Royal Commission, Round One: The home loan ‘Introducer’ program

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This week the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (the Royal Commission), began round one of its public hearings (see In today’s article we look briefly at one case study that has been discussed by the Royal Commission this week; the NAB ‘Introducer’ Program.

Royal Commission
Photo by Martin Pegg on Unsplash

This case shows what can happen when effective compliance controls are not in place within an organisation.


The Royal Commission was established on 14 December 2017, on the advice of the Commonwealth Government. It was initiated on the back of growing pressure for an independent and wider-ranging inquiry with full investigative powers.

Following the release of background papers, submissions from the public and public hearings focused on specific case studies, the Commissioner, the Honourable Kenneth Madison Hayne AC QC, is required to submit an interim report no later than 30 September 2018, and to provide a final report by 1 February 2019.

The first round of hearings looks at consumer lending practices in relation to a range of products and services including:

  • residential mortgages;
  • car finance;
  • credit cards;
  • add-on insurance products;
  • credit offers; and,
  • account administration.

In today’s article, we look at the first category of products only. Housing loans are the largest asset held by authorised deposit-taking institutions (ADIs) in Australia. Home loans represent a substantial portion of lending for all major banks (e.g. 60 per cent of NAB’s lending in home loans, 45% for ANZ, 64% for CBA in retail banking). The majority of borrowers use a mortgage broker to apply for a home loan

Banks, in general, accept that some of their conduct with respect to home loans has been unacceptably detrimental to consumers. Many banks have provided refunds as part of remediation programs. This remediation has related to three forms of conduct:

  • reliance on fraudulent documentation
  • processing or administration errors,
  • and breaches of responsible lending obligations.

NAB Introducer Program

The Royal Commission looks at several case studies in relation to home loans including CBA’s revocation of mortgage broker accreditation and ‘Aussie Home Loans’, where four mortgage brokers were found to have submitted home loan applications fraudulently. Today we look at just one case; the NAB Introducer Program.

‘Introducers’ were charged with introducing potential home loan applicants to NAB for a commission. They were not required to be licenced or regulated as a mortgage broker would be. Misconduct allegedly discovered by NAB in relation to the Introducer program included:

  • reliance on falsified loan documents;
  • dishonest use of customers’ signatures;
  • misstatement of loans; and
  • provision of unsuitable loans.

On 13 March, under questioning, the witness for NAB admitted that incentive structures and targets contributed to unethical behaviour in connection with the introducer program.[1] It was revealed that some bankers declared relationships that didn’t actually exist between a banker and an Introducer in order to create payment for an external third party, who was in turn related to the banker.

NAB also accepted that this program revealed that many of their controls were not as effective as they could have been including:

  • detection of fraud;
  • management of conflicts of interest;
  • monitoring and reporting; and
  • due diligence processes.

If you think we could be of any assistance in the design, implementation, audit and review of your compliance program, please get in in contact with us.

[1] See p85, Transcript of Proceedings,13 March, Royal Commission.

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