ANZ reaches $5m settlement with ASIC over Esanda car finance breaches

ANZ has fessed up to responsible lending breaches in relation to loans sold through its former car finance business.

 

ANZ Banking Group has admitted it breached responsible lending provisions two dozen times and will pay $5 million in remediation for selling customers dodgy loans through its previously-owned Esanda car finance business.

ANZ may also be on the hook for a separate penalty, which will be decided by the Federal Court, which has a first case hearing in early February.

The bank has struck a settlement agreement with the Australian Securities & Investments Commission after the watchdog launched a Federal Court action against the bank for loans sold through three brokers to ANZ.

ANZ had admitted to 24 contraventions of responsible lending provisions, which included selling loans based on unreliable and easily falsified pay slips from the brokers. ASIC has also taken action against the brokers that submitted false documents to ANZ — United Financial Services trading out of the Best Buys Auto car dealerships, Motorcycle Finance and Insurance, and Combined Motor Traders.

Finance brokers Jennifer Farias, Vaughn Hopkins and Daniel Wilson have also been banned, along with car yard loan-writer Adam Greene.

Esanda dealer finance was sold to Macquarie Group in 2015 for $8.2 billion, although the business was quickly embroiled in a scandal after ASIC revealed widespread wrongdoing by Get Approved Finance, a West Australian car finance arranger.

Brokers deceptively arranged for friends or relatives to become the nominated borrower, rather than the consumer who was not eligible for credit. The brokers also sold add-on products, such as insurance, on behalf of various providers to some borrowers without their knowledge or consent, in one case increasing the debt from about $24,000 to more than $39,000. More than $1.38 million in loans were wrongly financed, some larger than $50,000.

Responsible lending provisions require banks to verify documents, and ensure customers are not sold loans they cannot afford to repay.

ANZ will now remediate around 320 customers who took out car loans between 2013 and 2015, totally around $5 million. Customers will be able to enter into a more favourable loan, getting a refund, and wipe any default listings from their credit histories. The bank will also pay $390,000 of ASIC’s costs.

“ANZ has worked closely with ASIC on its investigation of this matter,” ANZ Australia boss Fred Ohlsson said. “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.”

In a statement of agreed facts, ANZ acknowledged it did not take reasonable steps to verify customers’ financial situation in relation to 12 loan contracts in circumstances where there was reason to doubt the information being provided by third party intermediaries.

The affected loans were excluded from the Esanda portfolio the bank had agreed to sell to Macquarie.

The news of legal action against ANZ comes amid intense scrutiny of the car yard finance sector. The corporate regulator that has so far clawed back more than $120 million in refunds for ripped-off consumers who were sold useless add-on insurance in car yards. Refunds promised to customers yesterday topped $120m, including Allianz’s $45.6m and $17.2m from Suncorp, ASIC said. As part of a crackdown on the sector, ASIC has already extracted refund pledges from Swann Insurance ($39m) and QBE ($15.9m), and is expected to force new regulations on the sector limiting predatory techniques that have been found to be rife in the industry. ASIC’s 2016 industry-wide review of add-on insurance revealed extreme rates of high-pressure sales tactics, inadequate customer information, sky-high commissions and conflicts of interest. Over three years, consumers paid $1.6 billion in premiums but received only $144m in claims — representing a claims payout ratio of just 9 per cent.