Comments comes amid escalating fraud concerns within broking and referrer channels
Peter White (pictured), the outgoing chief executive of the Finance Brokers Association of Australia (FBAA), has some choice words for the banking industry amid escalating home loan fraud concerns.
There is mounting evidence that organised crime syndicates are abusing mortgage broking and direct referrer channels to conduct financial crimes by taking out home loans using falsified documents.
A suspected $1 billion worth of fraudulently obtained home loans, as initially reported by Commonwealth Bank in February, has since ballooned to a reported $3 billion as more banks dig into their records.
Read more: Are bankers-turned-brokers slipping past Australia’s fraud radar?
While this has raised scrutiny over the actions of some operators within the mortgage broking sector, White called for restraint.
“Our industry is not immune to bad actors, but equally we must not accept any attempt to tarnish the overall reputation of brokers who are overwhelmingly of excellent character and go above and beyond to serve our clients and support lenders with integrity,” said White.
Like many others in the broking industry, he called for more sharing of data “to get the facts… and when this becomes available we will consider anything we can do as an industry body to play our part”.
However, White does not want to see the lenders off the hook, calling for a reevaluation of existing referral programs.
“The FBAA has been calling out some banks for ignoring recommendations from the Sedgwick report and the Hayne royal commission for many years, sadly to no avail. It is accepted that referral and introducer programs can be misused, and now they should be eliminated,” said White.
CBA’s referral program pays third parties such as real estate agents, accountants and other professionals a commission, usually about half a broker’s commission, for sending clients to the bank.
It is not the first time an introducer program has faced criticism for its role in questionable home loan deals. While CBA and Westpac still operate introducer programs, ANZ and NAB shut theirs down some time ago.
After regulatory scrutiny and the banking royal commission, NAB said it would scrap referral payments and wind up its introducer scheme around 2019. The following year, NAB was hit with a $15 million penalty after ASIC found misconduct in its referrer program between 2013 and 2016.
In 2021, ASIC launched court action against ANZ over its home loan introducer program, alleging the bank “breached consumer protection credit laws by accepting customer information and documents from introducers and other unlicensed individuals when this was not allowed”.
White also questions why bank branches sometimes approve applications previously rejected by brokers, “which we know happens”.
He supported calls for an industry-wide approach but said it must include all sectors.
“The finance broking sector has proven that we are prepared to work in the interests of the industry as a whole, even when it may adversely affect us,” said White. “If others are also willing to make the tough decisions – and time will tell – we can combat the problem together.”
