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Commonwealth Bank has outlined instances of alleged “misconduct” identified by its wholly owned subsidiary, Aussie Home Loans.
In her opening address to the Financial Services Royal Commission (RC) on Tuesday (13 March), Ms Rowena Orr QC revealed that despite including a response from Aussie that denied “misconduct” in its formal submission, Commonwealth Bank (CBA) provided Commissioner Kenneth Hayne with a spreadsheet detailing instances of alleged “misconduct” identified by Aussie Home Loans over the past five years.
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In the spreadsheet, CBA referred to seven events in relation to “breaches of responsible lending obligations”, two additional events relating to brokers “failing to provide credit products in line with a customer’s requirements or requests”, and further instances detailing “other types of misconduct in respective home loan applications, including the falsification of documents”.
Ms Orr also highlighted Aussie’s decision to include its formal response in the submission of its parent company, CBA, despite being given the opportunity to provide the RC with an independent response with a 50-page limit.
In Aussie’s eight-paragraph response, however, it denied engaging in any misconduct over the past 10 years, but it did acknowledge that it had identified “isolated and unauthorised incidents”, as well as “some technical breaches of the law in relation to credit assistance services provided by Aussie brokers and interactions between employees and Aussie brokers”. Such acknowledgements were listed by CBA in its initial submission as “falling below community standards and expectations”.
According to Ms Orr, Aussie’s response also detailed “isolated responses, which required customer remediation in relation to Aussie’s white label products”.
Examples regarding the nature of the “isolated and unauthorised conduct” identified by Aussie were also provided. They included:
- Former brokers using customer information and seeking to contact Aussie customers in contravention of their contractual and privacy obligations.
- Provision or facilitation by brokers of false or misleading information, or false declarations from customers in the process of applying for loans.
- Behavioural conduct, such as offensive or otherwise unprofessional behaviour directed towards or among employees and/or brokers.
- The identification of some minor system or process errors, resulting in incorrect calculation of interest, fees or charges by the credit providers on Aussie white label products.
- A small number of self-identified contraventions of the National Credit Act.
Moreover, when outlining CBA’s response to the RC’s inquiries into its responsible lending practices, Ms Orr stated that the major bank did not acknowledge instances of misconduct, but rather, referred to third-party conduct as “falling below community standards and expectations”.
Orr on broker-originated NAB loans
In her address, Ms Orr also noted that National Australia Bank (NAB) acknowledged misconduct in relation to its residential lending operations, which included NAB’s overcharging of interest on certain home loans, caused by its failures to link certain offset accounts to broker-originated mortgages. As a result, NAB refunded a total of $1.7 million to affected customers.
In an open letter addressed to customers, employees, shareholders and the community, NAB CEO Andrew Thorburn acknowledged past wrongdoing and stated that the bank is committed to cooperating with the RC.
Mr Thorburn said: “As we’ve responded to the royal commission’s requests for information over the last few months, it’s an important and confronting reflection point for us that there have been times in the past where we have not done the right thing for our customers.
“While many of these issues are public, we must continue to take action to strengthen our systems and processes so they don’t happen again.
“The simple fact is that none of these issues are acceptable. They should not have happened in the first place, and they show that we haven’t always done right by our customers or treated the community with respect. This is not good enough.
“It’s important now for us to move forward by learning from the past, owning up to mistakes and fixing them — and importantly, making sure they never happen again.”
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