The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price appears to be unaffected by the ASIC lawsuit that has been announced.
At the moment, the ANZ share price is trading slightly higher than the open while the S&P/ASX 200 Index (ASX: XJO) is down around 1%.
ASIC lawsuit against ANZ
ANZ acknowledged that the Australian Securities and Investment Commission (ASIC) has launched a civil penalty proceeding relating to three unlicensed third parties providing home loan application documents to ANZ lenders, including in connection with ANZ's home loan introducer program.
ASIC is alleging that ANZ contravened the National Consumer Credit Protection Act in relation to 74 home loan applications made between 2016 and 2018, and contraventions of general conduct obligations owed by credit licensees under the Credit Act.
The big four ASX bank says that it has co-operated with ASIC during its investigation and has established a customer remediation program as well as continuously improving its home loan processes and controls.
ANZ is considering the matters raised in the 'Concise Statement' and won't be providing further comment because the matter is now before the courts.
What is ASIC alleging that ANZ did?
The regulator says that ANZ's program involved home loan referrals to ANZ from third party "introducers" from various professions, such as cleaners and real estate representatives.
ASIC noted that introducer programs received considerable criticism in the Financial Services Royal Commission.
It's alleged that ANZ breached consumer protection credit laws by accepting customer information and documents from introducers and other unlicensed individuals when this was not allowed. ASIC also alleges that some of the documents provided were fraudulent.
ASIC is also saying ANZ breached its general conduct obligations by failing to take reasonable steps to ensure its representatives did not conduct business with unlicensed third parties and therefore failed to engage in credit activities "efficiently, honestly and fairly".
Comments on the case
ASIC deputy chair Sarah Court said:
ASIC is concerned that as a result of this conduct some loans may have been granted by ANZ based on false information and some consumers may have entered into home loans that were beyond their ability to pay.
If banks are going to accept referrals of consumers seeking a home loan from unlicensed individuals, who receive commission payments for the referrals, they need to make sure they have the right systems in place to properly process those referrals.
How much could the penalty be?
Time will tell. ASIC said that "between 2015 to June 2020, more than 50,000 loans were referred to ANZ through the introducer program, resulting in lending of more than $18.5 billion. In September 2018, the introducer program contributed to approximately 10% of all home loans sold by ANZ's branch network in Australia."
Though ASIC is referring to 74 home loan applications made between 2016 and 2018 with one of the allegations.
Last year, a penalty of $15m was imposed on National Australia Bank Ltd (ASX: NAB) for contravening National Consumer Credit Protection laws relating to its introducer program.
ANZ share price snapshot
The ANZ share price is up 0.3% and it has gone up by 17.6% over the last year.
