The Australian Securities and Investments Commission is suing Westpac after uncovering a subsidiary's systemic misconduct in arranging home loans.
ASIC has accused RAMS of multiple breaches of consumer credit laws, including franchise staff fabricating fake pay slips to fudge customer eligibility for loans in the hunt for commissions.
RAMS, a wholly-owned subsidiary of Westpac, has admitted to the misconduct, but its franchisees launched a class action in May challenging the claims and Westpac's resulting termination of franchise agreements.
"These terminations were based on unsubstantiated allegations that franchisees failed to detect 'suspected anomalies' in loan documentation submitted by customers - anomalies that either never existed or resulted directly from systemic failures in RAMS' own business infrastructure," a spokesman for the franchisees said.
"Franchisees operated strictly within RAMS-designed processes."
Westpac closed the RAMS business to new home loans in August 2024, absorbing the $31.8 billion of existing loans from the subsidiary into Westpac's loan book.
"Westpac improperly terminated viable businesses," the spokesman said.
"The franchisees seek justice for reputational and financial damages caused by this institutional blame shifting."
ASIC has alleged RAMS did business with unlicensed referrers, failed to supervise representatives and had breached consumer credit laws through lax policies and procedures.
"This is a systemic organisational governance failure by RAMS who did not adequately supervise its franchise network," ASIC Deputy Chair Sarah Court said.
"'RAMS franchise staff were found to have submitted false pay slips from non-existent employers and altered customers' liabilities and expenses to enable them to meet serviceability requirements to get the loan application over the line."
In another example a RAMS franchise employee was found to be involved in fabricating a fake contract for the sale of a home.
"RAMS allowed years of unlawful conduct to occur across its franchises, creating the opportunity for loans to be provided to customers who otherwise may not have qualified for those loans, and thereby increasing commissions earned by RAMS franchisees," Ms Court said.
ASIC is seeking civil penalties against RAMS in the Federal Court and the first case management hearing is yet to be scheduled.
In a statement, Westpac confirmed RAMS Financial Group (RFG) had reached an agreement with the regulator to resolve the investigation
"RFG will continue to work cooperatively with ASIC to resolve the proceedings as quickly as possible," a Westpac spokesman said.
"Westpac expects existing provisions should be sufficient to meet the financial outcome of the proceedings, subject to court approval."
ASIC did not flag the size of the penalty it would be seeking.
Court documents showed Westpac's 22-month investigation of RAMS cost about $46 million.
RAMS had remediated customers who "suffered detriment" because of the misconduct, ASIC said
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