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The Federal Court has ordered Westpac-owned mortgage lender RAMS Financial Group (RAMS) to pay a $20 million penalty after admitting to widespread compliance failures in relation to arranging home loans.
The court found that between June 2019 and April 2023, RAMS breached its obligations as an Australian credit licensee and 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 RAMS representatives to ensure compliance with credit laws (which included failures to create and enforce adequate policies and procedures, and failures to investigate misconduct), and failing to do all things necessary to ensure that the credit activities authorised by the licence are engaged in efficiently, honestly, and fairly.
- The court also found that RAMS failed to have in place effective processes and controls following internal findings of possible misconduct, which included instances of franchise staff submitting false payslips from non-existent employers and altering customers’ liabilities and expenses to ensure loan applications were approved.
ASIC deputy chair Sarah Court said: “Financial entities must adhere to their obligations under the law and consumers must be protected from lending practices which can expose them to harm.
“ASIC will continue to scrutinise those involved in the whole home lending process and will hold financial institutions accountable for misconduct.”
In handing down the decision, Justice Shariff found that “the contraventions here were serious in that they pertained to obligations that are designed to proscribe unlicensed and other related conduct that is essential to protect consumers and to regulate industry participants including the representatives of licensees.”
Justice Shariff added: “I am satisfied that [RAMS’] contravening conduct exposed consumers to a risk of loss that the loans they entered may not have been suitable for their circumstances which also exposed them to a risk that they may have been unable to service their loans without substantial hardship, or may have defaulted on their loan repayments and incurred fees or charges, as a consequence of those defaults.”
What led to $20m penalty?
RAMS, a wholly owned subsidiary of Westpac, operated as a stand-alone business within the Westpac Group, through a franchise network of independent franchisees and staff employed by them.
The lender provided credit services for RAMS-branded home loans targeting first home buyers and self-employed borrowers.
In early 2024, Westpac began a sale process for RAMS, but stopped the sale in April 2024, subsequently commencing a full wind-down of the business.
The RAMS Franchise Network was wound down in its entirety by 6 August 2024.
In June this year, ASIC sued RAMS for systemic misconduct in arranging home loans. RAMS admitted liability for the contraventions and has remediated customers who suffered negatively from the misconduct, ASIC said.
[Related: RAMS sued for misconduct, Westpac responds]
