ANZ Settles on Suspected Third-Party Fraud Affecting Car-Loan Customers

MELBOURNE, Australia--Australia & New Zealand Banking Group Ltd. (ANZ.AU) acknowledged it failed to take reasonable steps to verify the finances of a handful of customers in cases of suspected car-loan fraud by third parties.

On Thursday, ANZ said it reached a settlement with the Australian Securities and Investments Commission, which alleged that there were failings in the bank's lending obligations on 12 car-loan applications.

The bank agreed to pay a fine of 5 million Australian dollars (US$4 million) and fund the regulator's costs. ANZ said it also will remediate about 320 customers who took out car loans through three brokerages between 2013 and 2015, totalling about A$5 million.

Late last year, Prime Minister Malcolm Turnbull bowed to pressure following a string of banking and insurance industry scandals and ordered a royal-commission inquiry to examine the conduct of the country's banks, financial-services firms, insurers and pension funds. The commission is tasked with determining whether regulators are equipped to identify and address misconduct.

ANZ, one of the country's largest lenders, said it detected and reported to the regulator suspected fraud by intermediaries tied to submitting a dozen loan contracts on behalf of customers to the bank's since-sold Esanda lending arm, which took place between July 2013 and May 2015.

The bank and regulator filed a statement of agreed facts and admissions in federal court on Thursday. It will be up to the court, which has listed the first hearing for Feb. 2, to determine the penalty.

The bank admitted 24 contraventions of responsible lending provisions of the National Consumer Credit Protection Act, ASIC said. The regulator alleged that ANZ failed to meet its obligations when relying on payslips on loan applications to verify customers' incomes, when it knew that payslips could easily be falsified and it had reason to doubt the reliability of information from particular broker businesses.

ANZ said that since reporting the issue, it had increased supervision and training of asset-finance brokers.

"We take our responsible lending obligations seriously and we have since taken steps to strengthen our ability to prevent and detect fraud by third parties," Fred Ohlsson, ANZ executive for Australia, said.

Macquarie Group Ltd. (MQG.AU), in October 2015, agreed to buy ANZ's Esanda vehicle-finance unit, which at the time had net lending assets of A$7.8 billion.

Write to Robb M. Stewart at

(END) Dow Jones Newswires

January 17, 2018 23:10 ET (04:10 GMT)