NAB bankers sacked for not checking borrower information

NAB has sacked 20 bankers after they failed to check if borrower information was correct.

National Australia Bank has sacked 20 bankers after they failed to check if borrower information — provided by third-party referrers who are paid commissions — was correct.

Another 32 bankers have been punished in the wake of the review, with some being hit with pay cuts. A number of the sacked bankers are also being investigated by police.

The poor lending practices in NAB’s home loan division affected about 2300 customers, and the bank’s hard-line response is a signal that bad behaviour in one of the nation’s largest lenders will no longer be tolerated.

“I have zero tolerance for bankers not following bank procedures,” NAB head of consumer banking and wealth Andrew Hagger told The Australian. “I take this matter very seriously. This is also a message to all bankers that processes are there to be followed. Any banker who does not follow due process will encounter some kind of consequences.”

The issue stemmed from the bank’s Introducer Program, which gives accountants, solicitors, financial planners and real estate agents a commission for lending referrals to the bank. The batch of loans discovered by the bank, after an alert from a staff member and through an internal audit, was made without accurate customer information or documents. Referral fees often range from 0.2-0.5 per cent of a loan, or about $2500 for a $500,000 mortgage.

NAB said its review prompted the termination of 20 staff in NSW and Victoria. Many of the borrowers live overseas, and it is understood the bankers accepted information directly from the referrer rather than checking it themselves over a two-year period to October 2015.

“What occurred was unacceptable,” Mr Hagger said.

The bank has started writing to the affected customers asking them to participate in detailed reviews of their loans. If it is found the customers have suffered financial hardship, NAB may be on the hook for remediation payments — in line with duties under responsible-lending laws.

While there has since been a crackdown on lending to foreign buyers, the cases are likely to involve loans made when Asian buyers were rushing to secure high-rise units, some of which have fallen sharply in value.

It also comes as greater scrutiny falls on the quality of information about borrowers that banks hold in their mortgage portfolios.

A recent report by UBS warned that Australian banks were sitting on $500 billion worth of “liar loans” sold to borrowers who gave lenders false information to get a mortgage.

Mr Hagger said this issue was unrelated. “That report said borrowers gave lenders false information to get mortgages. This is about where we’ve got incomplete or potentially inaccurate information; we’re contacting customers in order to verify with them the true information,” he said. “Through the Introducer Program, the documentation we have on these particular loans is potentially incomplete or inaccurate.”

Mr Hagger said the problem loans accounted for just 0.4 per cent of loans sold through the Introducer channel over the period in question. He said NAB had tightened up the rules around its referrals program with better eligibility criteria, governance and controls. It also dumped a number of referrers.

A mortgage broking review by the Australian Securities & Investments Commission had raised concerns about referrer commissions. “We now have a much stronger Introducer Program,” Mr Hagger said.

The bank said it first became aware of the matter in October 2015, and then advised ASIC in December 2015 after an initial high-level review.

Since then, NAB has provided regular updates to ASIC on the progress of its investigation.

The scale of the problems points to issues with the bank’s back office systems and it will engage an independent expert to undertake regular audits of the remediation program, and will update ASIC every two months.