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Westpac Banking Group’s (ASX: WBC) defunct subsidiary RAMS is being sued in the Federal Court for systemic organisational failures that allegedly led to widespread misconduct by its franchisees and their staff in arranging home loans.
The civil proceedings have been brought by the Australian Securities and Investments Commission (ASIC) despite Westpac closing down the business to new home loan applications in August last year following an investigation by the corporate watchdog into its activities.
RAMS, which was founded as Registered Australian Mortgage Securities by the late John Kinghorn in 1991, had $31.8 billion in loans on its books at the time – all of which were absorbed by Westpac’s loan book when the business was discontinued.
ASIC is alleging that between June 2019 and April 2023 RAMS Financial Group breached its obligations as an Australian credit licensee including staff submitting false pay slips from non-existent employers to get home loans approved for clients.
Among the agreed facts are that the misconduct involved 12 RAMS franchises, comprising the St George, South Melbourne, Liverpool, Sydney CBD, Melbourne North East, Norwest, Alphington, Ryde, Fairfield, Inner West, Auburn Granville and Marrickville franchises.
ASIC says that RAMS admits that it conducted business with unlicensed persons, failed to supervise its representatives properly and failed to have adequate policies and procedures in place during this period.
“This is a systemic organisational governance failure by RAMS who did not adequately supervise its franchise network,” says ASIC deputy chair Sarah Court.
“RAMS allowed years of unlawful conduct to occur across its franchises, creating the opportunity for loans to be provided to customers who otherwise may not have qualified for those loans, and thereby increasing commissions earned by RAMS franchisees.
“RAMS franchise staff were found to have submitted false pay slips from non-existent employers and altered customers’ liabilities and expenses to enable them to meet serviceability requirements to get the loan application over the line, while in another example a RAMS franchise employee was found to be involved in manufacturing a fake contract of sale for a home.”
RAMS operates as a standalone business within the Westpac Group through a franchise network of independent franchisees and staff employed by them.
The company provides credit services for RAMS-branded home loans, which are funded by Westpac, targeting first home buyers and self-employed borrowers.
ASIC alleges RAMS contravened the Credit Act by dealing with unlicensed referrers, failing to have in place adequate arrangements to ensure that customers were not disadvantaged by any conflicts of interest, failing to supervise representatives to ensure compliance with credit laws and failing to investigate misconduct.
The company is also alleged to have failed to do all things necessary to ensure that the credit activities authorised by the licence are engaged in efficiently, honestly and fairly.
ASIC is seeking declarations and pecuniary penalties against RAMS.
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