The lending manager, who wished to remain anonymous, told Your Investment Property sister publication Australian Broker that banks have become an easy target.
“I think Australia has a culture of bank bashing, we’re kind of like a favourite target – it is politicians and bankers. [Mortgage] brokers have their own culture and will say ‘don’t deal with the bank, deal with us’, but at the end of the day the deals are coming from the banks.”
While the employee admits fraud does occur within banks, it is usually picked up through stringent internal compliance measures – not by ASIC.
“I guess [banks] are less of a target because [ASIC] assume there is internal checking. Obviously we do find people trying to do things like that and all we really do is boot them out straight away.
“In the broker world when they’re self-employed and there are no compliance people over their shoulder all the time I guess the probability of getting caught is a lot lower, so that increases the incentive to actually try.”
As bank employees are generally on salary, the “risk to reward ratio” of committing fraud makes it a highly unattractive prospect for most bankers, he said.
But Garry Compton, general manager of Finance National, says there have been a multitude of instances in which he or other brokers have not approved finance for a client due to responsible lending requirements, only to have that client get approval straight from the bank.
“There’s something going on, I’ve been in this game for over 15 years so I certainly know how to calculate their capacity. I know the banks’ criteria – we hold the highest accreditation here with lenders.”
The lending manager, however, claims that human error is a common reason for loans being turned down both from brokers and from banks. Bank employees are able to ask for assistance up the chain of management to fix the problem, whereas brokers may find it easier to simply try another bank.
It is in banks’ best interest to self-regulate, he said, and generally by the time ASIC finds something is wrong, action has already been taken by the bank.
Most action taken by ASIC has been due to red flags being raised by lenders, says Compton, but ASIC has limited power to be more proactive.
“Really, at the end of the day, it’s going to continue unless the bank holds itself up to investigation – and they’ll have to go through every single file – it’s just too big an area and ASIC won’t take them on.”
An ASIC spokesperson responded that ASIC uses a number of different ways to identify and pursue instances of mortgage fraud.
“ASIC undertakes a range of pro-active surveillances and will often commence enforcement action as a result of those surveillances.”
