One of the fundamental elements of the National Credit Act licensing regime is section 31(1) which prohibits credit licensees from conducting business with parties engaging in credit activity without an Australian credit licence.

ASIC has announced that it has commenced Federal Court proceedings against NAB seeking declarations and penalties in relation to ASIC’s claims that between 3 September 2013 and 29 July 2016, NAB accepted information and documents in support of consumer loan applications from third party introducers who were not licensed to engage in credit activity. The introducers were paid commissions to “spot and refer” customers.

As a result, ASIC alleges NAB breached section 31(1) of the National Credit Act. ASIC also alleges that NAB breached its obligations under section 47 of the National Credit Act requiring it to engage in credit activities efficiently, honestly and fairly and to comply with the Act.

The proceedings relate to the conduct of 16 bankers accepting loan information and documentation from 25 unlicensed introducers in relation to 297 loans.

Those introducers did not hold an ACL and provided NAB’s employees with information and documents beyond the consumer’s name and contact details including, for example, completed home loan applications, tax returns, payslips, letters of employment and other material. In some cases, information or documents provided by introducers to bank officers were false. The NAB advanced loans to these customers and commission was paid to the relevant introducers.

ASIC claims that NAB, by its contraventions of sections 31 and 47 of the National Credit Act, exposed each borrower under the Loans:
(a) to a risk of wrongful conduct by the Introducer, such as the provision of false or incomplete information and possible fraud;
(b) to the risk of entering into a credit contract that was not suitable for them, including because the customers may not have been able to repay the Loans, or may not
have been able to do so without substantial hardship.

The matter was part of a Financial Services Royal Commission case study contained in Volume 2 of the Final Report.

ASIC says that on 25 March 2019, NAB announced that it will be terminating the Introducer Program on 1 October 2019.

The proceedings have been listed for the first Case Management hearing on 16 September 2019 in the Federal Court.