The corporate regulator says National Australia Bank broke credit law, exposing customers and itself to potential fraud

This article is more than 1 year old

This article is more than 1 year old

The corporate regulator has launched legal action against National Australia Bank seeking fines of up to $530m over a program the bank ran where it paid “introducers” including gym instructors and hairdressers to bring in home loan customers.

NAB’s introducer program was closely examined during last year’s banking royal commission, which heard evidence that the program helped contribute to fraud by bankers in western Sydney who were accepting cash kickbacks to write home loans.

The lawsuit, filed with the federal court on Friday, is the second lodged by the Australian Securities and Investments Commission relating to the banking royal commission.

Last month, it sued ANZ over an alleged transfer fee rip-off in a case that could cost that bank hundreds of millions of dollars.

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NAB made more than 46,000 home loans worth about $24bn as a result of the introducer program, Asic told the federal court.

The regulator accused NAB of breaking the law 297 times by accepting detailed customer documentation, including payslips and tax returns, from introducers who did not have a credit licence.

Some of this documentation was fraudulent, it said.

Asic said 16 NAB bankers were involved in the alleged misconduct.

“This conduct exposed the customers and NAB to the risk of wrongful conduct by the introducer, including possible fraud,” Asic said in a concise statement filed with the court.

“It also exposed customers to a risk that loans advanced to them would be unsuitable.”

The maximum penalty per breach is $1.8m.

“Once you’re dealing with unlicensed persons you’re immediately imperilling the consumer and the system,” Asic commissioner in charge of enforcement Daniel Crennan said. “This case is about the systems that were in place that allowed the process to be misused.

“It was very wild, unregulated activity.”

The case is the third lawsuit Asic has filed relating to issues aired at the royal commission.

Crennan said a special team within Asic was hard at work on royal commission-related investigations and he hoped to file “a significant number of matters before Christmas”.

“We are seeing significant progress and we hope to be issuing some further proceedings in short order, that is, within weeks or months.”

NAB’s chief legal counsel, Sharon Cook, said the bank would “take this legal action seriously and will now carefully assess the allegations”.

“Throughout the Royal Commission we heard clearly that our actions need to change to meet the expectations of our customers and the community,” she said.

The royal commission heard that just four introducers, including a gym owner, were responsible for bringing $139m in loans to NAB.

After the program blew up, 21 employees left the bank – 10 of whom were sacked – and NAB reported suspected misconduct to police.

In March, NAB announced it would be killing the program entirely, effective from 1 October.