ANZ says 85 per cent of car lending stems from “third party intermediaries”. (AAP Image: Sergio Dionisio)
The financial services royal commission has spent a frustrating morning quizzing an ANZ executive who was not in charge of the business it was looking into at the time it made dodgy car loans.
After yesterday grilling Westpac over its car-lending practices, the commission today turned its attention to ANZ and its car-financing subsidiary Esanda, which was sold to Macquarie in October 2015.
In January this year, ANZ reached a deal with the corporate watchdog to pay a $5 million fine for 24 breaches of responsible lending laws by Esanda between 2013 and 2015.
It also revealed plans to provide remediation totalling around $5 million for more than 300 customers who got inappropriate loans.
The problem for the commission is that the witness called, ANZ’s current general manager small business bank, Guy Mendelson, did not work in the car financing business before its sale to Macquarie.
Mr Mendelson took over as the general manager of asset finance in August 2016, and was therefore responsible for implementing the remediation program for customers affected by payslip fraud.
However, the commission was keen to quiz Mr Mendelson on the operations of Esanda while it was still owned by ANZ, such as the interest rates charged to customers and the “flex” commissions going to car dealers.
On this topic, Mr Mendelson resembled Sergeant Schultz of Hogan’s Heroes fame.
Tweet about how ANZ’s Guy Mendelson adopts the Sergeant Schultz defence, “I don’t know”
“I can’t comment ’cause I don’t know,” he responded to one line of questioning.
“I don’t have that information because I wasn’t in the business at that time.”
However, Mr Mendelson did acknowledge that some customers were charged interest rates of up to 24 per cent per annum, based on base rates of between 6-16 per cent and “flex” commission rates or “overs” of 4-8 per cent.
Bank says Mendelson best placed to answer questions
Mr Mendelson also had to refer to ANZ’s public statements when repeatedly asked about the reasons for selling the business, as he was not involved in the decision-making process around that transaction.
ANZ told the ABC that the commission sent it criteria of the topics it wanted covered in this case study and asked for the witness best placed to cover those areas.
The royal commission has confirmed that this is the process it follows in requesting witnesses from financial institutions.
“The commission writes to parties and provides them with a list of topics or issues that the commission would like addressed in a witness statement,” a spokesperson confirmed in an email response to the ABC.
“The commission invites parties to provide one or two witness statements to address those issues or topics, and asks that parties ensure those providing the statements are of a sufficiently senior level, and are sufficiently familiar with the issues or topics that the commission has asked to be addressed.”
However, most of the staff responsible for Esanda’s conduct up to late 2015 went with the business to its new owners.
In ANZ’s view, that left Mr Mendelson as its best-placed remaining staff member to answer the commission’s questions.
It is unclear whether the commission will call anyone who worked at Esanda at the time that the poor lending practices took place.
Brokers couldn’t be bothered to take 55-minute test
While ANZ sold Esanda, which was responsible for car financing through dealerships, it continues to sell car loans, with 85 per cent generated by its broker network.
As of December, ANZ started requiring all of those brokers to go through an education program to help them understand their responsible-lending obligations.
Brokers needed to take a 30-question test that Mr Mendelson said should take around 55 minutes to retain their accreditation.
However, he revealed push-back from many brokers, with around 500 out of 4,000 refusing to take the test and dropping out of the bank’s network.
Mr Mendelson said the bank continued to face a tough challenge to verify income on car loans, with the area subject to increasingly sophisticated payslip fraud, occasionally by organised crime networks.
When pressed, Mr Mendelson said payslip fraud rates were about 0.1 per cent on about 50,000 car loans issued annually, or “no greater than 100, no less than 50” such cases of fraud per year.