Bank bashing culture unfair: Lending manager

by Amy Rosenfeld17 Dec 2013
A bank employee has hit back at the Australian "culture of bank bashing” following accusations ASIC is not doing enough to stamp out fraud in lending institutions.

Last week, Australian Broker reported ASIC has vowed to crack down on fraudulent brokers, and is currently investigating 20 cases of mortgage fraud.

Many readers strongly supported the move from ASIC to take down the “rogues” in the industry, but highlighted an apparent disparity between ASIC’s stance regarding fraud in lending institutions compared to fraud in brokerages.

The lending manager, who wished to remain anonymous, told Australian Broker banks have become an easy target for brokers.

“I think Australia has a culture of bank bashing, we’re kind of like a favourite target – it’s politicians and bankers. Brokers have their own culture and will say ‘don’t deal with the bank, deal with us’, but at the end of the day the deals are coming from the banks.”

While the employee admits fraud does occur within banks, it is usually picked up through stringent internal compliance measures – not by ASIC.

“I guess [banks] are less of a target because [ASIC] assume there is internal checking. Obviously we do find people trying to do things like that and all we really do is boot them out straight away, whereas in the broker world when they’re self-employed and there are no compliance people over their shoulder all the time I guess the probability of getting caught is a lot lower, so that increases the incentive to actually try.”

As bank employees are generally on salary, the “risk to reward ratio” of committing fraud makes it a highly unattractive prospect for most bankers, he said.

But Garry Compton, general manager of Finance National, says there have been a multitude of instances in which he or other brokers have not approved finance for a client due to responsible lending requirements, only to have that client get approval straight from the bank.

“There’s something going on, I’ve been in this game for over 15 years so I certainly know how to calculate their capacity. I know the banks’ criteria – we hold the highest accreditation here with lenders.”

The lending manager, however, claims that human error is a common reason for loans being turned down both from brokers and from banks. Bank employees are able to ask for assistance up the chain of management to fix the problem, whereas brokers may find it easier to simply try another bank.

It is in banks’ best interest to self-regulate, he says, and generally by the time ASIC finds something is wrong, action has already been taken by the bank.

Most action taken by ASIC has been due to red flags being raised by lenders, says Compton, but ASIC has limited power to be more proactive.

“Really, at the end of the day, it’s going to continue unless the bank holds itself up to investigation - and they’ll have to go through every single file – it’s just too big an area and ASIC won’t take them on.”

An ASIC spokesperson responded that ASIC uses a number of different ways to identify and pursue instances of mortgage fraud.

“ASIC undertakes a range of pro-active surveillances and will often commence enforcement action as a result of those surveillances.

“Misconduct can be brought to ASIC's attention by industry, either directly or indirectly through suspicious matter reports, disciplinary action by industry associations or termination of lender accreditations.”

ASIC is active across all sectors of the industry, said the regulator, however the phased introduction of responsible lending obligations meant credit assistance providers had to comply with these obligations six months before many lenders.

“The sheer number of credit assistance providers will always place them on our radar.

“The National Credit Act provides the opportunity for industry to consolidate the professional profile of its members and raise its public perception, particularly in areas where previously there was limited regulation and consumer safeguards.

“Those in the credit industry must be familiar with their obligations under the National Credit Act. They should know the law, read our guidance and seek additional advice if they feel they need it.”