ANZ has admitted that it does nothing to verify the general living expenses of customers who have been sent to the bank from mortgage brokers, saying the intermediaries should be checking that information themselves.

The bank has now been forced to explain how it is not breaking responsible lending laws under the National Credit Act, because it ought to be verifying the financial situation of customers who have applied for a home loan.

Appeared before the banking royal commission on Monday, William Ranken, ANZ’s general manager of home loans and retail lending, said that ANZ approved 177,604 home loan applications last year, worth $67bn. Roughly 102,000 of those applications – or 58% – had been submitted by mortgage brokers.

Brokers were responsible for assessing whether their customers could afford the ANZ mortgages they were applying for, he said, and that ANZ relied on those assessments when approving the mortgages. ANZ did not independently verify the information provided by brokers about their customers’ general living expenses.

Senior counsel assisting, Rowena Orr QC, said: “You don’t do anything to verify what the broker tells you about the customer’s expenses, you don’t do anything to check that that information accurately represents the customer’s living expenses?”



Ranken replied: “Their general living expenses, no.”



The head of the banking royal commission, Kenneth Hayne, then asked Ranken why he thought it was in the broker’s interest to ensure that their customers had provided an accurate account of their total living expenses when applying for a loan.

Ranken replied: “It’s up to the individual broker I suppose. They’re acting as an agent for the customer.”

Orr then reminded Ranken that the Australian Securities and Investments Commission (Asic) required ANZ to take some positive steps to verify the information provided by the consumer.

Ranken was asked whether the bank investigated inconsistencies between a customer’s declared expenses and evidence about their spending from bank statements

Ranken replied: “No, not necessarily,” adding that it would be too complex, time consuming, and costly to comb over every individual’s bank statements to try to find inconsistencies in their declared expenses and their real-life expenses.

He said ANZ took what customers said about their expenses to be “true and correct,” and then checked to see if their declared expenses were reasonable by comparing them to the household expenditure measure (HEM).

Hayne then asked: “But in over half of the cases it’s not your conversation is it. It’s the broker’s conversation?”

Ranken replied: “Correct.”



Hayne said: “Yeah. And the broker, I thought we’d agreed, correct me if I’m wrong, there is nothing in it for the broker to interrogate what the customer is telling the broker?”

Ranken replied: “Other than their own licensing obligations.”

Orr then suggested to Ranken that it appeared as though ANZ was not complying with the National Credit Act’s responsible lending obligations and with regulatory guide issued by ASIC, but the ANZ executive disagreed.

Last week, the royal commission heard evidence that Commonwealth Bank knew that mortgage holders were more likely to run into financial trouble when they secured their loans from a mortgage broker, because such loans were on average larger, more expensive and more likely to burden customers with debt.

It also heard that CBA knew that the commissions it paid to mortgage brokers could incentivise them to sell risky mortgages to customers, but it did not want to stop the practice until other banks stopped it too.