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ANZ has been fined $5m in relation to car loans issued by its former car finance business Esanda, and NAB had fired 20 bankers and began a remediation program after a review of its mortgage book related to its Introducer Program. So why is the royal commission looking into these resolved cases at its public hearings on consumer lending next month?
Besides the fact that these are serious cases that cast doubt on these lenders’ compliance with responsible lending obligations, the answer also lies in what Commissioner Kenneth Hayne had said at the commission’s initial hearing earlier this month.
Admitting that the commission will not have time to examine publicly every case of alleged misconduct in financial services, Hayne said the commission will have to refer to case studies and examples – which, as apparent by now, include cases that have been investigated and resolved.
In the Esanda case, for example, a judge recently fined ANZ $5m after ASIC and the bank made joint submissions to the Federal Court that ANZ paid that amount as penalty, as part of regulatory actions ASIC announced last month.
In NAB’s case, the bank reviewed its mortgage book last year and identified around 2,300 home loans that might have been submitted without accurate customer information and/or documentation, or correct information in relation to its Introducer Program. As a result of the review, it terminated 20 bankers and penalised additional 32 bankers, and started a remediation program for some customers.
The bank had updated ASIC of its investigation and even engaged with the regulator in its remediation program.
But more than just referring to cases such as these because of time constraints, the commission intends to go into the whys as well as whats after a case of misconduct had happened.
“We will have to proceed by reference to case studies and examples with a view to identifying the kinds of misconduct that have occurred, why it occurred, what should have been and what was the response to discovering the misconduct, and what follows from those conclusions,” said Hayne at the initial hearing on 12 February.
He said that in many cases, the fact that there has been misconduct – or conduct falling short of community standards and expectations – has already been proven, or is now acknowledged or admitted.
“In those cases, the commission must focus upon why the conduct occurred; what was the response by the relevant entity and regulators; what should have been the response; what if any recommendations should now be made,” said Hayne.
The commission believes there is more to gain by looking into “why this happened and at what was and what should have been the response then, reproving what other processes have shown happened or reproving what is now admitted to have occurred”.
This points to a far-reaching look into – and implications to – the financial services industry, in the pursuit of addressing the roots of misconduct and introducing reforms that will ensure they do not happen again.
Whatever recommendations the commission proposes at the end of its inquiry, they are likely to stop what a consumer group calls “the cycle of misconduct, apologies, and delay."
