ANZ’s Esanda book probed by ASIC amid sale to Macquarie

Macquarie Group has received an unwelcome early headache for its soon-to-be-acquired Esanda business.

Macquarie Group has received an unwelcome early headache for its soon-to-be-acquired Esanda business after the corporate regulator revealed the car finance provider would compensate more than 70 borrowers for shoddy lending uncovered in an ongoing investigation.

After Macquarie this month unveiled the $8.2 billion purchase of the Esanda dealer finance portfolio from ANZ Bank, the Australian Securities & Investments Commission yesterday revealed the business was embroiled in widespread wrongdoing by Get Approved Finance, a West Australian car finance arranger.

ASIC found that, between 2011 and last year, more than 15 of Get Approved Finance’s brokers engaged in “unfair conduct” by having Esanda approve loans for consumers with poor credit histories, even though they did not meet its lending criteria.

ASIC said its investigation into the conduct of Get Approved ­Finance and Esanda was ongoing.

“Get Approved Finance was able to earn commissions from both Esanda and the providers of the add-on products that would have been lost if Esanda had rejected the applications for credit,” ASIC said.

“ASIC was concerned that Esanda did not have systems in place to manage the risks created by these commission payments or to effectively identify the serious misconduct by the Get Approved Finance brokers, given that it continued for over two years.”

The majority of ANZ’s sale of Esanda to Macquarie is expected to be completed by October 31, with the remaining wholesale portfolio to close in phases by March 31. But an ANZ spokesman said the affected loans were excluded from the Esanda portfolio the bank had agreed to sell to Macquarie. “We have assisted ASIC with its review into Get Approved Finance and our immediate priority has been to apologise and compensate affected customers,” he said.

A Macquarie spokeswoman declined to comment ahead of the group’s first-half results on Friday.

The Get Approved brokers, two of whom have been permanently banned from the industry, 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.

“This case shows that some brokers will be tempted to take extreme steps to ensure that a loan is approved, to ensure they can earn commissions from the lender and from the sale of add-on products,” said ASIC deputy chairman Peter Kell. “Lenders must have effective systems in place to address this type or misconduct by brokers, or else they will run a substantial risk of having to compensate consumers .”