Each of the big four banks will be put under the microscope in the opening round of hearings from the royal commission into the sector, which will include mortgage fraud involving National Australia Bank and Commonwealth Bank of Australia brokers on the list of topics to be examined.
The commission's first targets were revealed as the corporate watchdog on Monday expanded its case against the Commonwealth Bank, which it accuses of trying to rig one of the most important interest rates in the country.
The Australian Securities and Investments Commission (ASIC) said in its statement of claim filed in the federal court that CBA tried to rig the bank bill swap rate on six occasions, up from three occasions in its initial statement last month.
The royal commission being led by Kenneth Hayne on Monday said the first round of hearings, to be held next month, would look at case studies covering areas including home loans, car loans, credit cards, add-on insurance, credit offers and account administration.
The first topic to be looked at will be residential mortgages, where the commission said it would refer to case studies involving National Australia Bank, CBA-controlled Aussie Home Loans and the CBA.
It will examine NAB's program of paying "introducer" - people outside the bank who collect a fee for referring a customer - after the bank last year revealed more than 20 bankers had been sacked or resigned for breaching its policies when issuing 2300 home loans.
NAB did not provide details on exactly what all of the breaches involved, but said some of the loans may have been based on false information.
The commission will also look at "fraudulent brokers" within Aussie Home Loans, after the corporate watchdog banned several Aussie brokers in recent years for submitting false or misleading documents.
The Commonwealth Bank's "accreditation of brokers and broker arrangements" is another area to be examined in the commission's scrutiny of the $1.6 trillion mortgage market.
Car loans will also be a key focus with the commission hearing from customers of Westpac and St George’s finance practices and ANZ and its former subsidiary Esanda’s car finance practices.
ANZ was hit with a $5 million fine earlier this year over the car lending practices at Esanda.
Credit cards will be another key focus of the royal commission which will hear case studies relating to Westpac’s unsuitable credit card limit increases and Citi’s imposition of international transaction fees.
Earlier this month, ASIC confirmed Westpac had provided $11.3 million in remediation to 3,400 credit card customers after the regulator found the bank had not made reasonable inquiries about customers’ income or employment status.
Citi in March 2017 refunded $5 million to 230,000 of its customers for failing to properly disclose that credit card international transaction fees apply on Australian dollar transactions if the merchant used an overseas entity to process the transactions.
The royal commission will also hear case studies about add-on insurance products flogged by the CBA. In August last year, the bank refunded $10 million to 65,000 customers after selling them unsuitable consumer credit insurance. The royal commission will also hone in on the pre-approved overdraft offer offers by ANZ that were deemed unsuitable by ASIC, leading to ANZ paying a $212,500 fine for breaching responsible lending laws.
Account administration will also be under the spotlight with the royal commission using case studies relating to ANZ’s account administration errors in 2016 and the Commonwealth Bank’s unsuitable overdraft facilities and failure of automated systems.
ANZ refunded $5 million to 25,000 basic account customers in March 2016 after failing to properly apply some fee reductions.
In September 2016, the Commonwealth Bank paid $180,000 in penalties and wrote off $2.5 million in loan balances after breaching responsible lending laws when providing personal overdraft facilities.This article was first published by https://www.smh.com.au/
Authors: Clancy Yeates & Sarah Danckert