ASIC alleges that between 3 September 2013 and 29 July 2016, NAB accepted information and documents in support of loan applications from introducers who were not licensed to engage in credit activity.
The introducer program was a “spot and refer” program operated by NAB since 2000, which allowed third-party introducers registered with the bank to refer the details of potential borrowers.
The introducer could then receive a percentage of the loan amount as a commission, but the program has been a constant source of problems for the bank.
Misconduct stemming from the program was later featured in the first case study before the royal commission and now ASIC is using the bank for breaches of laws that arose from it.
As a result of these introducers, ASIC alleges that NAB breached the National Credit Act which prohibits credit licensees from conducting business with parties engaging in credit activity without an ACL.
The commission also alleges NAB breached another section of the act which requires it to engage in credit activities efficiently, honestly and fairly.
The proceedings related to the conduct of just 16 bankers accepting loan information and documentation from 25 unlicensed introducers in relation to 297 loans.
ASIC is asking the court to impose civil penalties on NAB for breaching the act, with the maximum penalty for one breach equalling $1.7 to $1.8 million.
NAB’s chief legal and commercial counsel Sharon Cook said that the proceedings related to 297 loans made between 2013 and 2016 and NAB would carefully assess the allegations.
“ASIC claims that by receiving information from introducers that went beyond their limited remit of ‘spot and refer’, NAB breached the Credit Act,” said Ms Cook.
“Throughout the royal commission we heard that our actions needed to change to meet the expectations of our customers and the community. That’s why in March this year we announced we would be ending referral payments to introducers.”
Introducer background
The introducer program generated $24 billion worth of loans for the bank but an ASIC investigation found that NAB bankers overstepped the “spot and refer” requirement by accepting information and documentation from the 25 unlicensed introducers including home loan applications and ID documents.
The program lacked a head of the program and systems to monitor or review introducers, with controls relying heavily on bankers.
The royal commission identified these failings with the interim report identifying failings in the process of the program and ASIC has sought to persecute members responsible.
Most recently former branch manager Mathew Alwan was found guilty of fraud and is still awaiting sentencing.
NAB has already announced that it will terminate the program with the date from termination to be 1 October 2019.
