Fake payslips used to get loans approved in ‘systemic misconduct’: ASIC

Staff at Westpac’s RAMS home loan franchises submitted fake payslips from employers that did not exist to get mortgage applications over the line, the corporate watchdog says in a new court case alleging “systemic misconduct” within the lender.

The Australian Securities and Investments Commission (ASIC) on Wednesday launched legal action against RAMS, a home lending business that Westpac bought in 2007. Westpac closed RAMS to new customers in August last year.

Westpac said RAMS was working co-operatively with ASIC to resolve the proceedings as quickly as possible.Credit: Will Willitts

The case, which follows investigations by ASIC, alleges RAMS was in breach of the Credit Act by failing to properly supervise representatives of the company, and it says this resulted in “widespread misconduct” by RAMS franchisees and staff.

RAMS admitted it conducted business with unlicensed persons, failed to properly supervise its representatives, and failed to have proper policies and procedures in place.

Westpac, which has previously acknowledged misconduct in RAMS, said RAMS was working with ASIC to resolve the proceedings as quickly as possible.

A statement of agreed facts submitted by ASIC said Westpac launched a review of the RAMS franchisee network in late 2022, which resulted in Westpac paying about $7.6 million in compensation on 48 customer loans. The statement describes various types of misconduct including a case involving loan applications being supported with “false payslips from non-existent employers”.

The statement also says Westpac’s internal investigations had uncovered cases where loans were submitted with the borrowers’ expenses altered to allow the loan to pass the bank’s credit tests.

ASIC also laid out cases where RAMS representatives accepted business referrals from unaccredited “referrers” – people such as some accountants or lawyers who are authorised to receive a commission in return for referring mortgage customers to a bank.

“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,” ASIC deputy chair Sarah Court said.

“RAMS franchise staff were found to have submitted false payslips 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.”

ASIC alleges RAMS failed to properly supervise representatives of the company and that this led to “widespread misconduct” by RAMS franchisees and staff.Credit: Photo: Nic Walker

Jarden analyst Matt Wilson said the issues in RAMS were known to the market, and conduct problems such as this tended to occur across all banks due to their size and complexity.

“I think it’s just more of an extension of the operational and conduct risk that has permeated the sector for a decade or so,” Wilson said. “Westpac will wish to settle the issue and move forward.”

Westpac is also facing a class action, launched last year, from a group of RAMS franchisees who argue the bank wrongly terminated their franchise agreements.

A spokesperson for these RAMS franchisees on Wednesday said the terminations were based on unsubstantiated allegations that franchisees failed to detect suspected anomalies in loan documentation.

The spokesperson said these franchisees had not participated in ASIC’s investigation, and argued the problems identified by ASIC were not the result of franchisee misconduct, but rather, because of RAMS’ deficient business systems.

The RAMS mortgage portfolio was last year worth almost $30 billion, or 3.7 per cent of Westpac’s total home loan portfolio.

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