Banking Royal Commission: Aussie Home Loans failed to inform ASIC of misconduct by brokers

Aussie Home Loans failed to tell ASIC about the misconduct of several brokers who were later convicted for fraud offences.

Lynda Harris (middle) from Aussie Home Loans after testifying at the banking royal commission yesterday. (Stuart McEvoy/The Australian)

CBA-owned mortgage broker Aussie Home Loans failed to tell the corporate regulator about the misconduct of three of the four brokers who were later convicted for fraud offences, the financial services royal commission has heard. None of the brokers were reported to police.

Aussie’s head of human relations, Lynda Harris, this morning admitted to the commission the failure to report fraudulent brokers to the Australian Securities and Investments Commission in 2013 and 2014 was “a real gap”.

“We should have done then, we should do now,” she said.

Aussie reported only one of the four brokers convicted over fraud, that included using forged documents to support loan applications, to ASIC or the professional body covering brokers, MFAA.

Customers were also left in the dark about why mortgage brokers they had been dealing with had suddenly left the business, Ms Harris admitted.

The hearing this morning exposed the poverty of Aussie’s responses to fraud — it lacks a dedicated fraud team and evidence before the commission indicated it that in 2013-14 it concentrated its efforts when misconduct was exposed on convincing lenders not to cancel potentially lucrative trailing commissions.

Under close questioning by counsel assisting the commission, Rowena Orr, QC, Ms Harris said Aussie left fraud investigations up to lenders, rather than conducting them itself.

Ms Orr put it to Ms Harris that this was “not good enough”.

“We are outsourcing it to a third party that’s directly related to the situation and they have a level of expertise we don’t have within our organisation,” Ms Harris said.

Asked whether Aussie should develop fraud expertise within its business, Ms Harris said this was “very difficult”.

“We’re not big enough to be able to justify that,” she said.

The commission has been dealing with four fraudulent Aussie brokers whose misconduct was discovered in 2013 and 2014.

At the time, Aussie was 80 per cent owned by the CBA, which last year took full ownership by buying the remaining 20 per cent from founder John Symonds.