- The Australia Securities and Investments Commission (ASIC) won against the National Australia Bank (NAB) on Monday, slapping it with a $15 million fine
- Through a ‘loan-introducer’ scheme, NAB was found to have breached the Credit Act 260 times
- The scheme had unlicenced and untrained non-financial institutions guiding Australians to taking out hefty loans with NAB
- ASIC alleged that NAB had generated $24 billion off of roughly 46,000 loans alone
- Despite the fines, NAB’s shares on the Australian market gained 0.94 per cent
- Today, shares are up a slight 0.1 per cent, worth $19.42 per share
National Australia Bank (NAB) has had an embattled start to the week, including major service outages and being slapped with a multi-million-dollar fine.
ASIC lays down the law
“NAB’s processes around this program were severely flawed and they deserved to be taken through the courts”
ASIC Executive Director of Financial Services Enforcement, Tim Mullaly
After a Monday in Federal Court, NAB was fined $15 million for breaching the Credit Act.
The court found that NAB contravened the act 260 times — fined $100,00 on each basis. However, instead of being fined $26 million, NAB’s penance was heavily discounted for co-operating.
The Australian Securities and Investments Commission (ASIC) launched the case against NAB in late-2019.
The breaches originated from NAB’s ‘loan-introducer’ scheme. This scheme was exposed during the banking royal commission. ‘Introducers’ were paid compensation for leading new customers to NAB that took out loans.
ASIC alleged that between 2013 and 2016, NAB generated $24 billion off roughly 46,000 loans.
Per the scheme, introducers were expected to be real estate agents, or accountants — those with important financial links to future customers.
Instead, the bar was muddied with unlicenced and untrained third parties bringing in revenue-generating opportunities to NAB.
According to the Royal Commission into banking, a gym owner and a tailor alone referred enough people to NAB for $139 million generated from loans.
ASIC Executive Director of Financial Services Enforcement, Tim Mullaly, said his team scoured over 20,000 emails to build its case.
“It was significant misconduct that warranted a significant penalty, the program placed consumers at risk as the introducers were not licensed or authorised under the Credit Act,” he said.
“NAB’s processes around this program were severely flawed and they deserved to be taken through the courts,” he added.
Those sentiments by Mullaly echoed in Federal Court by Justice Michael Lee.
“There were no uniform processes in the selection of the introducers, no requirement that they have any particular training and no minimum level of due diligence,” Justice Lee said.
“There was also no relevant formal training for frontline bankers. At any one time, there were hundreds to thousands of these untrained introducers,” he continued. “What could possibly go wrong?”
Services outage
While NAB came under fire in Federal Court, digital services outside the courtroom took a hit as well.
The bank’s mobile app, customer banking sites, and trade services were all impacted by technological outages throughout Monday.
Our services are gradually recovering and we thank you for your patience. NAB Group Executive, Personal Banking, Rachel Slade has this message to share with you. pic.twitter.com/t3nqKFflaq
— NAB (@NAB) October 19, 2020
An outage map shared by NAB showed all major cities in Australia took a hit. It wasn’t until 5:00pm AEDT that all of the bank’s online services became fully operational again.
Despite the slew of negative news, NAB shares on the Australian market traded higher across Monday — closing at an increase of 0.94 per cent for $19.40 apiece.
Today, shares are up a slight 0.1 per cent, worth $19.42 per share at 10:56 am AEDT.