Westpac battles class action, ASIC, APRA scrutiny on RAMS

The lender is now contending with a lawsuit brought by former RAMS franchisees alongside regulatory investigations into its under-fire subsidiary.

Westpac is facing heat from all sides on its subsidiary RAMS Home Loans, with the lender now contending with a class-action lawsuit from disgruntled former franchisees as it bows to multiple regulatory investigations into lending practices at the mortgage-broking division.

The class action, filed in Federal Court on Friday by law firm Morris Mennilli and brought by lead applicant Top Ryde Financial Services, alleges RAMS breached its obligations by terminating franchise agreements without notice.

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 has also launched its own investigation into the bank’s mortgage broking arm, Westpac confirmed this month.

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 in May.

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 unsuccessful Morgan Stanley-led attempt to sell it couldn’t secure an acceptable offer.

A Westpac spokesman said the lender would consider the future of the franchise distribution business, which it bought for $140m in 2007.

“Westpac has concluded the sales process for its RAMS business without reaching a sales agreement,” the spokesman said.

“Westpac will continue to operate RAMS and support RAMS franchisees and customers while it considers further strategic options for the business”