home loan process and hold financial institutions accountable for abuses.”
Ms Court said Federal Court Judge Yaseen Shariff found in his ruling that the breaches were “serious in that they relate to obligations aimed at prohibiting unlicensed and other related conduct which is necessary to protect consumers”.
RAMS admitted misconduct earlier this year but franchisees launched a class action against the allegations and Westpac’s resulting termination of franchise agreements in May.
A spokesperson for the franchisees said at the time: “These terminations were based on false allegations that the franchisees failed to detect ‘suspicious anomalies’ in loan documents submitted by customers – anomalies that either never existed or resulted directly from systemic failures in RAMS’ own business infrastructure.”
“Franchisees operated strictly within the processes designed by RAMS.”
Westpac launched a sale process for RAMS in early 2024 but quickly killed the idea, opting to terminate the business in August.
Westpac and RAMS continue to support existing customers entering RAMS branded home loans.
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