Royal Commission into financial services holds first public hearings

13 March 2018

Royal Commission into financial services holds first public hearings

On Tuesday the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (popularly referred to as the “Royal Commission into Banking”) held its first hearings.

Witnesses who appeared before the Royal Commission were Karen Cox of the Financial Rights Legal Centre (a consumer advocate), and Anthony Waldron, an executive general manager of  National Australia Bank Limited (NAB).

Ms Cox testified that lenders have not been verifying borrowers’ expenditure as thoroughly as they should, and that interest-only loans have often been inappropriately granted.

These loans require borrowers to only pay the interest on their loans for a sent period (such as five years), after which the repayment amount can jump up to 40% when the borrower starts paying back the loan itself.

Further, Ms Cox raised concerns about mortgage brokers, claiming that the Financial Rights Legal Centre “see[s] people much more likely to be in trouble on broker-initiated loans”.

She criticised some brokers for up-selling clients, falsifying clients’ details, and choosing lenders based on their lenient lending criteria.

Mr Waldron appeared to answer questions about NAB’s “Introducer Program”, under which third-party professionals such as financial advisors, accounts and solicitors could receive a commission for referring clients to NAB for loans.

Although Introducers were required by NAB’s internal policies to commit to referrals of $2 million a year for personal loans or $10 million a year in commercial lending, Mr Waldron admitted that NAB was not enforcing that rule.

NAB has become more strict as to who can be an Introducer, but previously gym owners had pushed loans onto clients and benefited from scheme.

Abuse of the Introducer Program came to light through a NAB whistleblower, and NAB dismissed 20 employees and disciplined more than 30 others in 2017 as a result.

Evidence suggests that NAB knew, or should have known, about fraud within the program before the whistle was blown, with its internal audit team having suspicions in April 2015.

The hearing will continue tomorrow at 10:00 am.