Westpac shuts RAMS amid regulatory probes, class action
Westpac will immediately close RAMS to new home loan applications and while the bank has settled with franchisees, about 150 support staff are yet to learn their fate.
Westpac has closed its RAMS Financial division months after unsuccessfully putting it up for sale and as the lender battles a class action and regulatory probes into the mortgage broker franchise.
Westpac on Tuesday said it would immediately close RAMS to new home loan applications following a strategic review of the division.
The bank has settled with each of the 36 RAMS franchisees, for undisclosed amounts, but no decision has been made on the future of the 150 support staff employed by RAMS, a spokesman said.
It comes after Westpac in April scrapped the sale of the business after it was unable to secure an acceptable offer from potential buyers.
Weeks later, RAMS was hit with a class-action lawsuit from disgruntled former franchisees who say their agreements were terminated without cause. Regulators are also probing lending practices at the mortgage-broking division.
“After a thorough review, (we) have decided that offering home loans through RAMS franchisees is not right for Westpac,” the bank’s managing director for mortgages Damien MacRae said.
Existing RAMS customers’ loans will remain in place.
It brings to an end a 33-year run for RAMS, founded in 1991 and once a strong competitor in the low documentation mortgage lending industry.
Westpac bought the business in 2007 for $140m but the current value is “negligible”, industry sources said.
RAMS stopped offering low-doc loans to self-employed borrowers in 2019 in the wake of the bruising banking royal commission. These loans had accounted for about 40 per cent of its lending flows.
Broker numbers have also declined in recent years amid unfavourable renewal terms on franchise agreements.
Separately, RAMS earlier this year terminated the agreements of at least 20 franchisees, or a third of its network, after an investigation found alleged anomalies in information supplied by loan applicants.
The disgruntled former franchisees have launched a class-action lawsuit contending RAMS breached contractual and statutory obligations of good faith when it terminated their franchise agreements without proper cause.
The franchisees say the suspected anomalies are either without basis, and their detection came from flawed investigations, or they occurred because RAMS failed to implement or comply with business systems for responsible lending and not by reason of any conduct by the franchisees, court documents say.
RAMS is also under investigation by the corporate cop over the provision of home loan products. The regulator is also probing Westpac’s oversight of its subsidiary.
The Australian Securities and Investments Commission’s investigation into RAMS is centred around the provision of home loan products between January 2019 and September 2023.
The Australian Prudential Regulation Authority has launched a separate investigation into RAMS.
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