'I had never seen anything like this': Inside ANZ's car loan business
ANZ’s former car loan business Esanda was riddled with misconduct, the royal commission has heard, including dealers pumping up interest rates to get commissions and brokers swapping customer’s financial information with that of their guarantor to get loan approvals.
ANZ’s breaches of responsible lending requirements in its car finance business also ran to an alleged fraud involving a group of three dealers who supplied Esanda with fake payslips and bank statements to secure customer loans, the commission was told.
ANZ's Guy Mendelson said the bank had discovered during an internal investigation that one of its brokers had swapped the financial details of more than 90 customers with the financial details of the customers' guarantors of the loan.
The bank this year admitted to 24 breaches of responsible lending laws within its car loan business and paid a $5 million fine. ANZ sold its $8.2 billion Esanda Dealer Finance portfolio in October 2015 to Macquarie Group. It told the market at the time the sale was due to the business no longer being core and following new global capital requirements to ensure financial stability of the world’s banks.
Last week, ANZ announced it was suspending its consumer car finance products while it reviewed the business. Counsel assisting the royal commission, Albert Dinelli, pressed the bank’s general manager of small business banking, Guy Mendelson, about the reason for the sale.
“Did it have anything to do with Esanda not being able to discharge its lending obligations?” Mr Dinelli asked.
Mr Mendelson said the bank’s sale of non-core assets was “a well-articulated strategy both internally and externally”.
Mr Dinelli asked again: “As far as you are aware that none of these responsible lending issues were a factor in ANZ’s sale of Esanda. Is that clear?
“Yes,” Mr Mendelson said.
Mr Mendelson was also asked why the bank had announced it was ceasing its consumer car loans business last week.
Mr Mendelson said the bank had made the decision in January but didn’t want the closure of its consumer car loan book to come out during the course of the royal commission.
“I have to be fair and honest and we didn’t want it to be revealed while I was sitting here answering the questions ... and perverting the course of justice so to speak,” Mr Mendelson said.
He said ANZ’s ability to comply with its responsible lending obligations was only part of the reasons the bank suspended its consumer car loan business.
Appearing to become increasingly frustrated with Mr Dinelli’s line of questioning, Mr Mendelson said following the sale of Esanda and its computer programs, the bank’s car loan business was much smaller and had IT integration issues.
Mr Mendelson also told the royal commission the bank had discovered during an internal investigation that one of its brokers had swapped the financial details of more than 90 customers with the financial details of the customers' guarantors of the loans.
The Royal Commission hears that some ANZ customers were paying too much interest on their home loans for a decade before the bank refunded them.
This meant the loans were approved based on the guarantor’s ability to repay the loan, not the customer’s as required under responsible lending laws.
“I had never seen anything like this occur in my career prior to this and post this,” Mr Mendelson said.
He also said an investigation found 547 customers had been impacted through “a fraud” where fake payslips and bank statements were used to obtain car finance for people who could not afford the loan.
“We’ve boosted the number of staff in our fraud team. We have also improved the way our collections team can identify pay slip fraud,” Mr Mendelson said. “There’s no silver bullet for detecting pay slip fraud but we’ve improved our processes."
He also confirmed the bank had stopped allowing brokers and dealers to use flex commissions after the bank found they could deliver poor outcomes for consumers. Flex commissions allowed car dealers to jack up interest rates on car loans to receive larger commissions without disclosing that the rate was flexible to the consumer in 2016.
“We wanted to ensure there was a balanced outcome for the customer, intermediary and the bank,” Mr Mendelson.
The hearing continues.
Published: 30 March 2018
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St. George Bank
Australia and New Zealand (ANZ)
Commonwealth Bank of Australia