ASIC’s announcement on November 26, 2021, that it has commenced civil proceedings in the Federal Court against ANZ, is a timely reminder for all lenders to review their introducer programs.

Following criticism in the Financial Services Royal Commission, and the AU$15 million penalty imposed on NAB last year for contravening the National Consumer Credit Protection Act 2009 (NCCP Act) in connection with its introducer program, introducer programs are once again in the regulatory spotlight for all the wrong reasons.

Referrals from unlicensed individuals and businesses are legal, but only if the law is complied with. There are different rules for different types of referrals.

ASIC is currently alleging that between June 2016 and March 2018, ANZ breached the NCCP Act by accepting referrals through its home loan introducer program, and from unlicensed individuals outside that program (such as those from real estate representatives).

ASIC alleges that ANZ breached the law by accepting customer information and documents from unlicensed individuals, where such referrals were not permissible. Further, ASIC alleges that some of the documents provided to ANZ by those unlicensed individuals, were fraudulent, raising concerns that some consumers may have entered into loans that they could not afford to repay, as a result of the referrals.

Sarah Court, ASIC Deputy Chair, stated “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.”

ASIC also alleges that between November 2015 and June 2020, ANZ breached its general conduct obligations by failing to take reasonable steps to ensure its own representatives did not conduct business with unlicensed third parties, thereby failing to engage in credit activities “efficiently, honestly and fairly”, as is required under its Australian Credit Licence.

ASIC is seeking, amongst other things, pecuniary penalties and an order for ANZ to engage an independent expert to review its existing home loan customer referral arrangements. The proceeding will be listed for directions on a date to be determined by the court.

There is a clear need for lenders to ensure that their introducer arrangements comply with the law. This is much more than just making sure that referral agreements comply with the law, it is also essential that what happens in practice complies with the law. This applies equally to referrals to non-bank lenders and finance brokers.