‘Suspected anomalies’ led RAMS to cull a third of its franchisees

RAMS terminated a third of its franchisee network after it found ‘suspected anomalies’ in loan applications, but is now facing a class action for unconscionable conduct.

RAMS terminated about 20 of its franchisee agreements after an investigation found alleged anomalies in loan applications. Picture: NCA NewsWire / Morgan Sette

Westpac-owned RAMS Home Loans terminated a third of its franchisee agreements after an investigation found alleged anomalies in information supplied by loan applicants.

These anomalies included suspected false company tax returns; suspected falsified documents; inability to validate deposits paid; misrepresentation of the loan purpose; signature inconsistencies; and undisclosed or understated expenses, liabilities or dependants.

Westpac began cold calling customers or their accountants from at least July 2022, seeking information including financial documents for periods post-dating the settlement of loans and, at times, sought to re-verify information contained in applications that had previously been unconditionally approved, according to a statement of claim filed in the Federal Court as part of a class action brought by former franchisees.

These franchisees, led by Top Ryde Financial Services, contend that RAMS breached contractual and statutory obligations of good faith when it terminated their franchise agreements without proper cause.

Top Ryde was a RAMS franchisee from 2015 until its agreement was terminated in September 2023.

RAMS is understood to have terminated the agreements of at least 20 franchisees, or a third of its network, without notice or cause.

Franchisees were required to follow RAMS’ policies, and RAMS’ own audits did not identify any of the alleged anomalies, the statement of claim says.

RAMS, currently under investigation by multiple regulators, engaged in unconscionable conduct in its dealings with the terminated franchisees, the lawsuit alleges.

The class action was filed in Federal Court on Friday by law firm Morris Mennilli.

A spokesman for Westpac said RAMS had “exited a number of franchisees that did not meet required standards under their contractual arrangements. It takes its obligations seriously and will be defending the claim”.

The total damages sought by the claim are unspecified, the spokesman said.

The action comes after Westpac said RAMS was under investigation by the corporate cop over the provision of home loan products. The regulator is also probing the bank’s oversight of its subsidiary, Westpac said.

The Australian Prudential Regulation Authority, meanwhile, has launched its own investigation into RAMS, Westpac confirmed.

ASIC’s investigation into RAMS is centred around the provision of home loan products between January 2019 and September 2023.

“The current focus of ASIC’s investigation is on RAMS’ general conduct obligations, prohibitions on conducting business with unlicensed persons, and giving misleading information,” Westpac said at its half-year result earlier this month.

A spokesman for the bank said it was co-operating with regulators on the matter.

“Westpac self-reported to ASIC after identifying issues in some home loan applications through its risk review processes,” the spokesman said.

“We have taken a range of actions to strengthen these processes and have exited franchisees where necessary in accordance with their contractual arrangements.”

Westpac recently attempted to offload RAMS but was in April forced to scrap the proposed sale of the franchise business after an attempt to sell led by Morgan Stanley couldn’t secure an acceptable offer.